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TMI Blog1994 (1) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 stating that the said amount was collected as freight charges in respect of the sales made within the State representing loading, unloading and transport charges. The assessee had collected this amount by raising debit bills separately. Although this amount was not shown in the sale bills, it forms part of the total turnover. There were written agreements between the assessee and the buyers according to which price per tonne, was fixed at extraction site and transport charges for effecting delivery at buyer's premises were separately fixed. The assessee quoted the sale price at the place of extraction and transportation of the goods was the responsibility of the buyer. However, the assessee had undertaken to transport the goods at the instance of the buyer pursuant to the agreement. The dealer had charged and collected freight separately by debit note without including the same in the sale price of the goods. The transport charges were incidental to the sale and it could not be considered as inward freight or expenditure incurred before the sale or component of the price of the goods sold. Hence, the amount of transport charges collected was eligible for deduction under rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of the Supreme Court in Dyer Meakin Breweries Ltd. v. State of Kerala [1970] 26 STC 248 and D.C. Johar Sons (P.) Ltd. v. Sales Tax Officer, Ernakulam [1971] 27 STC 120.' The Full Bench answered the question in the affirmative. 3.. The Supreme Court has now delivered the judgment in Vinod Coal Syndicate v. Commissioner of Sales Tax [1989] 73 STC 317, which, prima facie, appears to take a divergent view from that taken in the cases of Dyer Meakin Breweries Ltd. [1970] 26 STC 248 (SC) and D.C. Johar Sons (P) Ltd. [1971] 27 STC 120 (SC). 4.. The judgment in Vinod Coal Syndicate [1989] 73 STC 317 (SC) construes a provision in the U.P. Sales Tax Act, which is akin to the provision in rule 6(4)(f) of the Karnataka Sales Tax Rules, 1957, and holds: 'Plainly, the Legislature intended that where the cost of freight was charged separately, that amount could not be included in the turnover of a dealer.' This statement of the law is of wide amplitude and appears to be not in conformity with the view taken by the Supreme Court earlier which appeared to restrict the exemption to freight incurred before sale. 5.. The point squarely arises in the case on hand. Having regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price per tonne and thereafter the goods were to be transported on behalf of the buyers at their risk for the freight *Reported as Narayani Rao v. Commissioner of Commercial Taxes in Karnataka [1992] 87 STC 112 (Kar) [FB]. charges to be paid by them separately. Hence, in the light of the aforementioned order of the Full Bench of this Court and testing the rule of exemption of freight charges in the manner laid down by the decisions of the Supreme Court in Dyer Meakin Breweries Ltd. [1970] 26 STC 248 and D.C. Johar Sons [1971] 27 STC 120, the petitioner is entitled for exemption in respect of the freight charges under rule 6(4) of the Rules. According to the learned counsel the terms of the contract, intention of the parties and actual transactions that have taken place should have been taken into account. Thus, they claimed exemption in regard to the freight charges in terms of rule 6(4)(f) of the Rules. Hence, the orders of the revisional authority and the Tribunal were wrong and the order of the assessing authority was perfectly valid and justified. 6.. Sri C.V. Kumar, learned Government Pleader, made submissions supporting and justifying the orders of the revisional author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se [1971] 27 STC 120 is the basic test. If the cost incurred by the dealer is incidental to his acquisition of goods, being part of his expenditure, it forms a component of the price when he sells the goods. If the cost of freight is charged by the dealer for the transportation of the goods, which is for and on behalf of the purchaser, it will be a case of post-sale expenditure, to which benefit of rule 6(4)(f) will be available. Cost of freight incurred for the inward journey of the goods to the dealer is not deductible, but freight outwards is deductible. 12.. In Dyer Meakin's case [1970] 26 STC 248 (SC) it is stated that rule 9(f) of the Kerala General Sales Tax Rules, 1963, which rule is similar to rule 6(4) of the Rules, seeks to exclude only those charges which are incurred by the dealer either expressly or by necessary implication for and on behalf of the purchaser, after the sale, when the dealer undertakes to transport the goods and delivers the same. The expenditure incurred by the dealer, which he had to incur before sale and to make the goods available to the intending customer at the place of sale, is not intended to be excluded. 13.. In D.C. Johar Sons' case [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng fault with the exemption given by the assessing authority under rule 6(4)(f) of the Rules. They thought that the sale was complete only after the delivery of the goods after weighment, till such delivery of the goods expenditure incurred including the transportation charges was a pre-sale expenditure although separately charged and that it was a component of the sale price, as such they held that the assessee was not entitled for exemption under rule 6(4)(f) of the Rules. Having applied the tests in the manner laid down by the judgments of the Supreme Court in Dyer Meakin [1970] 26 STC 248 and D.C. Johar Sons [1971] 27 STC 120 to the facts of the case, we hold that the exemption under rule 6(4)(f) of the Rules was available to the assessee. 17.. For the reasons stated, on the facts and circumstances of this case, we hold that: (1) The Tribunal was not correct in law in confirming the revisional order stating that the transportation charges were includible in the turnover of the petitioner. (2) The Tribunal was not right in holding that the sales were deemed to have taken place at the buyer's place and as such the transportation charges formed part of the petitioner's tur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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