1981 (12) TMI 158 - HC - VAT and Sales Tax

Summary

Issues: Claim for deduction of freight charges under the Tamil Nadu General Sales Tax Act, 1959.

Analysis:
The judgment delivered by the High Court of Madras pertains to two tax cases under the Tamil Nadu General Sales Tax Act, 1959, involving a claim for deduction of freight charges by the assessees. The assessees, engaged in the business of minerals, sold minerals at ex-mine rates and transported them to the buyer's designated location. The assessees contended that they were entitled to deduct the cost of freight from their turnover as per rule 6(c)(i) of the Tamil Nadu General Sales Tax Rules, 1959. The assessing authority initially rejected this claim, but the Appellate Assistant Commissioner allowed it upon considering the terms of the agreements between the assessees and their customers. The Appellate Assistant Commissioner noted that the assessees separately charged for freight, even though the prices were ex-mine rates. The Board of Revenue, however, in suo motu revision, reversed the Appellate Assistant Commissioner's decision and disallowed the freight charges.

Upon reviewing the Board's order, the High Court found discrepancies in the Board's reasoning and observed that the Board's findings indicated that the assessees were entitled to the deduction under rule 6(c)(i). The Board noted that the minerals were not delivered ex-mine and that sales were concluded at the buyer's site, but it did not dispute that freight was separately charged for. The High Court emphasized that as long as freight was charged separately from the price of the goods, the assessees were entitled to the deduction, regardless of whether the actual freight amount was accurately reflected in the charges levied on customers.

The High Court further clarified that the accuracy of the freight charges vis-a-vis the actual costs was irrelevant in determining the eligibility for deduction under rule 6(c)(i). As long as the freight was charged separately and not included in the price of the goods, the assessees were entitled to the deduction. The High Court concluded that the Board erred in reversing the Appellate Assistant Commissioner's orders and allowed the appeals, setting aside the Board's decision and restoring the Appellate Assistant Commissioner's orders in favor of the assessees. The assessees were also awarded costs.