1995 (11) TMI 387 - HC - VAT and Sales Tax

Issues Involved:

1. Taxability of pre-sale charges (handling, dressing, polishing, and transport charges) under the Tamil Nadu General Sales Tax Act.
2. Eligibility for exemption under section 5(3) of the Central Sales Tax Act for penultimate sales.

Issue-wise Detailed Analysis:

1. Taxability of Pre-Sale Charges:

The primary issue revolves around whether the pre-sale charges such as handling, dressing, polishing, and transport charges incurred by the assessee before the delivery of granite stones to exporters should be included in the taxable turnover. The Deputy Commissioner, exercising suo motu powers under section 32 of the Tamil Nadu General Sales Tax Act, included these charges in the sales turnover for the assessment years 1975-76 and 1976-77, amounting to Rs. 7,97,422.80 and Rs. 6,93,303.36 respectively.

The Tribunal upheld this decision, noting that the charges were collected as a composite sum along with the sale consideration, thus falling within the purview of section 2(h) of the Central Sales Tax Act. The Tribunal also pointed out that the freight and handling charges were included in the sale consideration as one lump sum amount, making them taxable.

The assessee argued that these charges were collected separately for independent services and should not be included in the taxable turnover. However, the Tribunal found that the charges were part of the sale price, as they were incurred to make the goods deliverable to the purchaser, thus constituting a part of the sales turnover.

The Supreme Court's decisions in cases like Commissioner of Sales Tax, U.P. v. Rai Bharat Das & Bros. and Hindustan Sugar Mills Ltd. v. State of Rajasthan supported the Tribunal's conclusion that such charges, being integral to the sale, must be included in the sales turnover.

2. Eligibility for Exemption under Section 5(3) of the Central Sales Tax Act:

The second issue concerns the assessee's claim for exemption under section 5(3) of the Central Sales Tax Act for penultimate sales made to exporters. The Tribunal denied this exemption for the assessment year 1975-76, as the provision was introduced only from April 1, 1976. For the assessment year 1976-77, the Tribunal also rejected the exemption claim, as the assessee failed to produce necessary documents such as the sale agreement and bill of lading to establish that the granite stones sold to exporters were indeed exported.

The Tribunal emphasized the need for a pre-existing agreement or order to sell specific goods to a foreign buyer, and the penultimate sales must have taken place to comply with this agreement. The assessee argued that the sales to exporters like Chennai Enterprises and Mass International were in the course of export and thus eligible for exemption. However, the Tribunal found that the assessee did not provide sufficient evidence, such as form "H" or other documents, to substantiate this claim.

The Tribunal's decision was based on the principle that all charges incurred before delivery, which were part of making the goods deliverable, must be included in the sales turnover. Additionally, the Tribunal held that without proper documentation to prove that the goods were exported, the exemption under section 5(3) could not be granted.

Conclusion:

The High Court dismissed the tax cases (revision), upholding the Tribunal's decision to include pre-sale charges in the taxable turnover and denying the exemption under section 5(3) of the Central Sales Tax Act for the assessment year 1976-77 due to lack of sufficient evidence. The Court concluded that the pre-sale charges were part of the sale price and taxable as per section 2(h) of the Central Sales Tax Act, and the assessee failed to meet the requirements for exemption under section 5(3).

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