Sales tax refund was payable on price revision of LPG cylinders by Ministry-Supreme Court

Assessee entitled to sales tax refund under Rajasthan Sales Tax Act, 1994 on price revision of LPG cylinders by ministry as the price mentioned in supply order was only provisional-Supreme Court

ABCAUS Case Law Citation:
ABCAUS 2220 (2018) (02) SC

The Challenge/Grievance:
The present case law involves bunch of SLP filed by assessees being aggrieved for non refund of sales tax on the price reduction of gas cylinders by the Ministry of Petroleum and Natural Gas (the Ministry).

Important Case Laws Cited/relied upon by the parties:
IFB Industries Limited v. State of Kerala (2012) 4 SCC 618
ONGC v. State of Gujarat 2014 SCC Online Guj 15385
Gail India Ltd. v. State of M.P. (2014) 72, VST 161
MRF Ltd. v. Collector of Central Excise, Madras 1997) 5 SCC 104

Brief Facts of the Case:
The appellant­ assessee were manufacturers of LPG cylinders.  The entire production was supplied to the Government owned companies  i.e., IOCL, BPCL and HPCL. The cost of the cylinders was determined by the Ministry of Petroleum and Natural Gas (Ministry) under the pricing policy.

Sales tax refund is payable on price revision of LPG cylinders-SC

During the year under consideration, cylinders were supplied to the IOC against its order. The supply order provided that the pricing formula was under review and the final proce would be only as per the approval.

The appellant assesses supplied the cylinders as per provisional price per cylinder mentioned in the supply order and also charged sales tax on the same in accordance with law.

Later, the IOC sent a letter to the appellant assesses intimating that a reduction in the price retrospectively. The oil companies deducted/adjusted the excess payment made and proportionate sales tax thereon from the payments due to the assessees.

As a result, the assessees approached the Assessing Authority for refund of the sales tax paid on the excess sale amount. The case of the assessees was that they had paid sales tax on the provisional price whereas the price had been reduced. The oil companies had adjueted/taken refund of the excess amount and therefore the tax paid on the excess amount be refunded to them. The assessee also urged that in view of the price reduction, the amount of reduction should not be counted in their total turnover.

The Assessing Officer rejected the claim of the assessees on the ground that there was no provision under the Act for reducing or refunding the  amount of tax once the amount of tax has been paid. It was also observed that the arrangement of the assessee with the oil companies was in the nature of a private agreement and the sales tax department had nothing to do with this.

The appeals filed by the assessee against the assessment order before the Deputy Commissioner of Appeals were partly allowed. Thereafter, the Revenue approached the Tax Board, which allowed the appeals of the Revenue.

Being aggrieved, the assessee approached the High Court by filing revision petitions which were dismissed.

Observations made by the Supreme Court:
The Hon’ble Supreme Court observed that section 2(39) of the Rajasthan Sales Tax Act, defined sale price meant the amount paid or payable as consideration for the sale less discount or rebate. Also Section 2(44) the turnover meant the aggregate amount received or receivable for sales.

The Hon’ble Supreme Court observed that the High Court held that since the words ‘paid’, ‘payable’, ‘amount received’ and ‘or receivable’ have been used in the aforesaid two sections, the assessee was entitled to receive the unrevised amount and if he had given any discount, he cannot claim refund of the same and the price of the cylinder could not be said to be as revised one. The High Court held that the goods were delivered at higher price and this amount was actually collected and therefore, the assesses were not entitled for any refund.

According to the Hon’ble Supreme Court, a bare reading of Section 2(39) which defined “sale price” clearly indicated that it is the price which is either paid or payable to a dealer as consideration for the sale. The definition itself made it clear that any sum by way of any discount or rebate according to the practice normally prevailing in the trade shall be deducted and shall not be included in the sale price. The definition of ‘turnover’ means the aggregate amount received or receivable by a dealer.

It was observed that when the orders were placed with the assessee, the price was not finalized by the Ministry. There was a clear cut stipulation in the purchase order that the price was only a provisional price subject to review and it was clearly understood by the parties that the final price applicable will be the price as approved by the Ministry. Therefore, though the assessee may have received the provisional higher price per cylinder, it was under a legal obligation only to receive that price which was fixed by the Ministry. This price could have been higher than the provisional price in which event the assessee would have had to collect and deposit with the Sales Tax Department sales tax on the excess amount. However, since the price of the cylinder had been reduced, the assessee cannot charge more than the price fixed, is bound to refund the excess amount collected and is therefore legally entitled to get refund of the tax paid on the excess amount.

The Hon’ble Supreme Court opined that in the supply order only a provisional price was fixed. The price fixation was not in the hands of the assessee. It was not even in the hands of the oil companies. The price is fixed by the Ministry and in such an eventuality, the amount actually payable was the amount to be fixed by the Ministry and that was also the amount which the assessee was legally entitled to receive.

Decision/ Conclusion/Held:
The appeals were allowed, the judgment of the High Court was set aside.  It was directed that the assessee shall be refunded the amount of sales tax paid on the excess amount with interest.

Sales tax refund is payable on price revision of LPG cylinders-SC

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