2015 (8) TMI 1356 - HC - VAT and Sales Tax

Valuation - the expenditure incurred on account of the siding and shunting are includable in the sale price or not? - Held that - merely because certain elements of expenditure are involved on account of the siding and shunting charges for placing the empty wagons at the filling/delivering point, the same would not form part of the freight charges. We may have to keep in focus that the entire expenditure is being incurred to enable the goods to be transported from the delivery point to the destination and incurred for the movement of the goods. Viewed from that angle, the expenditure incurred in the present case would certainly form part of the freight charges and in the facts of the present case, the contract being ex-works for refinery, Visakhapatnam and such expenditure agreed to be borne under the contract by the buyers to the buyers account. Thus the siding and shunting charges would not form part of the sale price and thus the Assessing officer had rightly excluded the same from the computation of the sale price - revision allowed - decided in favor of assessee.

Summary

Issues:
1. Interpretation of siding and shunting charges in relation to freight charges.
2. Taxability of siding and shunting charges compared to railway freight.
3. Inclusion of siding and shunting charges under 'C' declaration forms.

Issue 1: Interpretation of Siding and Shunting Charges
The case involved a dispute over whether siding and shunting charges should be considered separate from freight charges. The Assessing Officer initially exempted these charges as part of freight, relying on a Supreme Court judgment. However, the Deputy Commissioner reversed this decision, considering the charges as part of the sale price. The Tribunal upheld the Deputy Commissioner's decision, prompting the assessee to challenge the inclusion of siding and shunting charges in the sale price.

Issue 2: Taxability of Siding and Shunting Charges
The court examined the nature of the expenditure incurred for siding and shunting charges, which were collected from customers for dispatching finished products. It was argued that these charges were integral to the movement of goods and should be considered part of freight charges. The court analyzed the commercial understanding of freight charges, emphasizing that all expenses facilitating goods movement should be included. Ultimately, the court concluded that the siding and shunting charges were not part of the sale price, supporting the Assessing Officer's exclusion of these charges from tax computation.

Issue 3: Inclusion under 'C' Declaration Forms
The judgment also addressed whether 'C' declaration forms, used for sales turnover of goods, covered siding and shunting charges. The court clarified that these charges were not presale expenditures but essential for transporting goods to their destination. By considering the contractual terms and pricing mechanism set by the Government of India, the court determined that these charges should be treated as part of freight charges and not included in the sale price. The court set aside the Tribunal's decision, ruling in favor of the assessee and against the revenue department.

In conclusion, the High Court of Andhra Pradesh resolved the Tax Revision Case in favor of the assessee, determining that siding and shunting charges should not be subjected to tax as they form part of freight charges essential for goods transportation. The judgment clarified the interpretation of these charges in relation to sale price and upheld the exclusion of these charges from tax computation.