1979 (10) TMI 184 - SC - VAT and Sales Tax

Whether the amount of freight which was included in the free on rail destination railway station price but which was paid by the purchasers and hence deducted from the price shown in the invoices sent to the purchasers formed part of the sale price so as to be liable to be included in the taxable turnover of the assessee? Held that - The assessee could not be said to have filed false returns when it did not include the amount of freight in the taxable turnover shown in the returns and the Assistant Commissioner of Sales Tax was not justified in imposing penalty on the assessee under section 43 of the Madhya Pradesh General Sales Tax Act 1958 and section 9 sub-section (2) of the Central Sales Tax Act 1956. We accordingly reject the appeals in so far as they are directed against the inclusion of the amount of freight in the taxable turnover of the assessee but allow the appeals in so far as they relate to imposition of penalty and set aside the orders passed by the Assistant Commissioner of Sales Tax imposing penalty on the assessee.

Summary

Issues:
1. Inclusion of freight amount in taxable turnover under Sales Tax Acts.
2. Imposition of penalty for not disclosing freight amount in taxable turnover returns.

Issue 1: Inclusion of Freight Amount in Taxable Turnover:
The judgment addresses the question of whether the amount of freight included in the "free on rail destination railway station" price, but paid by purchasers and deducted from invoices, should be part of the taxable turnover under Sales Tax Acts. The Court refers to a previous decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan, where it was held that under the Cement Control Order, the freight amount formed part of the sale price and was includible in the taxable turnover. This ruling was applied to the present case under the Madhya Pradesh General Sales Tax Act, 1958, and the Central Sales Tax Act, 1956. The Court rejected the appellant's argument that the freight amount should not be included, affirming that it formed part of the sale price and was rightly included in the taxable turnover.

Issue 2: Imposition of Penalty for Non-Disclosure of Freight Amount:
The judgment also examines the imposition of a penalty on the appellant for not showing the freight amount in the taxable turnover returns. The penalty was imposed under relevant sections of the Sales Tax Acts on grounds of filing false returns. The Court analyzed the appellant's position, noting that the exclusion of the freight amount was based on a bona fide belief that it was not part of the taxable turnover. The Court emphasized that for a return to be considered false, there must be deliberateness or a guilty mind, which was lacking in this case. Citing Hindustan Steel Limited v. State of Orissa, the Court highlighted that a penalty should not be imposed for a technical or venial breach if it stems from a genuine belief of non-liability. The judgment concluded that the appellant's returns were not false, and the penalty imposed was unwarranted. As a result, the Court allowed the appeals regarding the penalty and set aside the orders imposing penalties, while rejecting the appeals against the inclusion of the freight amount in the taxable turnover.

In summary, the Supreme Court ruled that the freight amount should be included in the taxable turnover under the Sales Tax Acts based on precedent. However, the Court found that the penalty imposed on the appellant for not disclosing the freight amount in the returns was unjustified, as the exclusion was done in good faith.