1969 (2) TMI 131 - SC - VAT and Sales Tax

GOODS SUPPLIED TO OUTSTATION CUSTOMERS BY RAIL FREIGHT TO PAY FREIGHT PAYABLE DEDUCTED FROM CATALOGUE PRICE FREIGHT WHETHER PART OF SALE PRICE WHETHER TO BE INCLUDED IN TURNOVER

Summary

Issues:
Assessment of turnover for sales tax including railway freight in the price of goods sold.

Analysis:
The appellant, a public limited company, operated a factory in Andhra Pradesh and was registered as a dealer under the Andhra Pradesh General Sales Tax Act. The Commercial Tax Officer initially allowed a deduction for railway freight on goods supplied to outstation customers. However, the Deputy Commissioner later revised the assessment, including the railway freight in the turnover. The Appellate Tribunal overturned the Deputy Commissioner's decision, but the High Court restored it, leading to a dismissed writ petition challenging the assessment.

To stay competitive, the company maintained a uniform catalogue rate nationwide for its products. Goods were sent to outstation customers by railway under railway receipts with freight to pay. The company invoiced at the catalogue rate, with customers paying the invoice amount minus the railway freight to receive the goods. The Deputy Commissioner argued that since the freight was not shown separately in the invoices, sales tax should be paid on the price inclusive of freight. The Tribunal believed the freight was borne by purchasers, forming part of the turnover for tax purposes. The High Court supported this view based on the contract terms and invoice form.

The Andhra Pradesh General Sales Tax Act defines "turnover" as the total amount set out in the bill of sale, including any sums charged for goods at the time of delivery. The State contended that a sample invoice indicated the price was inclusive of railway freight. However, the Supreme Court disagreed, stating that under the contract terms, the company received the catalogue rate less the railway freight as the price of goods sold. The Court emphasized that the form of the invoice did not alter the true nature of the contract between the company and its customers. The appeals were allowed, setting aside the High Court's order and restoring the Tribunal's decision, with no costs awarded.

In conclusion, the judgment clarifies the application of sales tax on turnover, emphasizing the importance of contract terms in determining the price of goods sold, including the treatment of railway freight. The Court's analysis focused on the contractual obligations and the actual consideration received by the company, ultimately ruling in favor of the appellant based on the terms of the contract and the nature of the transactions.