2020 (1) TMI 937 - HC - VAT and Sales Tax

Taxability - freight charges - Reassessment of tax payable - Chhattisgarh Vanijyik Kar Adhiniyam, 1994 - whether the freight charges do not form part of the sale price defined under section 2(u) of the Act, 1994? - change of opinion. Whether the freight charges do not form part of the sale price defined under section 2(u) of the Act, 1994 and hence not taxable? - HELD THAT - It is clear point blank that the sale was to be completed only on effecting the door delivery in the premises of the purchaser/BSP and that the payment of consideration was to be based on the weight taken at the premises of the purchaser and never before. As such, the freight paid/agreed to be paid was to form part of the sale price defined under section 2(u) of the Act, 1994 and in turn, it will have a bearing in the turnover defined under section 2(w) of the Act, 1994. Whether mere change of opinion of the assessing officer is not a ground to initiate reassessment proceedings in terms of section 28 of the Act, 1994? - HELD THAT - The nature of contentions raised by the appellants/assessees in these cases. It is stated that all the materials were very much available with the adjudicating authority at the time of original assessment itself and that there was no instance of any suppression or non-disclosure of the full materials necessary for the assessment by virtue of which no reassessment proceeding could have been initiated, pursued or finalized by the adjudicating officer. However, based on the observation that the question still would be whether, in the present case, the Assessing Authority was satisfied or not, a decision was rendered as contained in paragraphs 30 and 31 holding that it was not so, and hence decided against the Revenue. When all any tax is to be paid on the freight charges as well, by virtue of the specific terms agreed between the appellants/suppliers/ dealers and the respondent-Bhilai Steel Plant (BSP)/buyer, it has to be shifted to the shoulders by the respondent-BSP or not? - HELD THAT - The question whether freight was forming part of the sale price was never subjected, considered or any opinion was expressed in this regard by the adjudicating officer in the first round of the proceedings. This escape of assessment was found by the Audit Department, which was taken as a piece of information by the adjudicating officer, who on application of mind, held that there was reason to believe that it had escaped assessment ; in turn leading to the proceedings under section 28 of the Act, 1994. Thus, the order passed by the adjudicating officer, which has become final, based on the interference declined by the statutory authorities. Appeal dismissed.

Summary

Issues Involved:
1. Whether freight charges form part of the “sale price” under section 2(u) of the Chhattisgarh Vanijyik Kar Adhiniyam, 1994.
2. Whether reassessment proceedings were validly initiated under section 28 of the Act, 1994.
3. Whether the tax liability on the freight charges should be borne by the respondent-BSP as per the terms of the agreement.

Detailed Analysis:

1. Freight Charges as Part of “Sale Price”:
The appellants argued that freight charges billed separately should not be included in the "sale price" under section 2(u) of the Act, 1994. The court examined the agreement between the appellants and the respondent-BSP, which stipulated that the sale was on a door delivery basis, meaning the sale was complete only upon delivery at the buyer's premises. The court referred to the definition of "sale price" in section 2(u) and the relevant case law, including the Supreme Court’s decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan, which held that freight charges form part of the sale price if the sale is complete at the buyer's premises. The court concluded that the freight charges were indeed part of the sale price as the delivery was completed at the buyer's location, making them taxable.

2. Validity of Reassessment Proceedings:
The appellants contended that the reassessment was based on a mere change of opinion, which is not a valid ground under section 28 of the Act, 1994. The court noted that the original assessment did not consider whether freight charges were part of the sale price, and no opinion was formed on this issue. The reassessment was initiated based on an audit objection, which the court held could be considered "information" leading to a belief that there was an escape of assessment. The court cited various judgments, including Larsen & Toubro Ltd. v. State of Jharkhand, to support the view that audit objections can constitute valid information for reassessment. Thus, the reassessment proceedings were deemed valid and within the legal framework.

3. Tax Liability on Freight Charges:
The appellants argued that if freight charges were taxable, the tax liability should be borne by the respondent-BSP as per the agreement terms. The court observed that no specific prayer or pleading was raised in the proceedings to shift the tax liability to the respondent-BSP. Additionally, the respondent-BSP was not a party to the adjudication proceedings before the assessing officer or the revisional authority and was impleaded only in the writ petitions. The court held that the issue of shifting the tax liability could not be entertained in these proceedings and left it open for the parties to pursue before the appropriate forum if sustainable.

Conclusion:
The court dismissed the appeals, upholding the decision that freight charges form part of the sale price under section 2(u) of the Act, 1994, and the reassessment proceedings were validly initiated under section 28 of the Act, 1994. The issue of shifting the tax liability to the respondent-BSP was not adjudicated in these proceedings and was left open for future litigation.