1967 (10) TMI 51 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of railway freight in the turnover for sales tax purposes.
2. Interpretation of contractual terms regarding the payment of railway freight.
3. Compliance with statutory provisions under the Andhra Pradesh General Sales Tax Act, 1957, and the relevant rules.
4. Validity of the Sales Tax Authorities' actions in ignoring the Tribunal's majority decision.

Detailed Analysis:

1. Inclusion of Railway Freight in Turnover:
The primary issue is whether the railway freight paid by the purchaser should be included in the turnover of the seller for sales tax purposes. The majority of the Sales Tax Appellate Tribunal ruled that railway freight payable by the purchaser should not be included in the turnover of the seller. However, the Accounts-Member dissented, arguing that since the company charged a list price inclusive of railway freight and the goods were F.O.R. destination, the railway freight should be included in the turnover.

2. Interpretation of Contractual Terms:
The interpretation of the contract between the company and stockists is crucial. The company's advocate argued that the price charged was the list price minus discounts and railway freight, which was payable by the stockists. The government pleader contended that since the gross list price included the freight, it should be part of the turnover. The court examined clauses (4) and (16) of the agreement to determine the obligations regarding the payment of railway freight.

Clause (4): It states that the price is the current general gross list price F.O.R., less any discounts. The court clarified that F.O.R. (Free on Rail) means the seller delivers the goods to the railhead at their expense, but does not necessarily include the freight to the destination.

Clause (16): This clause indicates that for consignments sold F.O.R. destination, the railway freight is payable by the stockists at the destination, and the amount shown on the railway receipt should be deducted from the invoice. The court interpreted this to mean that the company undertakes to pay the freight, and the purchaser pays it on behalf of the seller.

3. Compliance with Statutory Provisions:
Section 2(s) of the Andhra Pradesh General Sales Tax Act defines "turnover" to include any sums charged by the dealer for anything done in respect of goods sold at or before delivery, excluding freight charges if specified and charged separately. Rule 6(1)(g) allows deduction of freight charges from the total turnover if they are specified and charged separately.

The court found that the company's invoices did not comply with these provisions because the sales tax was calculated after deducting only the discount, not the railway freight, which was included in the list price. This practice did not meet the requirement of specifying and charging freight separately.

4. Validity of Sales Tax Authorities' Actions:
The court criticized the Deputy Commissioner of Sales Tax for ignoring the majority decision of the Tribunal and applying the minority opinion. The court emphasized that the Sales Tax Authorities must follow the Tribunal's majority decision and cannot act as if the minority opinion is binding.

Conclusion:
The court concluded that the railway freight must be included in the turnover of the company, agreeing with the dissenting opinion of the Accounts-Member of the Tribunal. The tax revision case was allowed with costs, and the writ petitions were dismissed without costs. The court directed the Tribunal to consider the validity of the Deputy Commissioner's order regarding the rejection of C Forms before disposing of the appeals.

Writ petitions dismissed and revision allowed.