1990 (11) TMI 366 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether transport charges can be included in the "taxable turnover" under the Tamil Nadu General Sales Tax Act, 1959.
2. Interpretation of Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959.
3. Conflict between the judgments in State of Tamil Nadu v. Parry and Company and Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu.
4. Applicability of Supreme Court judgments on the inclusion of freight charges in the sale price.

Issue-Wise Analysis:

1. Whether transport charges can be included in the "taxable turnover" under the Tamil Nadu General Sales Tax Act, 1959:
The core issue in this case is whether transport charges should be included in the "taxable turnover" of the assessee under the Tamil Nadu General Sales Tax Act, 1959. The assessee sought exemption for transport charges, and the Appellate Tribunal allowed this exemption based on Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959. The State of Tamil Nadu challenged this order.

2. Interpretation of Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959:
Rule 6(c) specifies that amounts such as freight, when charged separately by the dealer without including them in the price of the goods sold, should be deducted from the total turnover. The judgment underscores that the realization of tax under the Act depends on the actual turnover, which includes the aggregate amount for which goods are sold or delivered, excluding separately charged freight.

3. Conflict between the judgments in State of Tamil Nadu v. Parry and Company and Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu:
The judgment acknowledges a conflict between the decisions in State of Tamil Nadu v. Parry and Company and Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu. The former suggested that merely showing freight separately in the bill does not entitle the dealer to deduct it from the taxable turnover unless it was not included in the price in the bargain between the dealer and the purchaser. In contrast, the latter case, which aligns with the Supreme Court's stance, states that freight charges should be excluded from the taxable turnover if they are separately charged and not included in the sale price.

4. Applicability of Supreme Court judgments on the inclusion of freight charges in the sale price:
The judgment heavily relies on the Supreme Court's rulings, particularly in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh and Hindustan Sugar Mills Ltd. v. State of Rajasthan. These cases established that the form of the invoice is not determinative of the contract between the company and its customers. If freight is not part of the sale price and is separately charged, it should not be included in the taxable turnover. The judgment reiterates that the true test is whether the freight has been made part of the sale price. If not, and if the freight is separately shown, it should not be included in the taxable turnover.

Conclusion:
The judgment concludes that freight cannot be included in the taxable turnover unless it is found to be part of the sale price. In the absence of any material suggesting that freight was realized as part of the price of the goods sold, the Revenue is not entitled to claim tax on the transportation charges. Consequently, the tax case revision was dismissed, and the Tribunal's order allowing the exemption for transport charges was upheld.