2001 (1) TMI 953 - AT - VAT and Sales Tax

Issues Involved:
1. Levy of tax on collection and delivery charges.
2. Inclusion of delivery and collection charges in the taxable turnover.
3. Limitation of suo motu revision by the Joint Commissioner.
4. Interpretation of Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959.

Detailed Analysis:

1. Levy of tax on collection and delivery charges:
The assessing authority found that the exemption allowed in respect of collection and delivery charges was not in order. The dealers charged the customers at fixed rates for the delivery of gas cylinders and collection of empty cylinders, which did not represent the actual transport charges incurred. The sale of medical and industrial gases was considered complete when the gases were delivered in secured cylinders at the customers' doors. Therefore, the collection and delivery charges should be included in the price of the goods sold. The turnover of Rs. 7,90,192 was brought to assessment at eight percent.

2. Inclusion of delivery and collection charges in the taxable turnover:
The Appellate Assistant Commissioner initially granted relief by applying the ratio of the Madras High Court decisions in Ramco Cement Distribution Co. (P) Ltd. v. State of Tamil Nadu and Dalmia Cement (Bharat) Limited v. State of Tamil Nadu, holding that the freight and delivery charges collected by the assessee were not liable to tax. However, the Joint Commissioner, in suo motu revision, observed that the Supreme Court had reversed the decision of the Madras High Court in Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu, holding that freight charges, packing charges, and excise duty were includible in the taxable turnover. Therefore, the delivery and collection charges should be included in the price of the goods supplied, though shown separately in the bills.

3. Limitation of suo motu revision by the Joint Commissioner:
The Joint Commissioner resorted to suo motu revision for both the years by issuing a show cause notice, stating that the revision was initiated within the period of limitation by excluding the period during which the issue was pending before the Supreme Court. Thus, the suo motu revision order passed by the Joint Commissioner was within the period of limitation, and the plea regarding limitation failed.

4. Interpretation of Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959:
Rule 6(c) allows deduction of freight and delivery charges from the total turnover if such charges are specified and charged separately without including them in the price of the goods sold. The Supreme Court in Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu held that Rule 6(c) applies only when the sale price charged does not include the freight charges, and the dealer separately collects freight from the consumer. The Joint Commissioner concluded that the delivery and collection charges were combined charges covering both delivery of full cylinders and collection of empties, and hence, should be included in the price of the goods sold.

Conclusion:
The various terms and conditions of the contract indicated that the intention of the parties was to supply the gas cylinders at the customers' place and get back the empty cylinders. Therefore, the consideration of the price payable by the customer included not only the value of gas but also the charges incurred to collect the gas in the cylinders, supply them at the customers' place, and get back the empty cylinders. The delivery and collection charges collected in these cases had to be added to the price of the goods, though shown separately in the sale invoices. The conclusion reached by the Joint Commissioner to assess the delivery and collection charges for the assessment years 1976-77 and 1978-79 was upheld, and the tax appeal cases were dismissed.

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