1978 (8) TMI 202 - HC - VAT and Sales Tax

Summary

Issues involved:
The judgment addresses the following Issues:
1. Whether the supply of cement from 'Churk Cement Factory' to 'Dalla Cement Factory' constituted a sale liable to sales tax?
2. Whether the amount of freight should be excluded from the taxable turnover?
3. Whether the amount of freight should be taxed at the rate of 10 per cent under the Central Sales Tax Act, even if the primary transaction is covered by form D?

Issue 1: Supply of Cement - Sale or Not
The case involved the supply of cement from 'Churk Cement Factory' to 'Dalla Cement Factory', both owned by the State Government. The contention was whether these transactions amounted to a sale for the purpose of sales tax. The court emphasized that for a transaction to be considered a sale, there must be a transfer of property between two entities. It was held that transactions within the same entity cannot be considered sales. The court referred to previous decisions to support this interpretation. Despite billing and payment between the two government-owned units, the court concluded that the transactions did not constitute sales and were not subject to sales tax.

Issue 2: Exclusion of Freight from Taxable Turnover
Regarding the exclusion of freight from the taxable turnover, the court examined the relevant provisions of the Act. The standing counsel argued that as freight was not separately charged, it should be included in the turnover. However, the court pointed out that only amounts charged from purchasers could be included in the turnover. Since the freight charges were deducted before payment, they were not considered as charged from the purchasers. Citing a previous decision of the court, it was established that freight charges not separately charged could not be included in the turnover.

Issue 3: Taxation of Freight under Central Sales Tax Act
The third question was contingent on the second question's answer. As the court ruled in favor of excluding freight from the taxable turnover, it followed that no tax under the Central Sales Tax Act was applicable to the freight amount. The court concluded that the freight amount could not be taxed at a rate of 10 per cent under the Central Sales Tax Act, even if the primary transaction was covered by form D.

The judgment resolved all three questions in favor of the assessee, determining that the transactions were not sales, freight should be excluded from the turnover, and freight was not subject to taxation under the Central Sales Tax Act. The assessee was awarded costs amounting to Rs. 200.