1995 (2) TMI 431 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of freight charges in the calculation of the value of goods for the purpose of entry tax assessment.
2. Interpretation of Rule 12(1) of the West Bengal Taxes on Entry of Goods into Calcutta Metropolitan Area Rules, 1970.
3. Re-determination of the value of goods for entry tax purposes.

Detailed Analysis:

1. Inclusion of Freight Charges in the Calculation of Value for Entry Tax:

The primary issue revolved around whether freight charges should be included in the calculation of the value of goods for the purpose of entry tax assessment. The applicants, distributors of "Nirma" powder, contended that freight should not be included in the value determination under the West Bengal Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972 and its Rules. The applicants argued that the value should be based solely on the cost price as indicated in the invoice, excluding freight.

The respondents, however, maintained that the scheme of the Act necessitated the inclusion of freight charges in the saleable value of the goods. They cited Rule 12 of the Rules, which prescribes the procedure for determining the value for assessment purposes. The respondents argued that the cost price should encompass all expenses incurred up to the entry tax check-post, including freight.

2. Interpretation of Rule 12(1) of the Rules:

The applicants' counsel argued that Rule 12(1) should be interpreted to exclude freight from the value calculation. They referred to the Supreme Court judgment in South Gujarat Roofing Tiles Manufacturers Association v. State of Gujarat, which stated that the word "include" could sometimes imply limitation rather than enlargement. They contended that the list of items in Rule 12(1) was exhaustive and did not mention freight.

Conversely, the respondents cited the Supreme Court case of H.M.M. Ltd., which held that the value of goods should include all costs up to the point of entry into the market area, including transportation costs. They also referred to the Calcutta High Court judgment in Hindustan Gas and Industries Limited v. Entry Tax Officer, which supported the inclusion of freight in the value calculation.

3. Re-determination of the Value of Goods:

The applicants challenged the re-determination of the value of goods by the respondent authorities, arguing that the inclusion of freight charges was contrary to the provisions of the Act and Rules. They sought the quashing of the notice issued for re-determination and a declaration that freight should not be included in the value calculation. They also demanded a refund of the tax paid on the freight component.

The Tribunal, however, upheld the respondents' actions, stating that the re-determination of value, including freight, was in accordance with the law. The Tribunal emphasized that the Supreme Court's judgment in H.M.M. Ltd. was definitive and binding, and it categorically included the cost of transportation in the value of goods for tax purposes.

Conclusion:

The Tribunal dismissed both applications, agreeing with the respondents that freight charges should be included in the value determination for entry tax purposes. The Tribunal found no merit in the applicants' arguments and upheld the re-determination of value by the respondent authorities. The applications were dismissed without any order as to costs, and the operation of the judgment was stayed for eight weeks as requested by the applicants' counsel.