1992 (8) TMI 247 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of Section 5(2)(A)(a)(iii) of the Orissa Sales Tax Act, 1947 regarding the treatment of freight charges separately for taxation purposes.

Analysis:
The judgment by the Orissa High Court involved three cases with identical disputes, all disposed of through a common judgment. The cases revolved around the question of whether charging freight along with other charges separately and adding all items together to determine the total bill amount should be excluded as a cost of freight separately charged. Additionally, the issue of whether a dealer was entitled to charge separately for transport charges based on the agreement with the purchaser was examined.

The dealers in each case had agreements with railway authorities for the supply of ballasts, with sales tax paid on a part of the amount received, claiming that it related to the price for ballast supply, while the balance was for transport charges billed separately. However, the assessing officer considered the agreement as composite, adding transport charges to the taxable turnover and levying tax. Appeals to the Assistant Commissioner of Sales Tax and the Tribunal were unsuccessful, leading the dealers to approach the High Court under section 24(2) of the Act.

The legislative intent, as per sections 2(h) and 5(2)(A)(a)(iii) of the Act, was crucial in determining the treatment of freight charges for taxation purposes. The court emphasized that freight cannot be included in taxable turnover unless it is part of the goods sold. The onus was on the dealer to prove entitlement to a deduction under the Act, requiring separate charging of freight or delivery costs. While there was a bifurcation of rates in communications between the dealer and railway authorities, the transport charges alone were not separately indicated, leading to the conclusion that the dealer was not entitled to the deduction.

Ultimately, the High Court found that no question of law arose from the Tribunal's decision, upholding that the entire amount received by the dealer from railway authorities was subject to tax. The judgment was in favor of the Revenue, rejecting the dealer's claim for deduction under section 5(2)(A)(a)(iii) of the Act. Both judges concurred on the decision, answering the references in favor of the Revenue.