1989 (8) TMI 311 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Deductibility of freight charges from the turnover under the Central Sales Tax Act, 1956 and the Punjab General Sales Tax Act, as applicable to Haryana.
2. Applicability of the Supreme Court's Hyderabad Asbestos Cement Products Ltd. case to the sales transactions in the present case.

Issue-Wise Detailed Analysis:

1. Deductibility of Freight Charges from the Turnover:
The primary issue was whether the freight charges, which were initially included in the bill and later deducted, should be considered part of the dealer's turnover under Section 2(j) of the Central Sales Tax Act, 1956, and Section 2(i) of the Punjab General Sales Tax Act, as applicable to Haryana. The respondent, a registered dealer, was assessed for sales tax on the freight charges included in the price of goods, which were later deducted from the bill. The Assessing Authority and the Deputy Excise and Taxation Commissioner upheld this inclusion. However, the Tribunal found that the freight was neither payable to nor charged by the dealer, thus it should not be included in the turnover. The Tribunal's decision was based on the definitions of "sale price" and "turnover" in the respective Acts, and the contractual terms indicating that freight was to be paid by the purchaser at the destination.

2. Applicability of the Hyderabad Asbestos Cement Products Ltd. Case:
The second issue was whether the Supreme Court's ruling in Hyderabad Asbestos Cement Products Ltd. v. State of A.P. [1969] 24 STC 487 was applicable. The Tribunal concluded that the facts and contractual terms in the present case were similar to those in the Hyderabad Asbestos case, where the Supreme Court held that freight charges paid by the purchaser and deducted from the invoice did not form part of the turnover. The Tribunal noted that the present case involved an f.o.r. destination contract where the freight was to be paid by the purchaser, similar to the Hyderabad Asbestos case.

The State argued that the terms and conditions in the present case were substantially different, suggesting that the contract was an f.o.r. destination contract, making the freight part of the price charged. The State relied on decisions from the Madhya Pradesh and Madras High Courts, which were distinguished by the Tribunal as not applicable due to differences in statutory control over the commodities involved.

The court reaffirmed the Tribunal's findings, emphasizing that the contractual terms clearly indicated that the freight was to be paid by the purchaser and deducted from the invoice, aligning with the principles laid out in the Hyderabad Asbestos case. The court also referenced the Supreme Court's decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13, which supported the view that freight paid by the purchaser does not form part of the sale price.

Conclusion:
The court held that the freight charges deducted from the bill do not form part of the turnover, answering the first question in the affirmative and in favor of the assessee. It also confirmed that the Hyderabad Asbestos case's ratio is fully applicable, answering the second question in the affirmative and in favor of the assessee. The reference was thus answered in the affirmative, supporting the Tribunal's decision and rejecting the State's contentions.