1992 (6) TMI 165 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Availability of exemption under Rule 6(4)(f) of the Karnataka Sales Tax Rules, 1957.
2. Interpretation of "freight charges" in determining taxable turnover.
3. Applicability of Supreme Court judgments in similar cases.

Detailed Analysis:

1. Availability of Exemption under Rule 6(4)(f) of the Karnataka Sales Tax Rules, 1957
The primary question referred for consideration was whether the exemption under Rule 6(4)(f) is available to a dealer in all circumstances or is restricted as per the Supreme Court judgments in Dyer Meakin Breweries Ltd. and D.C. Johar & Sons (P) Ltd. The court concluded that the exemption is not available irrespective of the circumstances. The availability of the deduction must be tested in the manner laid down by the Supreme Court in the aforementioned cases.

2. Interpretation of "Freight Charges" in Determining Taxable Turnover
The dealer in question was engaged in the business of silica sand and claimed that freight charges, which were specified and charged separately, should be excluded under Rule 6(4)(f) to arrive at the taxable turnover. The Deputy Commissioner of Commercial Taxes and the Appellate Tribunal held that these freight charges were not deductible. The Appellate Tribunal opined that the amount payable by the purchaser included freight charges, forming part of the sale price, irrespective of whether the cost of freight was shown separately.

3. Applicability of Supreme Court Judgments in Similar Cases
The court examined several Supreme Court judgments to resolve the issue:

- Dyer Meakin Breweries Ltd. v. State of Kerala: The Supreme Court held that freight and handling charges incurred prior to the sale and for transporting goods to the company's warehouse were not deductible under Rule 9(f) of the Kerala General Sales Tax Rules. The deductible charges are those incurred by the dealer for and on behalf of the purchaser after the sale.

- D.C. Johar & Sons (P) Ltd. v. Sales Tax Officer: This case reaffirmed the principle that the price includes the expenditure incurred by the company for railway freight for transporting goods from the factory site to its place of business, and such expenditure is not deductible from taxable turnover.

- Vinod Coal Syndicate v. Commissioner of Sales Tax: The Supreme Court held that where the cost of freight was charged separately, it could not be included in the turnover of a dealer. However, the court noted that the facts and circumstances of this case were different, and the earlier decisions in Dyer Meakin and D.C. Johar & Sons were not considered.

The court emphasized that the basic test is whether the cost incurred by the dealer is incidental to his acquisition of the goods. If it is, it forms part of the sale price. If the cost of freight is charged for and on behalf of the purchaser post-sale, it can be excluded under Rule 6(4)(f).

Conclusion
The court concluded that the exemption under Rule 6(4)(f) is not universally available and must be evaluated based on the specific circumstances of each case, guided by the principles laid down in the Supreme Court judgments of Dyer Meakin and D.C. Johar & Sons. The reference was answered accordingly.