1994 (1) TMI 260 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for exemption of freight charges under Rule 6(4)(f) of the Karnataka Sales Tax Rules, 1957.
2. Determination of the point of sale completion.
3. Inclusion of transportation charges in the turnover.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption of Freight Charges under Rule 6(4)(f) of the Karnataka Sales Tax Rules, 1957:

The petitioner contested the revisional authority's decision to include freight charges in the taxable turnover. The assessing authority initially allowed an exemption for freight charges, considering them as separate from the sale price. However, the revisional authority, invoking section 21 of the Karnataka Sales Tax Act, 1957, added back the freight charges, asserting they were pre-sale expenditures. The Karnataka Appellate Tribunal upheld this view.

The Full Bench of the Karnataka High Court examined whether the exemption under Rule 6(4)(f) is available irrespective of circumstances or if it must be tested as per the Supreme Court judgments in Dyer Meakin Breweries Ltd. v. State of Kerala and D.C. Johar & Sons (P) Ltd. v. Sales Tax Officer. The Full Bench concluded that the exemption is not available irrespective of circumstances and must be tested against the principles laid down in the mentioned Supreme Court judgments.

2. Determination of the Point of Sale Completion:

The petitioner argued that the sale was completed at the extraction site, with the price fixed per tonne, and the transportation of goods was undertaken at the buyer's request and risk. The revisional authority and the Tribunal, however, held that the sale was completed at the buyer's premises after weighment, making the transportation charges part of the sale price.

The High Court, applying the Supreme Court's tests, determined that if transportation charges are incurred post-sale for and on behalf of the purchaser, they qualify for exemption. The Court found that in this case, the goods were sold at the extraction site, and the transportation charges were separately agreed upon and charged, making them eligible for exemption under Rule 6(4)(f).

3. Inclusion of Transportation Charges in the Turnover:

The revisional authority and the Tribunal included transportation charges in the taxable turnover, considering them pre-sale expenditures. The petitioner contended that these charges were post-sale and should not be included.

The High Court referenced the Supreme Court's decisions, which distinguish between pre-sale and post-sale expenditures. If freight charges are incurred post-sale for transporting goods on behalf of the buyer, they are deductible. The Court found that the transportation charges in this case were indeed post-sale, as the sale was completed at the extraction site, and the charges were separately billed and agreed upon.

Conclusion:

The High Court concluded that the Tribunal erred in confirming the revisional order. The transportation charges were not part of the sale price and were eligible for exemption under Rule 6(4)(f). Thus, the Tribunal's order was set aside, and the assessing authority's original order granting the exemption was restored. The revision petition was allowed.