2011 (8) TMI 1029 - HC - VAT and Sales Tax

Taxability of transportation charges - Tribunal held that transportation charges so collected are part of the post-sale expenditure and are not liable to be included in the total turnover - Held that - dealer collects freight charges as part of total order value. Though it is specifically mentioned what is the cost component to the said transportation charges collecting the value before effecting sale of the goods when sale of goods becomes complete only after the delivery of the goods therefore it becomes part of taxable turnover. If after transfer of title to the goods by delivery of the goods for which he has already collected the price of the goods and after delivery if he receives the transportation charges then the said amount does not form part of the taxable turnover as it is not a part of the sale consideration or paid prior to sale of the goods. That appears to be a clear manifestation of the intention by the Legislature as contained in various definitions referred to above and the clarifications issued by the Government. In that view of the matter the order passed by the revisional authority is strictly in accordance with law whereas the appellate authority was carried away by the legal position prior to the enactment of the Act and thus he got confused himself without looking into the express provisions contained in the Act. The revisional authority was therefore justified in interfering with the order as the order was prejudicial to the remedy - Following decision of APCO Concrete Block and Allied Products Versus Deputy Commissioner of Commercial Taxes Audit 1 DVO Bangalore and Others 2010 (7) TMI 943 - KARNATAKA HIGH COURT - Decided in favour of Revenue.

Summary

Issues:
Challenge to order by Karnataka Appellate Tribunal on sales tax liability for transportation charges in invoices.

Analysis:
The High Court addressed the challenge to the Karnataka Appellate Tribunal's decision on sales tax liability for transportation charges in invoices. The Tribunal had set aside the orders of the assessing authority and the Appellate Commissioner, ruling that the assessee was not liable to pay sales tax on the transportation charges mentioned in the invoice. The Court noted that the assessee had shown the transportation charges separately in the invoice, with payment terms of 60 days credit from the date of receipt of materials. The Court observed that the title of the goods passed to the consignee at the time of delivery, and any amounts received before delivery constituted part of the goods' value, including transportation charges. The assessing authority and the Appellate Commissioner had held that sales tax was payable on the total amount of goods plus freight charges. However, the Tribunal disagreed, stating that the transportation charges were fixed separately for each item, collected in tax invoices, and paid to transporters as post-sale expenditure, not to be included in the total turnover.

The Court further analyzed the situation, emphasizing that the transportation charges were payable within 60 days and not directly paid to transporters. Additionally, the charges were fixed to a particular unit, indicating they were not post-sale expenditure. Referring to a previous case, the Court highlighted that the collection of transportation charges as part of the total order value before goods' delivery constituted taxable turnover. The Court found the Tribunal's order contrary to law and unsustainable. Consequently, the Court allowed the revision petitions, setting aside the Tribunal's order and confirming the assessing authority's decision upheld by the Appellate Commissioner. The parties were directed to bear their own costs.