Revising Tribunal order that interest on belated payment added to taxable turnover. Bench held interest included in sale consideration per Act definition, dismissing revision.
Revision dismissed; questions of law answered for department; no interest on surplus.
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IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 3.12.2014
CORAM
THE HON'BLE MR.JUSTICE R.SUDHAKAR AND THE HON'BLE MR.JUSTICE R.KARUPPIAH
T.C.(R).No.166 of 2009
Raj Lubricants (M) Private Ltd. now known as Raj Petro Specialities Pvt. Ltd. 2A-D, Doshi Towers
Poonamallee High Road Kilpauk, Chennai – 600 010.
...Petitioner
Vs.
The State of Tamil Nadu rep. by the Deputy Commissioner (CT) Chennai (East), PAPJM Building Greams Road, Chennai – 600 006. ...Respondent
PRAYER: Revision under Section 38 of the Tamil Nadu General Sales Tax Act, 1959 read with Rule 30 of the Tamil Nadu General Sales Tax Rules, 1959 against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai, dated 26.6.2009 passed in T.A.No.489 of 2001 for the assessment year 1997-1998 against the order dated 23.02.2001 made in A.P.No.358 of 1991 on the file of the Appellate Assistant Commissioner (CT) II, Chennai, and against the order dated 03.05.1999 made in TNGST No.120090/97-98 on the file of the Commercial Tax Officer, Tondiarpet, Chennai.
For Petitioner : Mrs.Hema Muralikrishnan for M/s.K.J.Chandran
This revision is filed under Section 38 of the Tamil Nadu General Sales Tax Act, 1959 read with Rule 30 of the Tamil Nadu General Sales Tax Rules, 1959 against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai, dated 26.6.2009
passed in T.A.No.489 of 2001 for the assessment year 1997-1998 and the same was admitted on the following questions of law:
(iii)Is the Tribunal justified in applying the ratio of the decision of this Court in L&T McNeil Limited v. State of Tamil Nadu, (1990) 79 STC 70, notwithstanding the fact that in the instant case, sale by delivery of the goods took place on the date of the invoice and was not postponed to a later date?
“12. We are of the view that our Honourable High Court as in the case law cited above categorically held that
interest has to be linked to the payment of delivery and they would form part of sale consideration. Further it has to be noticed that the buyers have agreed to pay interest for the belated payment in the very same invoice and not under an independent agreement. Hence the contract of sale between the assessee and its buyers included the payment of interest on belated payment at some agreed rate. Therefore, the receipt of interest on belated payment cannot be said to be arising out of a post-sale independent transaction. On the other hand as we have already noticed that it was part and parcel of the single contract of sale. By and under which the parties agreed on the ordinary sale consideration and on the sale consideration for belated payment of invoice amount.
“5. ....... In view of the principles laid down by the Supreme Court, there is no doubt that the 'commitment charges' have to be included in the taxable turnover. We are of the opinion that the Tribunal was right in saying that the sale was completed only on payment and not earlier nor was there an appropriation to the contract when the goods were ordered or manufactured. We are of the view that the 'commitment charges' are linked to the payment and delivery and they form part of the consideration for the sale of goods which took place only at the time of delivery. In our view, the aggregate amount received by the assessee will include all payments made in consideration of the sale. We are not able to agree with the contention of Mr. K. J. Chandran, the learned counsel appearing for the petitioner, that the 'interest' and 'commitment charges' are something different and they cannot be included in the taxable turnover. We are of the view that instead of making a further revision of the sale price to compensate for the
delay of goods, the parties agreed to the payment of 'commitment charges' by way of interest on the outstanding up to the time of delivery. We are also of the view that it cannot be disputed that it is a credit sale. The terms of the package deal do not indicate that there was a credit for the amount fixed and agreed upon on the date of the deal and that interest was to be paid for subsequent period. So also, we are not impressed upon the argument based on explanation (3) to section 2 (n) of the Act. In our view, the argument of the learned counsel appearing for the assessee, with regard to section 2(n) of the Act, has to be rejected since that section has nothing to do with the transaction on hand and that provision is only about the 'situs' of the sale. In our view, 'interest' or 'commitment charges' have to be included in the taxable turnover of the assessee.”
For the foregoing reasons, we dismiss this revision and answer the substantial questions of law raised against the petitioner and in favour of the department. No costs.
Sd/-
Assistant Registrar(CS-III)
//True Copy//
Sub Assistant Registrar
sasi
To
1. The Assistant Registrar,
Tamil Nadu Sales Tax Appellate Tribunal
Main Bench, Chennai – 600 104.
2. The Appellate Assistant Commissioner (CT) II
VI Floor, Kuralagam Annexe
Chennai – 600 108.
3. The Commercial Tax Officer
Tondiarpet Assessment Circle
Chennai – 600 108.
1 CC to M/s.K.J.Chandran, Advocate SR.No. 59152
T.C.(R).No.166 of 2009
GP (CO)
PSI (19.12.2014)
2 issues framed by the court
Whether interest charged on belated payment of sale price can constitute pre-sale charges or part of sale consideration attracting sales tax.
Whether the Tribunal was justified in relying on L&T McNeil Limited when goods were delivered on the invoice date rather than later.
Colour shows how this judgement treated each authority
L&T McNeil Limited v. State of Tamil NaduRelied on¶26
L&T McNeil Limited v. State of Tamil Nadu, (1990) 79 STC 70
4 provisions across 2 enactments
Raj Lubricants (M) Private Ltd. (now Raj Petro Specialities Pvt. Ltd.)
The State of Tamil Nadu
R. Sudhakar
R. Karuppiah
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
