1991 (10) TMI 299 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of transit insurance charges in the taxable turnover under the Central Sales Tax Act, 1956.
2. Interpretation of "sale price" under Section 2(h) of the Act.
3. Validity of the Joint Commissioner's revision order.

Issue-wise Detailed Analysis:

1. Inclusion of Transit Insurance Charges in the Taxable Turnover:
The primary issue was whether the transit insurance charges collected by the assessees should be included in the taxable turnover under the Central Sales Tax Act, 1956. The assessing authority initially included these charges in the taxable turnover, but the Appellate Assistant Commissioner excluded them, stating that they were collected separately as per the contract terms between the buyer and seller. However, the Joint Commissioner, exercising suo motu revision, included these charges back into the taxable turnover, leading to the present appeal.

2. Interpretation of "Sale Price" under Section 2(h) of the Act:
The definition of "sale price" under Section 2(h) of the Act was pivotal. It reads: "'Sale price' means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged." The court noted that while the cost of freight or delivery is expressly excluded from the sale price, there is no specific exclusion for insurance charges. However, the court observed that if insurance charges are separately shown in the invoices and collected as per the terms of the contract, they should not be included in the sale price.

3. Validity of the Joint Commissioner's Revision Order:
The Joint Commissioner included the insurance charges in the taxable turnover, reasoning that they were part of the sale price as per the terms of the contract. However, the court disagreed, emphasizing that the insurance charges were separately collected and shown in the invoices, and were paid on behalf of the purchasers. The court cited the Kerala High Court's decision in Deputy Commissioner of Sales Tax v. McDowell & Co. Limited, which held that the cost of freight or delivery should include the cost of insurance when such charges are separately shown. The court concluded that the Joint Commissioner erred in including the insurance charges in the taxable turnover, as they were not part of the sale price under the terms of the contract.

Conclusion:
The court allowed the appeal, setting aside the Joint Commissioner's order and restoring the Appellate Assistant Commissioner's decision. The court held that the transit insurance charges, when separately collected and shown in the invoices as per the contract terms, should not be included in the taxable turnover. The court emphasized that these charges are akin to freight charges and should be excluded from the sale price when separately charged. The court's decision reaffirmed the principle that the nature of the transaction and the terms of the contract are crucial in determining the components of the sale price for tax purposes.