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2019 (12) TMI 800 - HC - VAT and Sales TaxValuation - sale of Gypsum - inclusion of freight charges paid by the Assessee for delivery of Gypsum sold by it to the customer - Tamil Nadu GST Act - HELD THAT - The Division Bench of this Court in the case of INDIA METERS LIMITED VERSUS STATE OF TAMIL NADU 2001 (11) TMI 979 - MADRAS HIGH COURT was concerned with almost similar controversy where the Assessee/Dealer supplied power meters to the State Electricity Board under a F.O.R. Destination contract and claimed under Rule 6(c) of the TNGST Rules that the freight charges were not part of taxable turnover. Thus, mere bifurcation of the sale price of the goods in a mutual contract between the parties under a separate bargain or even a common bargain will not be material and so long as the contract of sale is F.O.R. Destination and the contract of sale of goods results in the transfer of property of goods at the door steps of the buyer, all pre-sale expenses incurred by the selling dealer will be part of the sale price or taxable turnover. The deduction under Rule 6(c) of the TNGST Rules cannot be claimed by the selling Dealer, contrary to the specific terms of the F.O.R. Destination contract. Once the terms of the contract clearly specified, the contract of sale was F.O.R. Destination , the bifurcation of total sale price in two or three parts, as has been done in the present case like price for Gypsum, freight charges and loading and stacking charges will not be material, insofar as the question of determination of the taxable turnover is concerned. It is trite law that the Rule cannot go beyond the four corners of the main statutory provisions. The definition of taxable turnover does not make any such exclusions and it is clear that all pre-sale expenditure incurred by the seller/dealer are part of sale price including the freight as in the present case will fall under taxable turnover. The learned Sales Tax Tribunal as well as the Assessing Authority were justified in upholding the imposition of the tax on such part of the freight charges on the Assessee in the present case - Petition dismissed.
Issues Involved:
1. Whether freight charges paid by the Assessee for delivery of goods are part of the taxable turnover under the Tamil Nadu General Sales Tax Act, 1959. 2. Applicability of Rule 6(c) of the TNGST Rules for deduction of freight charges from taxable turnover. 3. Interpretation of "F.O.R. Destination" contracts in relation to taxable turnover. Issue-Wise Detailed Analysis: 1. Freight Charges as Part of Taxable Turnover: The primary issue in these writ petitions revolves around whether the freight charges paid by the Assessee for delivering Gypsum to the buyer's place of business should be included in the taxable turnover under Section 2(p) of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act). The Tamil Nadu Taxation Special Tribunal had dismissed the Tax Appeals filed by the Assessee, holding that these freight charges are part of the taxable turnover. The Tribunal noted that the transfer of property in the goods occurred at the buyer's place of business, making the freight charges a pre-sale expense and thus includable in the taxable turnover. 2. Rule 6(c) of the TNGST Rules: The Assessee argued that Rule 6(c) of the TNGST Rules allows for a deduction of freight charges from the taxable turnover. The Assessee contended that since there was a separate bargain for the price of Gypsum and the freight charges, these charges should not be part of the taxable turnover. However, the counsel for the Revenue countered this by stating that Rule 6(c) permits deductions only when such charges are not included in the price of goods. Since the contract was "F.O.R. Destination," all expenses incurred prior to the transfer of property are pre-sale expenses and part of the taxable turnover. The court found merit in the Revenue's argument, citing previous judgments that supported this interpretation. 3. Interpretation of "F.O.R. Destination" Contracts: The court examined the nature of "F.O.R. Destination" contracts, where the sale is completed only upon delivery at the buyer's location. The court referred to the Division Bench decision in India Meters Ltd. v. State of Tamil Nadu, which held that freight charges incurred under "F.O.R. Destination" contracts are part of the sale price and thus included in the taxable turnover. This decision was affirmed by the Supreme Court, which emphasized that expenses incurred by the seller on freight are part of the sale price until the transfer of title occurs at the buyer's location. The court agreed with this interpretation, stating that mere bifurcation of the sale price into different components does not exclude freight charges from taxable turnover. Conclusion: The court concluded that the freight charges paid by the Assessee for delivering Gypsum to the buyer's place of business are part of the taxable turnover. The contention that these charges should be excluded based on Rule 6(c) was rejected, as the contract was "F.O.R. Destination," making all pre-sale expenses includable in the taxable turnover. The writ petitions filed by the Assessee were dismissed, upholding the decisions of the Sales Tax Tribunal and the Assessing Authority.
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