STATE OF ANDHRA PRADESH versus M/S. A.P. PAPER MILLS LTD.

Citation: [2005] 1 S.C.R. 7 · Decided: 03-01-2005 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed

Judgment (excerpt)

STATE OF ANDHRA PRADESH 
A 
\!. 
MIS. A.P. PAPER MILLS LTD. 
JANUARY 3, 2005 
[S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] 
B 
Sales Tax: 
Andhra Pradesh Sales Tax Act, 1957-Sections 2(s), 6-A-Turnover- C 
Transportation charges and commission paid t~ ·agent for supplying raw 
material-Inclusion of, in turnover-Held, these expenses were incurred to 
procure raw material and required for completing the sale transaction and 
therefore form part of turnover. 
Respondent-assessee, a manufacturer of paper, purchased raw D 
material from unregistered dealers through agents on contract rates which 
besides cost of raw material included transportation charges and agents' 
commission. The assessee sought to pay sales tax on cost of raw material 
only. But the Assessing Authority assessed sales tax on total turnover which 
included transportation charges and the commission paid to agents. E 
Assessee challenged the assessment order unsuccessfully before the 
Appellate Commissioner. However, the Appellate Tribunal and the High 
Court held in favour of the assessee on the ground that transportation cost 
and agents' commission were incurred by assessee subsequent to purchase 
of raw materials and such charges would not represent the sale 
consideration. 
F 
In the appeal filed by Revenue, it was contended that transportation 
charges and commission paid to agent together with cost of raw material 
constituted 'turnover' under Section 2(s) of the Andhra Pradesh Sales Tax 
Act, 1957 and is liable to sales tax under Section 6-A thereof. 
G 
Allowing the appeal, the court 
HELD: I.I. Transportation charges and agent's commission paid by 
assessee to agent together with cost of raw material constitute 'turnover' 
under Section 2(s) of the Andhra Pradesh Sales Tax Act, 1957 and is liable H 
7 
8 
SUPREME COURT REPORTS 
12005] I S.C.R. 
A to sales tax under Section 6-A thereof. 19-A; 17-CI 
1.2. The Tribunal and the High Court erred in holding that the 
transportation charges and agents' commission were charges incurred 
subsequent to the purchase of raw material and such charges did not 
represent the sale consideration. There is clear statement of assessee that 
B agents were paid a total amount which included the cost of raw material, 
transportation charges and commission. 112-H; 13-A-BI 
1.3. The assessing authority is right in levying the tax on the total 
amount paid to agents for purchasing the raw material from unregistered 
C dealers. The expenses for procuring the raw material would become part 
of the total turnover. Admittedly, the assessee purchased raw material 
from unregistered dealers through agents and the agents were paid the 
total amount which included the cost of raw material, transportation 
charges and commission. The assessee, as held by assessing authority, did 
not transport raw material after purchase and the agent was made 
D responsible for transportation etc. and therefore total consideration paid 
for the purchase of goods would form part of turnover. I 12-C, D, El 
E.l.D Parry(/) ltd. v. Asstt. Commissioner of Commercial Taxes and 
Anr., 12000] 2 SCC 321; D.C. Johar and Sons (P) Ltd. v. Sales Tax Officer, 
Ernakulam and Anr., (1971) 27 STC 120; Dyer Meankin Breweries ltd. v. 
E State of Kere/a, (1970) 26 STC. 248 and Hindustan Sugar Mills ltd. v. State 
of Rajasthan and Ors., (1979) 43 STC 13, relied on. 
F 
Greaves Chi tram limited v. State of Tamil Nadu, (2003) 133 STC and 
Ram Oxygen (P) ltd. v. Joint Commissioner, (CT) (2004) 134 STC 240, 
approved. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3750 of I 999. 
From the Judgment and Order dated l.I2.98 of the Andhra Pradesh 
High Court in T.R.C. No. 232 of 1998. 
G 
Dabojit Borkakati for Mohanprasad Meharia for the Appellant. 
P.N. Gupta for the Respondent. 
The Judgment of the Court was delivered by 
H 
DR. AR. LAKSHMANAN, J. The short question involved in this 
STATE v. A.P. PAPER MILLS LTD. [LAKSHMANAN . .I.] 
9 
appeal is whether the transportation charges and agent's commission paid by A 
the respondent - Mis A.P. Paper Mills Ltd. to the agent together with the cost 
of raw materials constitute "turnover" under Section 2(s) and is liable to sales 
tax under Section 6-A of the Andilra Pradesh Sales Tax Act, 1957 (6/1957). 
The respondent is a public limited company engaged in the activity of 
manufacturing paper. The respondent is a registered dealer under the A.P. B 
Sales Tax Act, 1957 (hereinafter called as "the Act") and is an

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