2008 (7) TMI 896 - HC - VAT and Sales Tax

Levy of sales tax on the amount of freight charged by the respondent-assessee from its purchasers by raising debit notes for the amount of freight on the purchasers of cement Held that - The invoices and delivery challans in question clearly stipulated that the contract is ex-works and not f.o.r. destination. In the list of purchasers quoted in the assessment order even if the price is shown to be inclusive of freight in branch, to head office communications of the assessee, respondent-company, it cannot mean that such is the contract between the respondent, assessee-company and the purchasing dealers. Therefore, this court is of the opinion that the Tax Board having decided on these materials and evidence before it that contract in question was ex-works and not f.o.r. destination, these findings of facts are not found to be perverse in any manner and are not required to be disturbed in the revisional jurisdiction. Freight charges charged from the purchaser and dealers in contract of ex-works sale by way of debit notes was not exigible to sales tax under the provisions of the CST Act, 1956. See Hindustan Sugar Mills Ltd. 1978 (8) TMI 186 - SUPREME COURT OF INDIA . Revision petitions filed by the Revenue dismissed .

Summary

Issues:
Levy of sales tax on freight amount charged by the respondent-assessee from purchasers.

Analysis:
The revision petitions filed by the Revenue raised the issue of the levy of sales tax on the freight amount charged by the respondent-assessee from its purchasers by raising debit notes. The assessing authority imposed tax on the freight amount, considering it a contract "f.o.r. destination," and imposed additional tax. The first appeal filed by the assessee was rejected by the Deputy Commissioner (Appeals). However, the Rajasthan Tax Board allowed the appeals of the assessee, holding that no tax could be imposed under the provisions of section 2(h) defining "sale price" under the Central Sales Tax Act, 1956.

The Revenue challenged the decision by filing revision petitions. The Revenue argued that the prices charged by the respondent-assessee were inclusive of freight charges, indicating a contract "f.o.r. destination." On the other hand, the respondent-assessee contended that the contract was ex-works, not "f.o.r. destination," as evidenced by the invoices and delivery challans. The respondent-assessee also highlighted the exclusion part of the definition of "sale price" under section 2(h) of the CST Act, stating that freight charges, when separately charged, do not form part of the sale price.

The court emphasized that in revisional jurisdiction, findings of fact by the Tax Board are binding unless shown to be perverse or without material. The court held that the contract in question was ex-works, not "f.o.r. destination," based on the evidence before the Tax Board. Regarding the question of law, the court cited previous judgments, including one in a similar circumstance, where it was held that freight charges by way of debit notes in ex-works contracts were not subject to sales tax under the CST Act. The court dismissed the revision petitions, upholding the decision of the Tax Board and previous legal interpretations.

In conclusion, the court dismissed the revision petitions filed by the Revenue, stating that the issue of levying sales tax on freight charges had been settled by previous judgments and did not require fresh determination. The court upheld the decision of the Tax Board, emphasizing that the findings of fact were not perverse and that the contract in question was ex-works, not "f.o.r. destination."