2022 (1) TMI 1479 - HC - VAT / Sales Tax

Non-inclusion of freight amount as part of the sale price - Whether in the facts and circumstances of the case the Rajasthan Tax Board was justified in law in not appreciating the provisions of Section 2(36) of the RVAT Act and Section 2(h) of CST Act and thereby deleting the tax interest of penalty qua the freight amount which was part of invoice? - HELD THAT - As contained in para 11 of the impugned order specific finding has been given that freight/transport cost was separately reflected in the invoices on actual expenditure. No extra consideration was received by the respondent on account of cost of freight and therefore the same is in conformity with the provisions of Section 2(36) and Section 2(h) of RVAT Act 2003 and CST Act 1956 respectively and will not form part of assessable value. The judgment of Hon ble Apex Court in INDIA METERS LIMITED VERSUS STATE OF TAMIL NADU 2010 (9) TMI 878 - SUPREME COURT relied upon by revenue wherein it was held that freight cost will form part of sale price is distinguishable on following counts - (i) The provisions of RVAT Act 2003 and CST Act 1956 are not pari materia to the provisions of Tamil Nadu General Sales Tax Act 1959. (ii) In that matter the goods in question were electric meters and were supplied to the Electricity Board and the delivery was not ex-factory. (iii) Both the appellate authorities have concurrently held on the basis of invoices books of accounts and records that freight cost/transport cost was separately reflected in the invoices. Thus no interference is called for in the present revision petition. The same is hereby dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the Rajasthan Tax Board was justified in law in not including the freight amount as part of the sale price for the purpose of calculating tax, interest, and penalty under the Rajasthan Value Added Tax Act, 2003 (RVAT Act) and the Central Sales Tax Act, 1956 (CST Act), when the freight was separately charged in the invoice.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents

The legal framework revolves around the definitions of "sale price" under Section 2(36) of the RVAT Act, 2003, and Section 2(h) of the CST Act, 1956. These sections define "sale price" as the amount payable to a dealer as consideration for the sale of goods, inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery, but excluding the cost of freight if separately charged.

The petitioner relied on the precedent set by the Supreme Court in India Meters Ltd. Vs. State of Tamil Nadu, where it was held that freight and insurance charges are part of the sale price.

Court's interpretation and reasoning

The court interpreted the provisions of the RVAT Act and CST Act to mean that if the freight cost is separately charged in the invoice, it should not be included in the sale price. The court distinguished the India Meters Ltd. case by noting that the provisions of the Tamil Nadu General Sales Tax Act were not pari materia with the RVAT and CST Acts.

Key evidence and findings

The key evidence considered was the invoices, books of accounts, and records, which showed that the freight/transport cost was separately reflected in the invoices. The court found that no extra consideration was received by the respondent on account of the freight cost.

Application of law to facts

The court applied the definitions of "sale price" under the RVAT and CST Acts to the facts of the case, concluding that since the freight cost was separately charged, it should not be included in the assessable value for tax purposes.

Treatment of competing arguments

The court considered the petitioner's argument that the freight cost should be included in the sale price based on the India Meters Ltd. case. However, it rejected this argument by distinguishing the facts and legal provisions applicable in the present case from those in the cited case.

Conclusions

The court concluded that the Rajasthan Tax Board was correct in excluding the freight cost from the sale price, as it was separately charged in the invoices. The revision petition filed by the revenue was dismissed.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning

The court emphasized that "freight/transport cost was separately reflected in the invoices on actual expenditure. No extra consideration was received by the respondent on account of cost of freight and therefore, the same is in conformity with the provisions of Section 2(36) and Section 2(h) of RVAT Act, 2003 and CST Act, 1956 respectively and will not form part of assessable value."

Core principles established

The judgment establishes the principle that under the RVAT Act, 2003 and CST Act, 1956, freight costs separately charged in the invoice do not form part of the sale price for tax assessment purposes.

Final determinations on each issue

The court determined that the freight costs, when separately charged, should not be included in the sale price for calculating tax liability. The revision petition was dismissed, affirming the decision of the Rajasthan Tax Board.