M/S. UNIVERSAL CYLINDERS LIMITED versus THE COMMERCIAL TAXES OFFICER on 23 February 2018

508

SUPREME COURT REPORTS

[2018] 2 S.C.R.

A

M/S. UNIVERSAL CYLINDERS LIMITED

v.

THE COMMERCIAL TAXES OFFICER

(Civil Appeal No(s). 2431 of 2018 etc.)

B

FEBRUARY 23, 2018

[MADAN B. LOKUR AND DEEPAK GUPTA, JJ.]

Rajasthan Sales Tax Act, 1994: ss.2(39), 2(44) – Refund ofsales tax – Appellant-assessee manufacturer of cylinders for storageof LPG supplied the entire production to Government ownedCcompanies – The cost of the cylinders was to be determined by theMinistry of Petroleum and Natural Gas (MOP & NG) under thepricing policy – IOC placed an order for supply stating in thesupply order to charge a provisional price of Rs.682 per unit andthat pricing formula was under review by the Government and theDfinal prices applicable after 1.7.1999 would be only as per approvalof MOP & NG – Accordingly appellant-assessee supplied thecylinders – On 31.10.2000, IOC sent letter to appellant that afterreview of the prices, cylinders have again been provisionally revisedto Rs.645 per unit w.e.f 1.7.1999 – Thereafter oil companiesdeducted/adjusted excess payment of Rs.37 and proportionate salesEtax thereon from the payments due to the assessee – Claim for refundof sales tax on the excess amount of Rs.37 – Entitlement for – Held:s.2(39) defines “sale price” as a price which is either paid or payableto a dealer as consideration for sale – The definition itself makes itclear that any sum by way of any discount or rebate according toFthe practice normally prevailing in the trade would be deductedand not be included in the sale price – The definition of ‘turnover’means the aggregate amount received or receivable by a dealer –In the instant case, when the orders were placed with the assessee,the price was not finalized – There was a clear cut stipulation in thepurchase order that price of Rs.682/- was only a provisional subjectGto review and the final price applicable after 01.07.1999 would bethe price as approved by the MoP & NG – Therefore, though theassessee may have received Rs.682 per cylinder, it was under alegal obligation only to receive that price which was fixed by theMoP & NG – Assessee had to refund the amount of Rs.37/- per H

M/S. UNIVERSAL CYLINDERS LIMITED v. THECOMMERCIAL TAXES OFFICER

cylinder to the oil companies – Therefore, it actually received onlyRs.645 per cylinder – The price fixation is not in the hands of theassessee – It is not even in the hands of the oil companies – Theprice is fixed by the MoP & NG and in such an eventuality, theamount actually payable is the amount to be fixed by the MoP &NG and that is also the amount which the assessee is legally entitledto receive – The assessee is entitled to refund of the amount of salestax paid on the excess amount.

AB

Allowing the appeals, the Court

HELD: It is undisputed that the assessee had to refundthe amount of Rs.37/- per cylinder to the oil companies.Therefore, what it has actually received is only Rs.645/- percylinder. What was legally receivable by it was the amount to befinally fixed by the MoP & NG i.e. Rs. 645/- per cylinder. In thesupply order only a provisional price was fixed. The price fixationis not in the hands of the assessee. It is not even in the hands ofthe oil companies. The price is fixed by the MoP & NG and insuch an eventuality, the amount actually payable is the amount tobe fixed by the MoP & NG and that is also the amount which theassessee is legally entitled to receive. The assessee shall berefunded the amount of sales tax paid on the excess amount.The order of the Deputy Commissioner is restored. [Paras 17,18] [514-B, D]

C

D

E

IFB Industries Limited v. State of Kerala [2012] 4 SCR802 : 2012 (4) SCC 618; ONGC v. State of Gujarat2014 SCC Online Guj 15385; Gail India Ltd. v. Stateof M.P. (2014) 72 VST 161; MRF Ltd. v. Collector ofCentral Excise, Madras(1997) 5 SCC 104 – referred to.

F

From the Judgment and Order dated 27.02.2015 of the High Court H

Issues

Aof Judicature for Rajasthan at Jaipur in S. B. Sales Tax Revision PetitionNo. 59 of 2006.

WITH

C. A. Nos. 2432, 2433 and 2434 of 2018

BSameer Jain, Ms. Anu Sura, Angad Sandhu, Love Kumar Gupta,Rabin Majumdar, Advs. for the Appellant.

Amit Sharma, Sandeep Singh, Ankit Raj, Ms. Indira Bhakar, Ms.Ruchi Kohli, Advs. for the Respondents.

