1985 (4) TMI 265 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Division Bench decision of this Court in Webbs Sales and Service (P.) Ltd. v. Commissioner of Commercial Taxes, Bangalore [1969] 24 STC 84 has been impliedly overruled by the decisions of the Supreme Court in Dyer Meakin Breweries Ltd. v. State of Kerala [1970] 26 STC 248 (SC) and D. C. Johar & Sons (P.) Ltd. v. Sales Tax Officer, Ernakulam [1971] 27 STC 120 (SC).

Detailed Analysis:

Issue 1: Overruling of Webbs Sales and Service (P.) Ltd. v. Commissioner of Commercial Taxes, Bangalore [1969] 24 STC 84
The primary issue was whether the decision in Webbs Sales and Service (P.) Ltd. case, which allowed the deduction of freight and insurance charges from the taxable turnover, had been impliedly overruled by the Supreme Court decisions in Dyer Meakin Breweries Ltd. and D.C. Johar & Sons (P.) Ltd.

Facts and Background:
- M/s. United Trading Corporation and Workshop Private Ltd., and M/s. Arvind Motors, Mangalore, were engaged in selling motor vehicles and incurred freight and insurance charges for transporting vehicles from manufacturers to their place of business. They claimed exemption for these charges under the Karnataka Sales Tax Act, 1957 (K.S.T. Act) and the Central Sales Tax Act, 1956 (C.S.T. Act).
- The Commercial Tax Officer (C.T.O.) allowed the exemption based on the Webbs case ruling, but the Deputy Commissioner of Commercial Taxes (D.C.) included these charges in the taxable turnover, which was upheld by the Karnataka Sales Tax Appellate Tribunal.

Legal Provisions:
- Definitions under the K.S.T. Act:
- "Sale" (Section 2(t)): Every transfer of property in goods by one person to another for valuable consideration.
- "Taxable turnover" (Section 2(u-1)): Turnover on which a dealer is liable to pay tax, excluding inter-State trade or commerce.
- "Total turnover" (Section 2(u-2)): Aggregate turnover in all goods of a dealer within the State.
- Rule 6(4)(f) of the K.S.T. Rules: Allows deduction of freight charges from the total turnover if specified and charged separately.
- Central Sales Tax Act, 1956: Similar definitions and provisions for determining inter-State sales.

Judicial Analysis:
- Webbs Sales and Service (P.) Ltd. v. Commissioner of Commercial Taxes, Bangalore [1969] 24 STC 84:
- The court allowed the deduction of freight charges from the taxable turnover if specified separately in the invoice, interpreting Rule 6(4)(f) of the K.S.T. Rules.

- Agro Private Ltd. v. State of Mysore [1974] 34 STC 1:
- The court held that the Webbs case ruling was no longer valid in light of the Supreme Court decisions in Dyer Meakin Breweries Ltd. and D.C. Johar & Sons (P.) Ltd.

- Supreme Court Decisions:
- Dyer Meakin Breweries Ltd. v. State of Kerala [1970] 26 STC 248 (SC):
- The Supreme Court held that freight and handling charges incurred before the sale and included in the price are part of the sale price and not deductible under Rule 9(f) of the Kerala Sales Tax Rules.
- D.C. Johar & Sons (P.) Ltd. v. Sales Tax Officer, Ernakulam [1971] 27 STC 120 (SC):
- Reaffirmed the principle in Dyer Meakin, holding that transport charges are part of the sale price and not deductible.

- Hindustan Sugar Mills case [1979] 43 STC 13 (SC):
- The Supreme Court held that freight charges form part of the sale price under the Rajasthan Sales Tax Act.

Conclusion:
- The Full Bench concluded that the decision in Webbs Sales and Service (P.) Ltd. was impliedly overruled by the Supreme Court decisions in Dyer Meakin Breweries Ltd. and D.C. Johar & Sons (P.) Ltd.
- The court answered the referred question in the affirmative, holding that the Division Bench decision in Webbs Sales and Service (P.) Ltd. v. Commissioner of Commercial Taxes, Bangalore [1969] 24 STC 84 has been impliedly overruled by the Supreme Court decisions in Dyer Meakin Breweries Ltd. v. State of Kerala [1970] 26 STC 248 (SC) and D.C. Johar & Sons (P.) Ltd. v. Sales Tax Officer, Ernakulam [1971] 27 STC 120 (SC).

This comprehensive analysis preserves the legal terminology and significant phrases from the original text, ensuring a thorough understanding of the judgment's implications.