2019 (10) TMI 43 - HC - VAT and Sales Tax

Valuation - inclusion of expenditure in the value - Whether in absence of any payment being made by the assessee to any person for transportation of coal, there could arise any rejection of the value of goods disclosed by the assessee or of addition on that account? HELD THAT - The main part of the sub-section (h) of Section 2 of the Act reveals, only charges relating to transportation may be included in the value of goods. For a charge contemplated under Section 2(h) of the Act to arise, it must be in the nature of payment made by one person to another. It would be self-contradicted to accept that a person had charge himself for transportation done by him, of his own goods. Undisputedly, the sale of coal was completed at the collieries. Also, it is undisputed that the assessee transported the entire quantities of coal purchased by it from the collieries to its power plant through its railway line using railway wagons and rail engine owned by it - Therefore, there would never arise any charge for transportation paid by the assessee. What the assessee incurred was expense on own account. It could never be treated as a charge for transportation. Then, in absence of any legal fiction created by the Act to put a simple expenditure incurred on own account on the footing of a charge paid to another, that expense cannot be included in the value of goods. A perusal of the order of the Tribunal does not bring out any finding to the effect that the documents provided in support of the purchase price of coal were not worthy of credence. In absence of the pre-condition to invoke the explanation, the finding of the Tribunal is wholly erroneous and based on consideration extraneous in law - the direction of remand is unfounded and extraneous. The question of law is answered in negative, i.e. in favor of the assessee and the against the revenue - Revision allowed.

Summary

Issues:
Challenge to order of U.P. Trade Tax Tribunal regarding the value of goods for Entry Tax assessment.

Analysis:
The revisionist filed a revision against the U.P. Trade Tax Tribunal's order remitting the matter to redetermine the value of goods, specifically coal, for Entry Tax assessment. The key question raised was whether the absence of payment for transportation of coal by the assessee could lead to the rejection of the disclosed value of goods or any addition to it. The assessee, a thermal power plant operator, purchased coal and transported it using its own railway line, engine, and wagons. The assessing authority added freight charges to the value of goods declared by the assessee, resulting in a challenge and subsequent remand by the Tribunal.

The court examined Section 2(h) of the U.P. Tax on Entry of Goods into Local Areas Act, 2007, which defines the "value of goods" for tax assessment purposes. It was emphasized that charges related to transportation could only be included if they were payments made by one party to another. Citing precedent, the court clarified that a person cannot charge themselves for transporting their goods. Since the assessee owned the railway infrastructure and transported the coal themselves, no charge for transportation could arise. The expenses incurred by the assessee for transportation were on their account and could not be considered as charges for transportation.

The court further highlighted that the Tribunal's invocation of the Explanation to Section 2(h) was unfounded as it did not establish the preconditions necessary for applying the explanation. The Tribunal failed to show that the documents supporting the purchase price of coal were not credible, a prerequisite for invoking the explanation. Therefore, the Tribunal's decision to remand the assessment proceedings based on this flawed reasoning was deemed erroneous and legally unsound. Consequently, the court answered the question of law in favor of the assessee and against the revenue, allowing the revision and setting aside the Tribunal's order to remand the assessment.

In conclusion, the court held that the expenses incurred by the assessee for transporting coal on their account could not be treated as charges for transportation under the tax law. The Tribunal's decision to remand the assessment lacked legal basis, and the court ruled in favor of the assessee, allowing the revision and overturning the Tribunal's order.