The Judgment of the Court was delivered byC

DEEPAK GUPTA J. 1. Leave granted.

2. Since a common question of law arises in these appeals, theyare being disposed of by this common judgment. Briefly stated the factsare that the appellant-assessee manufactures cylinders for storage ofLiquefied Petroleum Gas (LPG). At the relevant time, the entireDproduction was for supply to Government owned companies viz. M/s.Indian Oil Corporation Ltd.(for short ‘the IOC’), M/s Bharat PetroleumCorporation Ltd., and M/s Hindustan Petroleum Corporation Ltd.. It isnot disputed that the cost of the cylinders was determined by the Ministryof Petroleum and Natural Gas (for short ‘the MoP & NG’) under theEpricing policy.

3. On 04.05.2000, the IOC placed an order for supply of 73380numbers of 14.2 Kg. LPG cylinders which was to be made by 31.08.2000.Clause 3 of the supply order reads as follows:

“You can charge a provisional price of Rs. 682.00 for 14.2 KgFcylinders. Pricing formula is under review by the Governmentand the final prices applicable after 01.07.99 will be only as perapproval of MOP & NG.”

4. The appellant-assessee supplied the cylinders and charged theamount of Rs. 682/- per cylinder and also charged sales tax on the sameGin accordance with law. Similar supply orders were placed by the othercompanies also.

5. On 31.10.2000, the IOC sent a letter to the appellant that afterreview of the prices, the price of 14.2 Kg. cylinders has been againprovisionally revised to Rs.645/- with effect from 01.07.1999. RelevantHportion of the letter reads thus :- “Pending finalization of the report and the short time available torecover the cost due to the proposed cylinder tender, Industryhas decided to revise the provisional basic price of 14.2 Kgcylinder to Rs. 645/- with effect from 01.07.1999. Accordinglywe will be recovering the differential amounts from your bills.Final adjustments would be made later on after finalization ofthe cylinder price.”

6. Thereafter, the oil companies deducted/adjusted the excesspayment of Rs.37/- and proportionate sales tax thereon from thepayments due to the assessee. Thereafter the assessee approached theAssessing Authority for refund of the sales tax paid on the excess saleamount i.e. Rs.37/-. The case of the assessee was that he had paid taxon the provisional price of Rs.682/- per cylinder. After the price hadbeen reduced to Rs.645/-, he was only entitled to Rs.645/-. The oilcompanies had taken refund of the amount of Rs.37/- and, therefore thetax paid on the excess amount be refunded to him. The assessee alsourged that this amount of Rs.37 should not be counted in its total turnover.

7. The Assessing Officer rejected the claim of the assessee onthe ground that there is no provision under the Act for reducing orrefunding the amount of tax once the amount of tax has been paid. Itwas also observed that the arrangement of the assessee with the oilcompanies was in the nature of a private agreement and the sales taxdepartment had nothing to do with this. The appeals filed by the assesseeagainst the assessment order before the Deputy Commissioner ofAppeals were partly allowed. Thereafter, the Respondent-Revenueapproached the Tax Board, which allowed the appeals of the Revenue.Being aggrieved, the assessee approached the High Court by filing revisionpetitions, which were dismissed. Hence, the present appeals.

8. To appreciate the rival contentions of the parties, we may makereference to Section 2(39) of the Rajasthan Sales Tax Act, 1994, whichdefines ‘sale price’ as under:

“2(39) “sale price” means the amount paid or payable to a dealeras consideration for the sale less any sum allowed by way ofany kind of discount or rebate according to the practice normallyprevailing in the trade, but inclusive of any sum charged foranything done by the dealer in respect of the goods at the time ofor before the delivery thereof.”

AB

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A9. Reference may also be made to Section 2(44) of the RajasthanSales Tax Act, 1994 which defines ‘turnover’ as under:

“2(44) “turnover” means the aggregate amount received orreceivable by a dealer for sales as referred to in clause (38)including the purchase price of the goods which are subject toBpurchase tax under section 11 of the Act; Explanation : Tax charged or collected and shown separately inthe sale bill/cash memorandum or in the accounts shall not formpart of turnover.”

10. The High Court held that since the words ‘paid’, ‘payable’,C‘amount received’ and ‘or receivable’ have been used in the aforesaidtwo sections, the assessee was entitled to receive the amount of Rs.682/-per cylinder and if he has given any discount, he cannot claim refund ofthe same and the price of the cylinder cannot be said to be Rs.645/- percylinder. The High Court also held that the goods were delivered atDRs.682/- per cylinder and this amount was collected and therefore, noamount should be refunded.

