2014 (9) TMI 467 - HC - VAT and Sales Tax

Taxability of transportation charges - Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the amount of transportation charges from part of the turnover of sale assessable to tax under the Gujarat Sales Tax Act, 1969, for the assessment years 1977-78, 1978-79 and 1979-80 - Held that - As per the definition of sale price , defined under Section 2(29) of the Act, Sale Price include amount of consideration paid or payable to dealer for any sale made including any sum charged for anything done by the dealer in respect of the goods at the time or before the sell thereof. It is submitted that, therefore, in the definition of sale price under Section 2 (29)of the Act, there is no specific inclusion of freight and or transport charges. Shri. Kaji, learned Advocate, has tried to distinguish the decision of the Hon ble Supreme Court in HINDUSTAN SUGAR MILLS LTD. (1978 (8) TMI 186 - SUPREME COURT OF INDIA) and has relied upon another decision of the Hon ble Supreme Court in HYDERABAD ASBESTOS CEMENT PRODUCTS LTD. VS. STATE OF ANDRA PRADESH , (1969 (2) TMI 131 - SUPREME COURT OF INDIA). Any amount received and or recovered by the applicant-assessee may be even transportation charges or any other amount received is required to be included in the Sale Price . Identical question came to be considered by the Hon ble Supreme Court in the case of HINDUSTAN SUGAR MILLS LTD. (Supra). While considering, some what, similar provisions in the Rajasthan Sales Tax Act, the Hon ble Supreme Court has observed and held that the amount of freight formed part of the sale price within the meaning of the first part of the definition of the term in section 2(p) of the Rajasthan Sales Tax Act and section 2(h) of the Central Act, so includable in the turnover of the assessee. when the applicant admittedly received the amount of transportation charges through pipeline of crude oil that was sold by the assessee to its sole purchaser, i.e. IOC, from IOC the same was required to be included in the Sale Price and is rightly included in the Sale Price . It is, therefore, rightly held that the applicant is liable to pay the tax on the same. Now, so far as the interest charged under Section 47(4A) of the Act on the ad hoc payment made by the applicant-assessee on the ground of subsequent increase in price by the Government of India with effect from 14.09.1981, i.e. the question No.2, is concerned, it is required to be noted that and it cannot be disputed that, as such, the liability to pay the Sales Tax and or eventuality to pay the Sales Tax would be at the time of sell. Therefore, the liability to pay difference in gas price as per the Central Government revised prices on 14.09.1981, would arise from that date i.e. 14.09.1981, and that the dealer was liable to pay the tax on the revised prices on and with effect from 14.09.1981. Under the circumstances, the petitioner is rightly charged with the interest on the revised price / ad hoc amount of gas with effect from 14.09.1981. - Decided in favor of revenue.

Summary

Issues Involved:
1. Whether the transportation charges form part of the turnover of sale assessable to tax under the Gujarat Sales Tax Act, 1969.
2. Whether the provision relating to interest under Section 47(4A) of the Gujarat Sales Tax Act, 1969, was rightly invoked in the assessment of the year 1979-80.

Detailed Analysis:

Issue 1: Transportation Charges as Part of Turnover of Sale
The core issue is whether the transportation charges received by the assessee from the Indian Oil Corporation (IOC) for transporting crude oil through a pipeline should be included in the 'sale price' under the Gujarat Sales Tax Act, 1969. The Tribunal held that these charges form part of the turnover of sale assessable to tax for the assessment years 1977-78, 1978-79, and 1979-80.

The applicant argued that the definition of 'sale price' under Section 2(29) of the Act does not explicitly include freight or transportation charges, relying on the Supreme Court decision in "HYDERABAD ASBESTOS CEMENT PRODUCTS LTD. VS. STATE OF ANDRA PRADESH" (1969) 24 STC 487, which held that only the amount received by the seller should be included in the turnover.

Conversely, the respondent contended that the issue is covered by the Supreme Court decision in "HINDUSTAN SUGAR MILLS LTD. VS. STATE OF RAJASTHAN" (1979) 43 STC 13, which held that freight forms part of the 'sale price' and is includable in the turnover.

The Court noted that under Section 2(29) of the Act, 'sale price' means the amount of valuable consideration paid or payable to a dealer for any sale made, including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery. The Court concluded that the transportation charges received by the assessee from IOC must be included in the 'sale price' and are rightly taxed.

Issue 2: Interest under Section 47(4A)
The second issue concerns whether the interest under Section 47(4A) of the Act was rightly invoked for the assessment year 1979-80. The applicant contended that the interest should be charged from the date they received the revised amount from IOC (06.05.1982) rather than the date the Government of India revised the gas prices (14.09.1981).

The respondent argued that the liability to pay sales tax arises at the time of sale, and therefore, the interest should be charged from the date of the price revision by the Government of India.

The Court held that the liability to pay sales tax arises at the time of sale, and any subsequent payment by the buyer does not affect this liability. Therefore, the interest was rightly charged from 14.09.1981, the date on which the Government of India revised the prices.

Conclusion:
The Court answered both questions against the applicant-assessee and in favor of the respondent-revenue, concluding that the transportation charges are part of the 'sale price' and that the interest under Section 47(4A) was rightly invoked from the date of the price revision by the Government of India. The reference was disposed of accordingly.