2015 (1) TMI 1043 - HC - VAT and Sales Tax

Amount paid under contract of selling formed part of sale price or not - Whether the Tribunal was justified in holding that the Airtime charges and License fees charged under an contract of selling activated pager do not form a part of sale price within the meaning of Section 2(29) of the Bombay Sales Tax Act, 1959 Held that - In State of Karnataka vs. Bangalore Soft Drinks Pvt. Ltd. 1998 (9) TMI 539 - SUPREME COURT OF INDIA it has been held that the Respondent has effected sales exworks and had also undertaken transport of the goods to the place of the buyer - The goods were transported in the vehicles of the Petitioners only - the transfer of the property in the goods takes place at the factory gate of the Petitioner and the subsequent transportation undertaken by the Petitioner was for and on behalf of the Petitioner as his agent - The obligation of transportation was construed to be as separate contract and therefore, the freight charges cannot be included in sale price of the goods - the goods which form part of the subject matter of the contract between the Respondent and its buyer were in a specific and deliverable state - The transfer of property in the goods in pursuance of the sale contract takes place against the payment of the price of goods - The delivery of the goods is effected by the seller to the buyer and the obligation under law to obtain registration of the motor vehicle is cast upon buyer - The service of facilitating the registration of the vehicle which is rendered by the seller-assessee is to the buyer and in rendering that service, seller acts as an agent of the buyer - The handling charges for this service cannot form part of sale price - Thus, taking overall view of the matter it is clear that the sale price does not include airtime charges and/or license fees thus, sale price will be restricted to that of the hardware, namely, pager units and will not include the cost of airtime and license fees - the tribunal was justified in holding that airtime charges and license fees charged under the contract for selling activated pager do not form part of the sale price Decided against Revenue.

Summary

Issues Involved:

1. Whether "Airtime charges" and "License fees" charged under a contract of selling activated pagers form part of the sale price within the meaning of Section 2(29) of the Bombay Sales Tax Act, 1959.

Detailed Analysis:

1. Background and Facts:
The Respondent, a registered dealer under the Bombay Sales Tax Act, 1959, is an importer and reseller of hardware, specifically radio pagers. The Respondent was assessed by the Sales Tax authorities, which included airtime charges and license fees in the gross sales for tax purposes. The Respondent argued that these charges should not be part of the sale price of the hardware.

2. Tribunal's Decision:
The Sales Tax Tribunal held that airtime charges and license fees were not part of the sale price of the pagers. This decision was based on the distinction between the sale of the hardware and the provision of services (airtime and license).

3. Arguments by the Petitioner:
The Petitioner contended that the license fees should be part of the sale price, relying on the Supreme Court's decision in M/s. Central Wines, Hyderabad vs. Special Commercial Tax Officer Sales Tax, which stated that any amount collected from the purchaser as consideration for the sale forms part of the sale price.

4. Arguments by the Respondent:
The Respondent argued that there were separate agreements for the sale of hardware and the provision of airtime services. The Respondent also highlighted that the airtime and license fees were not optional and were separate from the sale of the pager hardware.

5. Legal Analysis:
The court analyzed the definition of "sale price" under Section 2(29) of the Bombay Sales Tax Act, 1959, which includes any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof. The court found that airtime charges and license fees were for services provided after the sale and delivery of the pager, and thus, did not form part of the sale price.

6. Supporting Judgments:
The court referred to several judgments, including:
- Hindustan Sugar Mills vs. State of Rajasthan: Emphasized that consideration for the sale includes all amounts payable by the purchaser to the dealer.
- Imagic Creative Pvt. Ltd. vs. Commissioner of Commercial Taxes: Distinguished between service tax and sales tax, indicating that services provided after the sale do not form part of the sale price.
- State of Karnataka vs. Bangalore Soft Drinks Pvt. Ltd.: Held that transportation charges post-sale do not form part of the sale price.

7. Conclusion:
The court concluded that airtime charges and license fees do not form part of the sale price of the pager hardware. The sale price is restricted to the cost of the hardware alone. The tribunal's decision was upheld, and the question of law was answered in the affirmative, favoring the Respondent.

8. Costs:
There was no order as to costs.