2015 (4) TMI 492 - HC - VAT and Sales Tax

Valuation - Determination of sale turnover - Inclusion of value of freight - Held that - As per terms and conditions in the contract, when the seller was required to deliver the goods at the destination after taking into consideration the transit risk and all other liability namely; delivery charges plus sales tax plus octroi duty plus local tax/levies etc, in transit and at destination on the corporation selling price to the general trade on the date of delivery for each supply and when there is a specific reference of delivery at consignees storage/consumer pumps in corporation/ transporters in bulk and for delivery at consignees storage/ consumer pumps, it prescribes that price built up will be exdepot price plus delivery charges/octroi/local levies/ Surcharges, Transportation charges at actual Sales Tax and any other levy as applicable from time to time and it will be the responsibility of the assessee and the IOC/BPC/HPC shall be responsible & liable for any shortage, damages or deterioration to the consignment in transit if the same is to be carried in their own or contractor s truck s/tank lorries to the destination station and as per the terms and conditions of DGS & D, the rate contract, as noticed earlier and specifically mentioned herein above, it was the duty of the assessee to deliver the goods at the destination. Therefore, in my view, the Tax Board has rightly come to the conclusion that the freight is includable in the sale price - Decided against assessee.

Summary

Issues Involved:
1. Inclusion of freight charges in the sales turnover for the purposes of levy of sales tax.
2. Evaluation of contractual terms between the petitioner-assessee and the Railways.
3. Interpretation of Section 2(36) of the Rajasthan Value Added Tax Act, 2003 (RVAT Act).
4. Burden of proof on the petitioner-assessee regarding separate reimbursement of freight charges.
5. Applicability of relevant case law and precedents.

Detailed Analysis:

1. Inclusion of Freight Charges in Sales Turnover:
The core issue revolves around whether freight charges should be included as part of the sales turnover for the purpose of levying sales tax. The Assessing Officer (AO) concluded that freight, being part of the bill (invoice), should be added while levying sales tax. The Deputy Commissioner (Appeals) [DC(A)] and the Rajasthan Tax Board (Tax Board) upheld this view, stating that the petitioner-assessee failed to prove that freight charges were separately reimbursed by the Railways.

2. Evaluation of Contractual Terms:
The petitioner-assessee argued that according to the terms and conditions of the agreement, freight was reimbursable separately by the Railways. The counsel for the petitioner highlighted several clauses from the agreement indicating that freight was to be charged as per actual and reimbursed separately. However, the respondent-Revenue contended that since the freight was included in the bill, it formed part of the sales turnover and should be taxed accordingly.

3. Interpretation of Section 2(36) of the RVAT Act:
Section 2(36) defines "sale price" and includes any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery, except the tax imposed under the Act. Explanation III to Section 2(36) states that if the cost of freight and other expenses are incurred by the dealer for or on behalf of the buyer and charged separately in the invoice, they shall not be included in the sale price. The court concluded that the petitioner-assessee failed to prove that the freight charges were separately reimbursed as required by this provision.

4. Burden of Proof on the Petitioner-Assessee:
The court emphasized that the burden of proof lies on the petitioner-assessee to demonstrate that the freight charges were separately reimbursed. Despite opportunities provided, the petitioner-assessee did not present adequate evidence to substantiate this claim. This failure to discharge the burden of proof strengthened the Revenue's position that the freight charges should be included in the sales turnover.

5. Applicability of Relevant Case Law:
The court referred to several judgments to support its decision. The judgment in Hindustan Sugar Mills Ltd. v. State of Rajasthan was particularly influential, where it was held that if the freight is part of the price, it should be included in the sales turnover. Similarly, the judgment in India Meters Limited v. State of Tamil Nadu reinforced that when the seller is obligated to transport goods to the buyer's location, freight charges form part of the sale price. The court found that the petitioner-assessee's reliance on other judgments was misplaced as those cases involved clear evidence that freight was separately charged and paid, which was not the case here.

Conclusion:
The court concluded that the Tax Board was justified in including freight charges in the sales turnover for the purposes of levying sales tax. The petitioner-assessee failed to provide evidence that freight charges were separately reimbursed, and the contractual terms indicated that the responsibility for freight and transit risk lay with the assessee until delivery. Consequently, the question of law was answered against the petitioner-assessee and in favor of the Revenue, with no order as to costs.