2009 (8) TMI 1100 - HC - VAT and Sales Tax

Effective sale - Whether the goods are sent through lorries and the appellant itself had arranged for the transportation and the risk of the goods continued till it was delivered at the place of the dealer? Held that - The assessee had failed to prove that there was any independent contract entered into with the dealers to hold that the freight charges were independent of the transaction and could not be included in the total taxable turnover, the contention of the assessee cannot be accepted and the same is liable to be rejected. One another reason as found by the authorities was that the freight charges were not collected on the basis of actuals, but on a assumption depending upon the distance of the local dealers show-room from the assessee s distribution point and varied from local distributor to distributor and was nevertheless was added in the invoices and the net amount was shown. Appeal dismissed.

Issues:
1. Challenge to order passed by Karnataka Appellate Tribunal regarding VAT charges on freight.
2. Interpretation of Karnataka Value Added Tax Rules, 2003 regarding inclusion of freight charges in taxable turnover.
3. Assessment of whether freight charges are part of total taxable turnover.
4. Examination of separate and distinct contract for payment of transportation charges.
5. Application of legal precedent in determining inclusion of freight charges in taxable turnover.

Analysis:

1. The petitioner, a private limited company engaged in the business of distributing Yamaha motorcycles, challenged an order by the Karnataka Appellate Tribunal regarding VAT charges on freight. The authorities found that the petitioner charged VAT separately on the basic value of goods, not in compliance with the Karnataka Value Added Tax Rules, 2003.

2. The assessing authority concluded that the goods were dispatched from the depot to the transporter, not to the dealer or consumer, and that the risk was with the petitioner until delivery. Consequently, a demand was raised for the tax amount that had escaped assessment. The assessing officer held that effective sale occurred upon delivery to the dealer or customer, leading to the order in question.

3. The first appellate authority and the Tribunal upheld the assessing authority's decision, stating that the petitioner failed to prove that freight charges were paid by the buying dealers. The authorities determined that freight charges should be included in the taxable turnover as pre-sale expenses, with VAT payable at each stage of sales.

4. The petitioner contended that there was a separate contract with dealers for payment of freight charges, citing an invoice as evidence. However, all three authorities found that the petitioner did not demonstrate a separate contract, and the risk of transportation was with the petitioner until delivery to dealers, justifying the inclusion of freight charges in the taxable turnover.

5. Legal precedent was cited to support the inclusion of freight charges in taxable turnover, emphasizing that the charges were not collected based on actual expenses but were added to invoices depending on dealer locations. The Tribunal rejected the appeal, and the High Court affirmed the findings, concluding that the petitioner's contentions were unfounded based on the facts and legal interpretations provided.

This detailed analysis covers the issues raised in the legal judgment, the arguments presented by the petitioner, and the reasoning behind the decisions made by the authorities and the Tribunal, ultimately leading to the rejection of the petitioner's appeal by the High Court.

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