1973 (7) TMI 101 - HC - VAT and Sales Tax

Summary

Issues:
1. Claim for deduction of freight and transport charges from total turnover under Madras General Sales Tax Act, 1959.
2. Interpretation of agreement between limestone suppliers and buyer regarding pricing and transport charges.
3. Applicability of rule 6(f)(i) of the Madras General Sales Tax Rules.
4. Comparison with a similar case regarding deduction of transport charges.
5. Dispute over deduction of enhanced royalty paid by the buyer in certain assessment years.

Detailed Analysis:
1. The petitioners, limestone suppliers to India Cements Ltd., were assessed under the Madras General Sales Tax Act for five assessment years. They claimed deduction of freight and transport charges from their total turnover, which was rejected by the assessing authority and subsequent appeals. The main issue was whether the disallowance of this claim could be sustained.

2. Initially, an all-inclusive price was fixed for the limestone, but later amended to separately show the price per tonne and the freight charges. Invoices were prepared accordingly. The court noted that the revised agreement between the parties clearly separated the price of the limestone and the transport charges, indicating the assessees' right to claim deduction for the latter. The court emphasized the importance of the revised agreement and relevant invoices in determining the applicability of the deduction rule.

3. The court referred to a similar case where transport charges were separately shown in invoices and held deductible under the relevant tax rule. It highlighted that the key factor was whether the invoices reflected separate charges for transport, irrespective of the place of sale. In this case, the agreement specified the price of the limestone at the extraction point and the buyer's obligation to pay transport charges separately.

4. A comparison was drawn with a Supreme Court decision where separate charges were disallowed as they enhanced the cost price before the sale. However, in the present case, the court found that the transport charges were post-sale expenses agreed upon by the parties, justifying their deduction from the total turnover.

5. Lastly, a dispute arose regarding the deduction of enhanced royalty paid by the buyer in certain years. The court ruled that the enhanced royalty, although separately charged and paid, should be treated as part of the sale price and not eligible for deduction. Consequently, the court allowed the petitions in part, upholding the deduction of freight and delivery charges but denying the deduction of enhanced royalty paid by the buyer.