1991 (7) TMI 356 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of taxable turnover under the Tamil Nadu General Sales Tax Act for the year 1978-79; Disallowance of exemption on freight charges; Interpretation of rule 6(c)(i) of the Tamil Nadu General Sales Tax Rules; Applicability of Cement Control Order on sale transactions; Claim for deduction of freight charges; Judicial precedents on inclusion of freight charges in sale price.

Analysis:
The petitioners, engaged in cement manufacturing and trading, contested the assessment of their total and taxable turnover for the year 1978-79 under the Tamil Nadu General Sales Tax Act. The assessing authority disallowed exemption on freight charges and excise duty, leading to a dispute specifically concerning the freight charges. The assessing authority determined that the cost of transport to the destination must be borne by the assessee, not the buyers, and that the invoice does not dictate the contract terms between the parties. The assessing authority relied on the Cement Control Order, stating that the price based on free on rail destination is binding, and denied the claim for deduction under rule 6(c)(i) of the Tamil Nadu General Sales Tax Rules.

The Appellate Assistant Commissioner upheld the assessing authority's decision, referencing a Tribunal judgment in a similar case involving the Cement Control Order. The Tribunal, in its findings, emphasized that since the freight charges were part of the price of the goods, the benefit under rule 6(c)(i) could not be availed. The Tribunal also cited a Supreme Court case to support its decision, rejecting the appeal based on the legal principles involved.

In a subsequent argument, the petitioner's counsel attempted to rely on a Division Bench judgment and a recent High Court judgment to support their case. However, the distinguishing factor in those cases was that the sale price was inclusive of freight charges based on the bargain between the parties, which was not the situation in the present case. The High Court reiterated the legal principle that freight can only be included in the taxable turnover if it is established as part of the sale price agreement.

Ultimately, the High Court dismissed the petition, affirming the decisions of the lower authorities and emphasizing that freight charges cannot be included in the taxable turnover unless explicitly agreed upon as part of the sale price. The judgment provides a comprehensive analysis of the legal provisions and precedents governing the treatment of freight charges in sales transactions under the relevant tax laws.