2006 (11) TMI 593 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of turnover under the U.P. Trade Tax Act, 1948 regarding inclusion of freight charges in the taxable turnover.

Analysis:
The case involved a revision under section 11 of the U.P. Trade Tax Act, 1948 regarding the inclusion of freight charges in the turnover for assessment years 1999-2000. The applicant, a selling agent, received goods by stock transfer from the principal and sold them within the State of U.P., charging the value of goods and freight separately in the bill. The assessing authority included the freight charges in the turnover, leading to the appeal.

The applicant argued that since the freight was charged separately in the bill, it should not be considered part of the turnover as per Explanation II of section 2(i) of the Act. However, the opposing counsel contended that the aggregate amount for which goods are supplied includes freight charges when sold, as it was the responsibility of the applicant to transport the goods from Ahmedabad to Agra for sale. The exclusion of freight under Explanation II was explained based on previous court decisions.

The High Court considered the responsibility of the applicant in transporting goods for sale and referred to previous judgments to interpret the definition of turnover. The court cited cases like Sharma Coal Company and Dyer Meakin Breweries Ltd. to emphasize that freight charges incurred before the sale and forming part of the price of goods sold should be included in the turnover. The court highlighted that the exclusion clause in the definition of turnover does not apply when freight charges are part of the sale price, even if separately charged.

The court distinguished cases where freight charges were incidental to the sale and held that in the present case, the freight charges were part of the sale price as the applicant sold goods on a principal-to-principal basis. The responsibility for freight payment indicated that it was part of the turnover. Relying on various court decisions, including those by the apex court, the High Court upheld the order of the Tribunal, dismissing the revision.

In conclusion, the judgment clarified the interpretation of turnover under the U.P. Trade Tax Act, emphasizing that freight charges incurred before the sale and forming part of the sale price should be included in the turnover. The court's decision was based on legal precedents and the specific circumstances of the case, affirming the inclusion of freight charges in the taxable turnover.