11. We have heard learned counsel for the parties and a numberof decisions have been cited.

12. In IFB Industries Limited v. State of Kerala[1], the issue wasEwith regard to the definition of ‘turnover’. This court held that to takethe benefit of trade discount and to make it eligible for exemption, allthat the assessee is required to prove was that the purchaser had paidonly the sum originally charged less the discount and that this should bea regular practice in the trade.F13. Reliance has also been placed on the judgment of the GujaratHigh Court in ONGC v. State of Gujarat[2], wherein in similarcircumstances, it was held that the discount does not form part of thesale price. A similar view was taken by the Madhya Pradesh High Courtin Gail India Ltd. v. State of M.P.[3]. The facts of this case were thatthe petitioner company GAIL, a Public Sector Undertaking, was doingGbusiness of supply of various petroleum products including LPG. Theprice of LPG and kerosene was regulated and controlled by the PublicPlanning and Analysis Cell (PPAC). The assessee supplied LPG to the 1 (2012) 4 SCC 618

2 2014 SCC Online Guj 15385 (Tax Appeal No. 50 of 2014)

H

3 (2014) 72, VST 161

oil companies on the basis of provisional price and final bill invoice wasissued after the price was settled by the PPAC and credit note or debitnote was issued. The High Court after referring to the judgment of thisCourt in IFB Industries Ltd. (supra), held that both the provisionalprice and the final price are controlled by the PPAC. The change in saleprice is due to the direction by the PPAC and is not within the control ofthe assessee. It held that even though the credit note may have beenissued on the basis of the provisional price, the price to be taken intoconsideration for calculating the turnover and the sale price must be theactual price received by the assessee.

14. Learned counsel for the respondent has relied upon a judgmentof this Court in the case of MRF Ltd. v. Collector of Central Excise,Madras[4]. We are of the opinion that this judgment has no relevance tothis case since it is a judgment arising out of the Excise Act where thetax is attracted the moment the goods are removed from the factorygate.

15. In our view, a bare reading of Section 2(39) of the RajasthanSales Tax Act, which defines “sale price” clearly indicates that it is theprice which is either paid or payable to a dealer as consideration for thesale. The definition itself makes it clear that any sum by way of anydiscount or rebate according to the practice normally prevailing in thetrade shall be deducted and shall not be included in the sale price. Thedefinition of ‘turnover’ means the aggregate amount received orreceivable by a dealer.

16. In the instant case, when the orders were placed with theassessee, the price was not finalized by the MoP & NG. There was aclear cut stipulation in the purchase order that the price of Rs.682/- isonly a provisional price subject to review and it was clearly understoodby the parties that the final price applicable after 01.07.1999 will be theprice as approved by the MoP & NG. Therefore, though the assesseemay have received Rs.682/- per cylinder, it was under a legal obligationonly to receive that price which was fixed by the MoP & NG. This pricecould have been higher than Rs.682/- per cylinder, in which event theassessee would have had to collect and deposit with the Rajasthan SalesTax Department sales tax on the excess amount. However, since theprice of the cylinder has been reduced, the assessee cannot charge morethan the price fixed, is bound to refund the excess amount collected and 4 (1997) 5 SCC 104.

AB

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Ais therefore legally entitled to get refund of the tax paid on the excessamount.

17. We may also note that it is undisputed that the assessee had torefund the amount of Rs.37/- per cylinder to the oil companies. Therefore,what it has actually received is only Rs.645/- per cylinder. What wasBlegally receivable by it was the amount to be finally fixed by the MoP &NG i.e. Rs. 645/- per cylinder. In the supply order only a provisionalprice was fixed. We have also taken into consideration the fact that theprice fixation is not in the hands of the assessee. It is not even in thehands of the oil companies. The price is fixed by the MoP & NG and insuch an eventuality, the amount actually payable is the amount to beCfixed by the MoP & NG and that is also the amount which the assessee is legally entitled to receive.

18. In view of the above discussion, we allow the appeals, setaside the judgment of the High Court and direct that the assessee shallbe refunded the amount of sales tax paid on the excess amount. TheDorder of the Deputy Commissioner is restored. The assessee shall beentitled to interest at the rate of 9% per annum on the amount payable toit from the date of the order of the Deputy Commissioner till payment ofthe amount.

19. Pending applications, if any, shall also stand disposed of.E

Devika Gujral Appeals allowed.

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