Bombay High Court
The Commissioner Of Sales Tax, ... vs M/S Bajaj Tempo Ltd on 23 August, 2016
Bench: S.C. Dharmadhikari
STR2.09.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SALES TAX REFERENCE NO.2 OF 2009
IN
REFERENCE APPLICATION NO.96 OF 2006
The Commissioner of Sales Tax,
Maharashtra State, 8th Floor,
Vikrikar Bhavan, Sardar Balwant
Singh Dhodi Marg, Mazgaon,
Mumbai 400 010 ... Applicant
v/s
M/s Bajaj Tempo Ltd.,
Mumbai Pune Road,
Akurdi, Pune 411 035 ... Respondent
Mrs Uma Palsuledesai, Assistant Government Pleader for Applicant.
Mr P.C. Joshi for Respondent.
CORAM : S.C.DHARMADHIKARI AND
B.P. COLABAWALLA JJ.
Reserved on : 16th August, 2016.
Pronounced on : 23rd August, 2016
Judgment (Per B.P. Colabawalla J.) :-
1. By this Reference, the First Bench of the Maharashtra
Sales Tax Tribunal at Mumbai (for short, "the MSTT") has referred
the following questions of law for a decision of this Court under
section 61 of the Bombay Sales Tax Act, 1959 (for short, "the BST
Act") :-
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(I) Whether on the facts and in the circumstances of
the case and on a true and correct interpretation of
the definition of the word 'Purchase Price' in section
2(22) of the Bombay Sales Tax Act, 1959 read with
Explanation-I added to the said definition, the
Tribunal was justified in law in holding that the
word 'Purchase Price' referred to in sub-rule 3(a) of
rule 41D will not include the amount of Customs
Duty paid or payable under the Customs Act, 1962
by the Respondent?
(II)
Whether on the facts and in the circumstances of
the case and on a true and correct interpretation of
Explanation-I to section 2(22) added with effect
from 1/9/1990 when the sub-clause 2 of sub-rule 3
of Rule 41D specifically provides reduction of 3 % of
the purchase price of goods covered under section
75, the Tribunal was justified in law in holding that
the term 'Purchase Price' is applicable only to the
purchases effected within the State and is not
applicable to the purchases covered by section 75?
2. The real controversy in the present Reference is whether
the customs duty paid by the Respondent herein (M/s Bajaj Tempo
Ltd.) on goods imported by it from out of the country, and which are
used in the manufacture of their vehicles, should be included in the
definition of the words "purchase price" as set out in section 2(22) of
the BST Act.
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3. The brief facts giving rise to the present controversy are
that the Respondent herein (M/s Bajaj Tempo Ltd.) is a
manufacturer of motor vehicles, especially three-wheelers and parts
thereof. It is duly registered under the provisions of the BST Act as
also the Central Sales Tax Act, 1956 (for short, "the CST Act"). The
Respondent has its factory in Maharashtra and branches in other
States. The vehicles manufactured by the Respondent are sold in
and from Maharashtra as also transferred to branches in other
States for sale over there.
4. For the financial year 1998-99, the Repondent herein
was assessed under the BST Act and which gave rise to an
assessment order dated 28th January, 2002 passed by the Senior
Assistant Commissioner of Sales Tax (Assessment), A-22, Pune
Division, Pune. This assessment resulted in a refund of around
Rs.15.31 lacs to the Respondent.
5. Being aggrieved by the Assessment Order on various
grounds, the Respondent herein filed an Appeal against the same
before the Appellate Deputy Commissioner of Sales Tax (Appeals) 2,
Pune Division, Pune. After hearing the parties, the Appellate Deputy
Commissioner of Sales Tax passed his order dated 23rd July 2003
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thereby partly allowing the Appeal filed by the Respondent herein.
6. Still not satisfied with the partial relief granted in the
First Appeal, the Respondent herein filed a Second Appeal No.2203
of 2003 before the MSTT. In the Second Appeal filed before the
MSTT, three grounds were pressed on behalf of the Respondent
herein as more particularly set out in paragraph 4 of the order and
judgment dated 10th February, 2006 passed by the MSTT. As far as
we are concerned, it is only one ground which is germane to decide
the present controversy which reads as under :-
"The lower authorities have erred in holding the customs duty paid
by the Appellant himself as part of the purchase price of the imports
effected by him and accordingly in making reduction in the set off
under rule 41D of the Bombay Sales Tax Rules, 1959 ('Bombay
Rules') with reference of such purchase price of the imports."
