2014 (1) TMI 458 - HC - VAT and Sales Tax

Disallowances of installation charges and transportation charges - Levy of Value Added Tax - Held that - Petitioner is engaged in trading of house hold articles, electrical and electronic goods etc. manufactured by other companies. Petitioners have produced the price lists issued by the manufacturers. A perusal of these price lists specify that the prices are exclusive of installation charges. Further the invoices raised by the petitioners specifies that the prices of goods are ex-showroom price. It further specifies that transfer of title in goods takes place at the place of seller. Therefore, the sale price of the goods at the ex-showroom price attracts sales tax. Subsequent to the transfer of title in the goods at the place of seller they Act as agents of customers for transportation of goods and to installation purpose. Therefore the transportation charges and the installation charges do not become the part of sale price of the goods. The invoices produced by the petitioner specifies under different heads, the sale price of the goods, the transportation charges and the installation charges. Petitioners have collected transportation charges and the installation charges from the customers under different heads in the invoices raised by them. Further it is not in dispute that the petitioners have paid service tax on these transportation charges and installation charges. Thus the petitioners have discharged their legal obligation of paying the service tax on the services rendered by them. The State Government cannot enrich by wrongly bringing the transportation charges and the installation charges as part of sale price of the goods. Therefore the impugned orders are liable to be quashed - Decided in favour of assessee.

Summary

Issues:
Challenge to Section 2(36) of the Karnataka Value Added Tax Act, reassessment orders for multiple assessment years, inclusion of installation and transportation charges in sale price.

Analysis:

Challenge to Section 2(36) of the KVAT Act:
The petitioners sought a writ to declare Section 2(36) of the KVAT Act as ultra vires. The section defines "Turnover" and includes sums charged for services done by the dealer in relation to goods sold. The court examined the definition and its application to the case.

Reassessment Orders for Multiple Years:
Respondent issued reassessment orders proposing disallowances and VAT levy on installation and transportation charges for various assessment years. Petitioner contended that these charges were not part of the sale price and had paid service tax separately. The court reviewed the proposition notices and the replies submitted by the parties.

Inclusion of Installation and Transportation Charges in Sale Price:
The main issue was whether installation and transportation charges formed part of the sale price. Petitioner argued that as per sale agreements and invoices, these charges were separate and not included in the sale price. They contended that post-sale services were charged separately and service tax was paid accordingly. The court analyzed the nature of these charges and their relationship to the sale transaction.

Judgment:
The court examined the definition of "Turnover" under Section 2(36) of the KVAT Act, emphasizing that charges for services related to goods sold could be included in the sale price. However, based on the facts presented, where the transfer of title occurred at the seller's location and charges were clearly delineated in invoices, the court ruled in favor of the petitioners. It held that transportation and installation charges were not part of the sale price and service tax had been appropriately paid. Consequently, the court allowed the writ petitions, quashed the reassessment orders for the relevant assessment years, and directed accordingly.

This detailed analysis outlines the key legal issues, arguments presented by both parties, and the court's reasoning leading to the judgment in this case.