9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (4) TMI 84 - HC - VAT and Sales TaxEntitlement of deduction of freight - freight in the sale bill charged separately - part of sale price or not - HELD THAT - In the considered view of the Court, the discussion by the Tribunal, and the conclusion reached by it, overlooks the actual applicable clauses of the contract. In fact the Tribunal does not actually discuss Clause 6.1 read with Clause 4 (a) of the PO which would indicate what the intention of the parties was when they entered into the contract of sale and purchase as to the exact place of delivery of the goods in question. The definition of sale in Section 2(h) of the CST Act had to be understood in the context of the clauses of the contract. Here, once the sale was complete at the site of the inspection of the goods, which is the factory of the Petitioner, then the freight charge for further transportation of the goods to the purchaser s site would obviously not form part of the sale price. Therefore, it was being separately shown in the invoice. It is seen that the Petitioner had indicated separately the freight charge of ₹ 45/-. The Tribunal committed a serious error in understanding the freight charge to be same freight charge irrespective of the distance between the factory of the Petitioner and the destination of the Purchaser. The crucial factor, which was missed, was that the rate was an uniform rate of ₹ 45 per piece as this was for a supply of 50000 units - In almost identical facts, the Supreme Court in STATE OF KARNATAKA AND ANOTHER VERSUS BANGALORE SOFT DRINKS PVT. LTD. 1998 (9) TMI 539 - SUPREME COURT held that despite there being a uniform rate per unit as freight charge that still would not be included in the sale price - the case supports the case of the Petitioner is that in the instant case the freight charges are not includable in the sale price, which is amenable and therefore, has to be excluded while calculating the taxable turn over for the purposes of the OST Act. In the considered view of the Court, since the Tribunal made a factual error as regards the place of delivery in terms of the Clauses of the Contract in the present case, it made a further error in distinguishing the above decision as not applicable to the facts. On the other hand, this Court finds that the said decision is squarely applicable to the fact in the present case. The question framed is answered in negative that is in favour of the Petitioner-assessee and against the Department by holding that the Tribunal was incorrect in holding that the freight shown in the sale bill separately is part of the sale price - Revision petition disposed off.
Issues Involved:
1. Whether the Tribunal was legally correct in holding that freight separately charged in the sale bill is part of the sale price and not deductible. 2. Interpretation of the contract clauses regarding the completion of sale and delivery. 3. Applicability of Section 2(h) of the CST Act in determining the sale price. 4. Relevance of previous judgments in similar cases. Detailed Analysis: Issue 1: Tribunal's Decision on Freight Charges The primary issue was whether the Tribunal was correct in including separately charged freight as part of the sale price, thus disallowing its deduction. The petitioner, a manufacturer and trader of iron and steel goods, had bid for a tender floated by the Department of Telecommunications (DoT) and quoted prices with separate components including freight. The Tribunal upheld the assessment order which included freight in the sale price, rejecting the petitioner’s claim for deduction. Issue 2: Contract Clauses on Sale and Delivery The contract stipulated that the sale was complete once the goods were inspected and earmarked at the petitioner’s factory. Clause 9 of the Bid Document required separate quoting of prices for various components including freight. Clause 6.1 of the General Conditions of Contract specified that delivery was deemed complete upon inspection. The Tribunal overlooked these clauses, erroneously concluding that the sale was completed at the consignee’s place, thus including freight in the sale price. Issue 3: Section 2(h) of the CST Act Section 2(h) of the CST Act defines "sale price" and excludes the cost of freight if separately charged. The petitioner argued that since the sale was completed at the factory, the freight for transporting goods to the DoT site should not be included in the sale price. The Court agreed with this interpretation, noting that the freight was separately shown in the invoices, aligning with the statutory definition. Issue 4: Relevant Judgments The petitioner cited several judgments, including the Supreme Court’s decision in State of Karnataka v. Bangalore Soft Drinks Pvt. Ltd., which supported the exclusion of uniformly charged freight from the sale price. The Court found these precedents applicable, noting that the Tribunal failed to consider these correctly. The Court also referenced Hindustan Sugar Mills v. State of Rajasthan, which clarified that the sale price should be the amount payable for the sale, excluding separately charged freight. Conclusion: The Court concluded that the Tribunal erred in its judgment by not considering the contractual clauses and relevant legal precedents. It held that the freight charges, separately shown in the sale bill, were not part of the sale price. Consequently, the petitioner was entitled to deduct these charges from the taxable turnover. The revision petition was disposed of in favor of the petitioner, answering the substantial question of law negatively against the Department.
|