7. After hearing both sides on this particular issue, the
MSTT in paragraphs 10 and 11 of its judgment dated 10th February,
2006 inter alia held that the situs of the purchase and import was
not within the State and therefore such purchases are not a
"purchase" as defined in BST Act. According to the MSTT, it thus
clearly followed that the term "purchase price" as defined under
section 2(22) thereof was applicable only to purchases made within
the State. It would not be applicable to purchases covered by section
75 of the BST Act, was the finding of the MSTT.
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8. Since the Revenue was unhappy with this decision, they
preferred a Reference Application No.96 of 2006 requesting the
MSTT to refer the above referred questions of law for determination
of this Court. The MSTT, after hearing the parties, by its order and
judgment dated 11th August, 2006 was pleased to refer the questions
of law set out in paragraph 1 above, for determination of this Court.
It is in these circumstances that the present matter has come up
before us.
9. In this factual backdrop, Ms Uma Palsuledesai, learned
Assistant Government Pleader, appearing on behalf of the Applicant,
contended that "purchase price" has been defined in section 2(22) of
the BST Act. It means the amount of valuable consideration paid or
payable by a person for any purchase made, including any sum
charged for anything done by the seller in respect of the goods at the
time of or before delivery thereof. She submitted that Explanation I
to the said definition categorically states that the amount of duties
levied or leviable on goods inter alia under the Customs Act, 1962
shall be deemed to be a part of the "purchase price" for such goods.
Laying heavy stress on this Explanation, the learned Assistant
Government Pleader contended that on a true and correct
interpretation of the definition of "purchase price" read with
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Explanation I thereto, the same would clearly include the amount of
customs duty paid or payable under the Customs Act, 1962. This
being the case, Ms Palsuledesai contended that the submission made
on behalf of the Respondent that only the cost of material purchased
from outside the country should be considered while reducing set off
under Rule 41D, is without any substance. According to her, while
effecting the purchase of the said goods from abroad, the Respondent
herein had to pay customs duty. As per the definition of the word
"purchase price" [section 2(22) of the BST Act], and more
particularly Explanation I thereto, the amount of duties levied or
leviable under the Customs Act 1962, were deemed to be a part of
the purchase price of such goods. For all the aforesaid reasons, she
submitted that the questions of law as set out in paragraph 1 above
be answered in the negative and in favour of the Revenue /
Applicant.
10. Before we deal with the present controversy, it would be
necessary to set out a few provisions of the BST Act. Firstly, section
2(22) of the BST Act defines "purchase price" which reads thus:-
"2. Definitions - In this Act, unless the context otherwise requires, -
(22) "purchase price" means the amount of valuable
consideration paid or payable by a person for any purchase
made include any sum charged for anything done by the
seller in respect of the goods at the time of or before
delivery thereof, other than (the cost of insurance for transit
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or of installation) when such cost is separately charged.
Explanation I - For the purposes of this clause, the amount
of duties levied or leviable on goods under the Central
Excise and Salt Act 1944, or the Customs Act, 1962 or the
Bombay Prohibition Act, 1949 shall be deemed to be part of
the purchase price of such goods, whether such duties are
paid or payable by or on behalf of the seller or the
purchaser or any other person;
Explanation II - Purchase price shall not include sales tax,
(turnover tax, surcharge and resale tax) paid or payable by a
person in respect of any such purchase;"
11. As can be seen from the definition, "purchase price"
means the amount of valuable consideration paid or payable by a
person for any purchase made, including any sum charged for
anything done by the seller in respect of the goods at the time of or
before delivery thereof, other than the cost of insurance for transit
or of installation, when such cost is separately charged. Explanation
I to the said definition stipulates that for the purposes of this clause,
the amount of duties levied or leviable on goods under the Central
Excise and Salt Act, 1944 or the Customs Act, 1962 or the Bombay
Prohibition Act, 1949 shall be deemed to be part of the purchase
price of such goods, whether such duties are paid or payable by or on
behalf of the seller or the purchaser or any other person.
Explanation II stipulates that the purchase price shall not include
sales tax, turnover tax, surcharge and resale tax paid or payable by
a person in respect of any such purchase.
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12. Thereafter, the word "sale" has also been defined in
section 2(28) which reads as under :-
"2. Definitions - In this Act, unless the context otherwise requires, -
(28) 'sale' means a sale of goods made within the State for cash
or deferred payment or other valuable consideration and
includes any supply by a society or club or an association to
its members on payment of a price or of fees or subscription
but does not include a mortgage, hypothecation, charge or
pledge and the words 'sell', 'buy' and 'purchase' with all its
grammatical variations and cognate expressions, shall be
construed accordingly.
