1975 (1) TMI 71 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of contract terms for sales tax deduction

The judgment delivered by the Bombay High Court in this case involved a reference under section 34(1) of the Bombay Sales Tax Act, 1953, regarding the interpretation of a contract between the respondent and the Housing Commissioner. The main issue was whether the respondent was entitled to deduct cartage and transport charges separately shown in their invoices from the turnover of sales for the assessment periods under review.

Analysis:

The respondent firm, engaged in manufacturing bricks, had a contract with the Housing Commissioner for the supply of bricks at a specified rate "inclusive of all taxes, etc." The contract required the respondent to deliver the bricks to various sites without constructing approach roads for the delivery vehicles. The respondent invoiced the Housing Commissioner with a split rate of Rs. 48 per 1,000 bricks, with Rs. 33.60 for the bricks and Rs. 14.40 for cartage. The assessing authority, Assistant Commissioner, and Deputy Commissioner rejected the firm's contention to exclude the cartage charges from turnover, but the Sales Tax Tribunal ruled in favor of the respondent.

The definition of "turnover of sales" under section 2(20) of the Act includes the sale price received by a dealer, deducting any refunded amount. The crucial term "sale price" in section 2(14) encompasses the consideration payable for goods, excluding cash discounts but including charges for services done by the dealer before delivery, except for freight or delivery costs separately charged. The respondent argued that by splitting the rate in their invoices, they were charging separately for freight, thus excluding it from the sale price.

The Court emphasized that for separate charges to be valid, there must be a contractual right and corresponding liability. In this case, the contract stipulated an all-inclusive price of Rs. 48 per 1,000 bricks, covering delivery to various sites without specifying separate charges for cartage. Despite the respondent's separate invoicing, the Court held that there was no contractual provision for such charges, and the Housing Commissioner's acquiescence did not imply a contract variation.

Referring to precedents from the Nagpur and Madhya Pradesh High Courts, the Court clarified that if parties agree on an all-inclusive price, additional charges like freight are included in the sale price. Since there was no agreement for separate charges in the present case, the respondent was not entitled to split the rate and exclude cartage charges. The Court ruled against the respondent's claim for deduction of cartage and transport charges from the turnover of sales for the relevant assessment period.

The Court's decision was limited to the period from April 1, 1959, to December 31, 1959, and the respondent was directed to pay the costs of the reference. The reference was answered in the negative, affirming that the respondent was not entitled to deduct the separately shown cartage and transport charges from the turnover of sales for the specified period.