2004 (4) TMI 540 - HC - VAT and Sales Tax

Issues Involved:

1. Inclusion of transport rebate or freight charges in the taxable turnover.
2. Validity of the penalty imposed on the assessee.

Issue-Wise Detailed Analysis:

1. Inclusion of Transport Rebate or Freight Charges in the Taxable Turnover:

The petitioner, a public limited company, contended that transport rebate or freight charges should not be included in the taxable turnover. The petitioner argued that the sale of products was an ex-factory/ex-depot sale, with all risk and responsibility ceasing on delivery to the carrier. The price was the f.o.r. price, and if purchasers arranged their own transport, the price was reduced by the transportation cost. The petitioner maintained a scale of transport charges based on distance and tonnage, which was deducted from the f.o.r. price to arrive at the ex-factory sale price.

The assessing authority determined the taxable turnover by disallowing the transport rebate, which led to a difference in the taxable turnover. The petitioner's contention was that the rebate was not part of the sale price and was shown separately. However, the assessing authority included the rebate in the taxable turnover and imposed a penalty.

The Tamil Nadu Sales Tax Appellate Tribunal initially ruled in favor of the petitioner, excluding the transport rebate from the taxable turnover. However, the Tamil Nadu Taxation Special Tribunal reversed this decision, holding that the transport rebate should be included in the taxable turnover under sections 2(q) and 2(p) of the Tamil Nadu General Sales Tax Act, 1959.

The petitioner argued that the agreement with stockists and the terms in the invoices and price list supported the exclusion of freight charges from the taxable turnover. The petitioner cited various Supreme Court rulings, including Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh, which held that the price received by the company was the invoice amount less the freight, and the form of the invoice was not determinative of the contract.

The Revenue countered by citing the Supreme Court ruling in Tungabhadra Industries Ltd. v. Commercial Tax Officer, which required that to claim the exclusion of freight charges, they must be specified and charged separately and not included in the price of the goods sold. The court noted that the freight charges were included in the sale price in the invoice, and the conditions for exclusion were not met.

The court concluded that the petitioner did not satisfy the conditions for excluding freight charges from the taxable turnover. The agreed price was inclusive of freight, subject to a fixed transport rebate, making the actual freight charges irrelevant to the customer. Therefore, the transport rebate could not be excluded from the taxable turnover.

2. Validity of the Penalty Imposed on the Assessee:

The assessing authority imposed a penalty on the petitioner for the difference in the taxable turnover due to the disallowed transport rebate. The Tamil Nadu Sales Tax Appellate Tribunal initially deleted the penalty, but the Tamil Nadu Taxation Special Tribunal reinstated it, holding that the transport rebate should be included in the taxable turnover.

The court upheld the penalty, noting that the petitioner did not meet the conditions for excluding the freight charges from the taxable turnover. The penalty was justified as the petitioner's claim for exclusion of the transport rebate was not in accordance with the legal provisions.

Conclusion:

The court dismissed the writ petitions, upholding the inclusion of transport rebate in the taxable turnover and the imposition of the penalty. The court emphasized that the legal conditions for excluding freight charges were not met by the petitioner, and the agreed price was inclusive of freight charges, making the transport rebate part of the taxable turnover.

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