Explanation - For the purpose of this clause -
(a) a sale within the State includes a sale determined to
be inside the State in accordance with the principles
formulated in sub-section (2) of section 4 of the
Central Sales Tax Act, 1956 (LXXIV of 1956);
(b)(i) every disposal of goods referred to in the Explanation
to clause (11);
(ii) a delivery of goods on hire-purchase or any system of
payment by installments;
(iii) the supply, by way of or as part of any serviced or in
any other manner whatsoever, of goods, being food
or any other article for human consumption or any
drinks (whether or not intoxicating, where such supply
or service is made or is given on or after the 2nd day of
February 1983; for cash deferred payment or other
valuable consideration);
(iv) the transfer, otherwise than in pursuance of a contract
of property in any goods for cash, deferred payment
or other valuable consideration;
(v) the supply of goods by any unincorporated
association or body of persons, to a member thereof
for cash, deferred payment or other valuable
consideration;
shall be deemed to be a sale"
(emphasis supplied)
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13. As can be seen from the said definition, the term
"purchase" has been defined in section 2(28) with reference to the
definition of the term "sale". From the aforesaid definition, it would
thus be clear that the term "purchase" for the purposes of the BST
Act is a purchase made within the State. This is made further clear
by the fact that whilst computing the turnover of purchase for
ascertaining the liability for registration under section 3, or for
ascertaining the leviability of additional tax under section 15AI, or
the turnover tax under section 9, only the purchases which are
effected within the State have to be taken into consideration. As far
as taxes on purchases from another State or purchases in the course
of imports, the same are covered by section 75 of the BST Act.
Section 75 reads thus :-
"75. Certain sales and purchases not to be liable to tax - Nothing in
this Act or the rules made thereunder shall be deemed to impose or
authorise the imposition of a tax on any sale or purchase of any
goods, where such sale or purchase takes place -
(a) (i) outside the State; or
(ii) in the course of the import of the goods into the
territory of India; or the export of the goods out of
such territory; or
(b) in the course of inter-State trade or commerce,
and the provisions of this Act and the said rules shall be read and
construed accordingly;
Explanation - For the purpose of this section whether a sale or
purchase takes place -
(i) outside the State, or
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(ii) in the course of the import of the goods into the
territory of India or export of the goods out of such
territory, or
(iii) in the course of inter-State trade or commerce,
shall be determined in accordance with the principles specified in
sections 3, 4 and 5 of the Central Sales Tax Act 1956."
(emphasis supplied)
14. Section 75 clearly stipulates that nothing in the BST Act
or the Rules made thereunder shall be deemed to impose or
authorise the imposition of tax on any sale or purchase of any goods
of which sale or purchase takes place inter alia in the course of
import of the goods into the territory of India or the export of the
goods outside such territory. Section 75 further provides that the
provisions of the BST Act and the Rules framed thereunder shall be
read and construed accordingly.
15. On a conjoint reading of the aforesaid provisions, it is
clear that if the situs of the inter-State purchases and imports is not
within the State then such purchases are not a "purchase" as defined
under section 2(28) of the BST Act. This being a case, it would
therefore logically follow that the term "purchase price" as defined
in section 2(22) is applicable only to purchases made within the
State and would not be applicable to purchases which take place in
the course of import of the goods into the territory of India or export
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of the goods out of such territory (section 75 of the BST Act). This
being the clear position, as can be discerned from the statutory
provisions as set out in the BST Act, the customs duty paid on the
goods imported into the territory of India by the Respondent herein,
cannot be held to be a part of the import purchase price for the
purposes of deduction or set off under Rule 41D. We must mention
here that this issue has been decided and in our view correctly so, by
the MSTT in Second Appeal No.2203 of 2003. The reasoning of the
MSTT can be found at paragraphs 10 and 11 of its decision dated
10th February, 2006 and we are in full agreement with the same.
16. Before parting, we must mention that the BST Act is a
State Legislation and does not have extra-territorial jurisdiction.
This is clear from the preamble of the Act which clearly states that
this is a law (BST Act) relating to the levy of tax on the sale or
purchase of certain goods in the State of Bombay. Section 1(2) of the
BST Act clearly stipulates that it extends to the whole of the State of
Maharashtra. This is yet another factor which would persuade us to
hold that the customs duty paid on purchases which take place in
the course of import of goods into the territory of India can never be
included in the definition of "purchase price" of the said goods.
17. Accordingly, both the questions of law referred to this
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Court by the MSTT and more particularly set out in paragraph 1
above, are answered in the affirmative and in favour of the
Respondent. The Sales Tax Reference is disposed of in the aforesaid
terms. However, in the facts and circumstances of the case, there
shall be no order as to costs.
( B.P. COLABAWALLA J.) (S.C.DHARMADHIKARI J.)
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