2009 (10) TMI 872 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, the Tribunal is legally correct in treating the turnover representing loading charges, transport charges, unloading charges of fly ash as not includible in the purchase turnover for the purpose of levy of tax under section 7A of the Tamil Nadu General Sales Tax Act, 1959? Held that - As it is quite natural and legal that the sale comes to an end the moment the sale price is paid by the dealer to the thermal power station and the delivery is accepted by the dealer at that point of time ex-site itself. Therefore, whatever expenses which the dealer incurs thereafter for the purpose of drying and then transporting to his place is quite natural and it can only be post-sale expenditure and at no stretch of imagination, it could be concluded or arrived at as pre-sale expenditure. When this question of fact, which has been clearly upheld by both the appellate authorities concerned, we have no hesitation in accepting the question of fact and there is no need to make our interference with the finding of fact. As decided in Gwalior Rayon Silk Manufacturing and Weaving Co. Ltd. v. State of Tamil Nadu 1980 (9) TMI 262 - MADRAS HIGH COURT the transport charges, which was incurred by the assessee, in respect of delivery of goods from the Forest Department, would not attract levy of charges under section 7A.In favour of the assessee and against the State.

Summary

Issues:
Interpretation of pre-sale and post-sale expenses in the context of levy of tax on turnover including transportation charges for fly ash.

Analysis:
The primary issue in this case revolved around determining whether expenses incurred by a dealer in transporting fly ash from a thermal power station to their premises constituted pre-sale or post-sale expenses for tax assessment under section 7A of the Tamil Nadu General Sales Tax Act, 1959. The assessing officer initially included transportation charges, loading, unloading, and clearing charges in the total purchase value of the fly ash, leading to the imposition of tax and penalty. However, the Deputy Commissioner (CT) Appeals later ruled that the sale was complete at the thermal power station gate, and subsequent expenses were post-sale operations not subject to tax. The Sales Tax Appellate Tribunal upheld this decision, citing precedents and contractual agreements between the parties.

The Tribunal based its decision on the principle that the sale is complete upon delivery at the thermal power station, making subsequent expenses post-sale in nature. It referenced the judgment in Gwalior Rayon Silk Manufacturing and Weaving Co. Ltd. v. State of Tamil Nadu [1982] 49 STC 73, which clarified that post-purchase expenditure should be included in the turnover for tax assessment. Additionally, the Tribunal cited the Orissa High Court decision in P.R. Tata & Co. v. Sales Tax Officer, Koraput I Circle [1971] 27 STC 176, emphasizing that the purchase price includes only the consideration payable before or at the time of delivery, excluding expenses incurred by the purchaser post-delivery.

The High Court concurred with the Tribunal's findings, reiterating that the expenses for transporting fly ash post-delivery were rightfully considered post-sale expenses. Relying on the legal precedents and factual determinations made by the lower authorities, the High Court dismissed the tax revision, upholding the distinction between pre-sale and post-sale expenses in the context of tax liability under section 7A. The court's decision aligned with established legal interpretations and previous judgments, ultimately ruling in favor of the assessee and against the State.

In conclusion, the case delved into the nuanced distinction between pre-sale and post-sale expenses in the assessment of tax on turnover, particularly concerning transportation charges for fly ash. The legal analysis emphasized the completion of sale at the delivery point and the exclusion of post-delivery expenses from the taxable turnover. The consistent application of legal principles and precedents by the authorities and the High Court led to the dismissal of the tax revision, providing clarity on the tax treatment of such expenses in similar cases.