1997 (4) TMI 468 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of freight, loading, and unloading charges in the turnover.
2. Justification for reopening the assessment under Section 19 of the Kerala General Sales Tax Act, 1963.
3. Validity of the reassessment order and additional demand.

Issue-wise Detailed Analysis:

1. Inclusion of Freight, Loading, and Unloading Charges in the Turnover:

The primary contention revolves around whether the freight, loading, and unloading charges should be included in the turnover of the petitioner. The petitioner argued that these charges were paid directly by the customers to the lorry drivers and thus should not be included in the turnover. The petitioner also claimed that there was an oral agreement with the customers regarding the payment of these charges directly to the drivers. However, the court noted that there was no material or evidence to substantiate this claim. The court emphasized that according to Section 2(xxvii) of the Kerala General Sales Tax Act, the turnover includes the aggregate amount for which goods are bought or sold. Rule 9(f) of the Kerala General Sales Tax Rules, 1963, specifies that deductions for freight and delivery charges are only permissible if they are charged separately by the dealer and not included in the price of the goods sold. Since the expenses in question were incurred in connection with the purchase of goods and not specified separately, they should be included in the turnover.

2. Justification for Reopening the Assessment under Section 19 of the Kerala General Sales Tax Act, 1963:

The assessing authority originally completed the assessment based on the petitioner's return without considering the freight, loading, and unloading charges. Subsequently, the assessment was reopened under Section 19 of the Kerala General Sales Tax Act, 1963, which allows the assessing authority to reassess if any part of the turnover has escaped assessment or has been under-assessed. The court noted that the reopening was justified since the freight charges were not considered in the original assessment, and the notice for reassessment was issued within the permissible period of four years. The petitioner was given a reasonable opportunity to be heard, fulfilling the procedural requirements under Section 19.

3. Validity of the Reassessment Order and Additional Demand:

The reassessment was based on the finding that the sale value of cement per bag was higher than what was reported by the petitioner. The assessing authority determined that the actual sale value should include the freight, loading, and unloading charges, leading to an additional demand. The court upheld the reassessment, noting that the petitioner failed to provide evidence of any agreement with customers regarding the payment of these charges. The court also found that the estimate of the sale value based on comparable cases was reasonable. The decisions cited by the petitioner, including C.O. Devassy v. State of Kerala and the Supreme Court rulings in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh and Hindustan Sugar Mills Ltd. v. State of Rajasthan, were deemed not applicable to the facts of this case.

Conclusion:

The court concluded that the freight, loading, and unloading charges should be included in the turnover as they were pre-sales expenses incurred by the dealer. The reopening of the assessment under Section 19 was justified, and the reassessment order was valid. The tax revision case was dismissed, with no order as to costs.