1983 (1) TMI 232 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Inclusion of transport charges in the assessable turnover.
2. Applicability of Supreme Court decisions.
3. Interpretation of statutory provisions under the Orissa Sales Tax Act.
4. Necessity of impleading the Steel Authority of India.

Detailed Analysis:

1. Inclusion of Transport Charges in the Assessable Turnover:

The primary issue revolves around whether transport charges, separately charged by the petitioner, should be included in the assessable turnover for sales tax purposes. The Sales Tax Officer included these charges, arguing that they were incurred prior to the delivery of goods to the purchaser and thus formed part of the sale price. The petitioner contended that these charges should not be included as they were separately billed and not part of the sale price.

2. Applicability of Supreme Court Decisions:

The Sales Tax Officer relied on two Supreme Court decisions: *Dyer Meakin Breweries Ltd. v. State of Kerala* and *D.C. Johar & Sons (P.) Ltd. v. Sales Tax Officer, Ernakulam*. In *Dyer Meakin Breweries Ltd.*, the Court held that expenditure on freight and handling charges incurred before the sale was a component of the sale price and not deductible. Similarly, in *D.C. Johar & Sons (P.) Ltd.*, the Court applied the same principle, denying the deduction of freight and packing charges incurred before the sale.

Additionally, the Sales Tax Officer referenced *Hindustan Sugar Mills Ltd. v. State of Rajasthan* and *Cement Marketing Company of India Ltd. v. Assistant Commissioner of Sales Tax, Indore*, where the Court held that freight charges, even if separately billed, formed part of the sale price under certain conditions.

3. Interpretation of Statutory Provisions under the Orissa Sales Tax Act:

Section 4 of the Orissa Sales Tax Act defines the incidence of taxation, with gross turnover being the basis of liability. The term "sale price" under section 2(h) was amended by the Orissa Sales Tax (Amendment) Act (3 of 1976), which omitted the words "other than the cost of freight or delivery or the cost of installation when such cost is separately charged." This amendment introduced a provision in section 5(2)(A)(a)(iii) allowing the deduction of outward freight or delivery costs when separately charged.

The High Court noted that the Sales Tax Officer failed to consider this amended provision, which explicitly allowed the deduction of separately charged transport costs from the taxable turnover. The Court emphasized that the factual difference in the instant case, where goods were earmarked for the purchaser and delivered to the site, supported the assessee's claim for deduction.

4. Necessity of Impleading the Steel Authority of India:

The Steel Authority of India, the purchaser, filed a counter-affidavit asserting that it was not a necessary party to the proceedings and should not have been impleaded. The High Court did not delve deeply into this issue, focusing instead on the substantive matter of taxability of transport charges.

Conclusion:

The High Court concluded that the Sales Tax Officer erred in including the transport charges in the assessable turnover, as these charges were separately billed and deductible under the amended provisions of the Orissa Sales Tax Act. The writ applications were allowed, and the demand for the disputed portion was struck down. No costs were awarded.