1981 (3) TMI 229 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales turnover under Central Sales Tax Act - Inclusion of freight value in taxable turnover - Interpretation of sale price definition under Section 2(h) of the Central Sales Tax Act.

Analysis:
The case involved the reassessment of a dealer's turnover under the Central Sales Tax Act due to an alleged omission of freight value in the taxable turnover. The assessing officer revised the turnover to include the freight value, leading to an appeal by the dealer to the Tribunal. The Tribunal held that freight paid by the purchasing firm did not form part of the sales turnover, resulting in the addition being deleted. The State of Tamil Nadu filed a revision petition against the Tribunal's order.

Upon reviewing the contract documents between the dealer and the purchasing firm, it was evident that the price agreed upon included the freight value. The Tribunal's reasoning that the freight did not form part of the price was disputed, emphasizing that the freight was integral to the agreed price as per the terms of the contract. The definition of sale price under Section 2(h) of the Central Sales Tax Act was crucial in determining whether the freight should be included in the taxable turnover.

The Court referred to a Supreme Court decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan, which elucidated that when the agreed price includes freight and the dealer arranges for the goods to be delivered at the destination railway station, the freight forms part of the sale price. The Court emphasized that the method of payment, such as 'freight to pay,' does not negate the inclusion of freight in the sale price. Citing previous Supreme Court decisions, the Court rejected the Tribunal's view and upheld that the freight value should be considered in the taxable turnover.

In conclusion, the Court set aside the Tribunal's order and reinstated the assessing officer's decision, ruling in favor of including the freight value in the taxable turnover. The judgment highlighted the importance of interpreting the sale price definition under the Central Sales Tax Act in determining the components included in the taxable turnover.