2013 (4) TMI 679 - HC - VAT and Sales Tax

Charges incurred prior to sale - whether form part of the sale price under section 2(h) of the Central Sales Tax Act? Held that - In the instant case, arecanut cannot be sold as it is stocked in the godown. After the order is confirmed according to the speci fication of the purchaser, arecanut is removed from the godown and then according to his requirement it is filled into single or double gunny bags and then stitched by jute twine and transported to pick-up points to the transporters or to the railway station. All these acts are necessary to make goods to reach a deliverable state and the goods are sold. The title of goods passes when it is delivered to the transporter either at the pick-up points or at the railway station. Therefore, three authorities have rightly held that the handling charges and packing charges do not constitute cost of delivery, on the contrary, they form part of sale price. In that view of the matter, we do not see any merit in these petitions. Revision dismissed.

Summary

Issues:
1. Interpretation of the definition of "sale price" under section 2(h) of the Central Sales Tax Act.
2. Determination of whether charges incurred in handling goods prior to sale form part of the sale price or are considered as cost of delivery.

Detailed Analysis:

1. Interpretation of the definition of "sale price":
The judgment involved a multi-State co-operative society registered under the Karnataka Value Added Tax Act, 2003, and the Central Sales Tax Act. The key issue was the interpretation of the definition of "sale price" under section 2(h) of the Act. The court analyzed the definition, which includes the amount payable to a dealer as consideration for the sale of goods, deducting cash discounts, cost of freight, delivery, and installation. The court referred to a judgment by the Madhya Pradesh High Court, emphasizing that charges like "hammali" (cost of delivery) are not part of the sale price, even if separately charged. The court clarified that charges deductible from the sale price are limited to specific costs, and any charges for actions done by the dealer before delivery may be included in the sale price.

2. Charges incurred in handling goods:
The court examined whether charges incurred in handling goods before sale constitute part of the sale price or are considered as cost of delivery. The petitioner argued that the handling charges claimed were essentially delivery charges and should be exempt from the definition of sale price. The court analyzed the activities undertaken by the assessee, such as filling arecanut into gunny bags, stitching them, and transporting them to pick-up points or railway stations. The court noted that the assessee's obligation was to transport goods to designated points, not deliver them to the purchaser's doorstep. Referring to a Supreme Court judgment, the court emphasized that charges for actions integral to making goods deliverable are part of the sale price. Consequently, the court concluded that the handling and packing charges incurred by the assessee were not considered as cost of delivery but formed part of the sale price.

In conclusion, the High Court dismissed the revision petitions, affirming that the handling and packing charges incurred by the assessee were part of the sale price under the Central Sales Tax Act. The judgment provided a detailed analysis of the interpretation of the sale price definition and the distinction between handling charges and cost of delivery, emphasizing the importance of activities integral to making goods deliverable in determining the sale price.