The division bench of the Bombay High Court, in a recent decision, held 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. It was further held 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 of the Bombay Sales Tax Act.
The applicants in the case are the Revenue, who raised two important questions of Law before the High court. Firstly, whether 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? Secondly, whether 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 of the BST Act?
M/s Bajaj Tempo Ltd, the Respondents in the instant case, urged that the customs duty paid by them on goods imported by it from out of the country, for the purpose of the manufacture of their vehicles, should not be included in the definition of the words “purchase price” as set out in section 2(22) of the Bombay Sales Tax Act.
The Sales Tax Tribunal earlier 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 Bombay Sales Tax Act. On this basis, the Tribunal found 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 Bombay Sales Tax Act. Being dissatisfied with the above order, the Revenue approached the High Court raising the above two substantial questions of law.
On behalf of the Revenue, it was contended that the definition of “purchase price” as defined under the BST Act includes 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.It was further 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, it was contended that on a true and correct interpretation of the definition of “purchase price” read with Explanation I thereto, the same would clearly include the amount of customs duty paid or payable under the Customs Act, 1962.
The Court analyzed all the relevant provisions of the BST Act and found that “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 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.”
While concluding the case in favour of the Respondents, the Court added that “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 Bombay Sales Tax 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.”
Read the full text of the Judgment below.
