2024 (11) TMI 1276 - HC - VAT / Sales Tax

Assessment of turnover under the Tamil Nadu General Sales Tax Act, 1959 for the periods 1996-97, 1997-98, and 1999-00 - inclusion of freight charges in the sale price of cement - HELD THAT - None of the orders of assessment conduct an examination of the nature envisaged by the AAC in remand order dated 31.08.2000. No doubt, the assessing authority has attempted a cursory comparison of the transactions pre and post 05.10.1996 in the order for the period 1996 97, noting that the sale price was Rs. 84,975/- for 10 tonnes of white cement vide invoices upto 5.10.96 and Rs. 85,670/- for 10 tonnes vide invoice dated 26.11.1996. It cannot be understood how the above figures support the department s contention that there has been suppression of freight in the second invoice dated 26.11.1996 as that figure is, in fact, higher than the sale price pre 05.10.1996. As far as 1997 98 is concerned, there is no question of comparison, as all the transactions have taken place post 05.10.1996. In this case, there is reference to a single invoice dated 31.3.1995 and again, it cannot be appreciated how, based on this invoice, the assessing officer comes to the conclusion of suppression. As far as 1998 99 is concerned, three invoices had been examined, one dated 31.3.1995, the second, a depot transfer invoice dated 17.02.1999 and the third, an invoice dated 14.02.1999. Learned Additional Government Pleader would draw attention to the fact that the depot transfer invoice relates only to a transfer between Kottayam and Coimbatore and was for a sum of Rs. 74,644/-. This price would, admittedly, not include a component of freight. The object of Section 12A of the TNGST Act is to bring to tax turnover that, according to the authority, has been supressed by reduction of sale price in the accounts of an assessee. The suppression, in this case, is said to be the freight. An important factor in this matter is that the books of the petitioner have not been rejected and the assessments are based on the books. The admitted position is that the books reflect the component of freight charges and the cost of cement. The impugned orders are set aside - these writ petitions are allowed.

Summary

Issues:
1. Assessment of turnover under the Tamil Nadu General Sales Tax Act, 1959 for the periods 1996-97, 1997-98, and 1999-00.
2. Dispute regarding the inclusion of freight charges in the sale price of cement.
3. Examination of the nature of transactions pre and post a specific date in relation to invoicing methods.
4. Interpretation of the provisions of Rule 6 of the Tamil Nadu General Sales Tax Rules, 1959.
5. Application of Section 12A of the TNGST Act in cases of alleged suppression of turnover.

Detailed Analysis:
The judgment involves three writ petitions concerning assessments under the Tamil Nadu General Sales Tax Act, 1959 for specific periods. The petitioner, a cement manufacturer and dealer, contested assessments that disregarded the sale price of cement as per its accounts and included freight charges. The issue arose due to a change in invoicing method by the petitioner post a certain date, leading to disputes over the inclusion of freight charges in the consolidated sale price (paragraphs 2-6).

The matter underwent multiple rounds of litigation, including a remand by the Appellate Assistant Commissioner (AAC) for a detailed examination of the issue. The AAC emphasized the need for a thorough analysis of various aspects related to costing, agreements, and accounting practices in determining the turnover (paragraphs 7-8). Subsequent assessments failed to address the AAC's directions adequately, leading to discrepancies in the comparison of transactions pre and post the invoicing change (paragraphs 9-11).

The judgment criticized the revenue's arguments based on incomplete comparisons of invoices and highlighted the importance of considering all relevant factors in determining the sale price, especially in cases involving freight charges (paragraphs 12-15). The court upheld the petitioner's stance that freight charges are part of the sale consideration, citing legal precedent and emphasizing the need for supporting evidence to dispute the petitioner's version (paragraphs 16-17).

Additionally, the judgment discussed the applicability of Section 12A of the TNGST Act concerning assessments of sales shown at abnormally low prices to evade tax. It clarified that while the department can investigate prices reflected in accounts, the books of the petitioner, which included freight charges, were not rejected, indicating no suppression of turnover (paragraphs 18-19).

Ultimately, the impugned orders were set aside, and the writ petitions were allowed, emphasizing the importance of a comprehensive examination of all relevant factors in assessing turnover under the TNGST Act (paragraph 20).