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TMI Blog2020 (1) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals. 2. The basis for the challenge is mainly on three grounds : (A) That, the freight charges do not form part of the "sale price" defined under section 2(u) of the Act, 1994 and hence not taxable ; (B) That, "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 and further ; (C) That, if at 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. 3. The legal and factual aspects are allegedly not considered by the learned single judge (Kasturchand Bafna v. State of Chhattisgarh [2017] 100 VST 251 (Chhattisgarh)) properly. It is stated that a mistake has been committed in placing undue reliance on the verdict passed by the apex court in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC) ; [1978] 4 SCC 271, where the finding was based on the "control orders" issued by the State which governed the field and not applicable to the cases in hand by virtue of very nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na v. State of Chhattisgarh [2017] 100 VST 251 (Chhattisgarh)), both the sides sought to rely on verdicts passed by the apex court and different High Courts in support of their contentions. After appreciating the rival contentions, the relevant provisions of law and the binding precedents, the learned single judge (Kasturchand Bafna v. State of Chhattisgarh [2017] 100 VST 251 (Chhattisgarh)) held that the version of the appellants/ writ petitioners/assessees that the "freight charges" would stand excluded by virtue of the second limb of the definition of "sale price" under section 2(u) of the Act, 1994 was not correct or sustainable. The observation made by the apex court in this regard in Hindustan Sugar [1979] 43 STC 13 (SC); [1978] 4 SCC 271 was specifically adverted to ; besides referring to the law declared by the apex court in India Meters Limited v. State of Tamil Nadu [2010] 34 VST 273 (SC) ; [2010] 9 SCC 423. The observation of the apex court in paragraphs 18, 19 and 38 of the said decision were also extracted, to hold that "freight charge" was definitely to form part of the "sale price" and that the second limb of the definition under section 2(u) of the Act, 1994 would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eveals the factual aspects as to the scope of the bill for payment. Clause 12 clearly segregates the total amount payable, splitting it into "four" different parts such as : (a) Basic price exmines Mandia/Balaghat/Jabalpur inclusive of royalty and LW cess = Rs. 248.58 per m/t. (b) Sales/Commercial Tax at 4% against Form 33 = Rs. 9.94 (c) Surcharge on coal tax at 15% = Rs. 1.46 (d) Freight by road on pre-paid door delivery basis = Rs. 362.05 Landed cost = Rs. 622.03 per m/t. Obviously, no tax was worked out on the "freight charges", despite it was surely to form part of the "landed cost". The agreement further stipulated that "door delivery" was to be effected and it was for the dealer to meet the task of loading, unloading, transportation and stacking at the premises of the buyer. All these activities were included in the total landed cost. Under section 28(1) of the Act, 1994, three circumstances are envisaged to facilitate reassessment and since no tax was assessed on the "freight charges", it was a case of escapement of tax and hence the proceedings for reassessment are stated within the four walls of law. The intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e BSP under any circumstance. As far as the BSP is concerned, it was only a "contractual obligation" between the appellants/suppliers and the BSP/buyer and there is no statutory liability and that the claim is highly barred by limitation as well. It is also brought to the notice of this court that, at no point of time, was there any demand from the appellants/ assessees to the respondent/BSP claiming any amount under any head as involved in the present case and hence no liability can be sought to be shifted to the shoulders of the respondent- BSP. 12. Based on the rival submissions as above, the first question to be considered is whether the "freight charges" stand excluded from the purview of "sale price" as defined under section 2(u) of the Act, 1994 for fixing the "taxable turnover" as defined under section 2(w) of the Act, 1994. For easy understanding, it will be appropriate to extract section 2(u) of the Act, 1994 as given below : "Section 2(u). 'Sale price' means the amount payable to a dealer as valuable consideration for the sale of any goods less any sum allowed as cash discount according to ordinary trade practice but inclusive of any sum charged for anything d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Chhattisgarh [2017] 100 VST 251 (Chhattisgarh)) in paragraph 7 of the common judgment. We find it appropriate to have the same extracted for easy reference (pages 255 and 256 in 100 VST) : "8. Weighment : Weighment done at BSP weigh bridge shall be final for the purpose of payment. However in case of despatch by rail if wagons escape weighment at BSP or at both ends, RR weight shall be final for payment. 13. Price : The breakup of landed cost per tonne is as under : (a) Exmines rate per tonne inclusive of royalty and LWC : Rs. 149.04 (b) Sales/Commercial tax at 4% : Rs. 5.96 (c) Freight by road on pre-paid door delivery basis : Rs. 95.00 Landed cost per tonne : Rs. 250.00 The above exmines rate per tonne is inclusive of royalty at Rs. 25 per tonne and labour welfare cess at Rs. 0.50 per tonne. 14. Escalation : The price of contract shall remain firm during the currency of contract and as such no escalation is payable on any account whatsoever including freight (for road supplied). However, any change in the statutory levies, viz., royalty, sales tax and labour welfare cess during the pendency of the contract shall be borne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned therein. Under paragraph 17 of the agreement, the onus on the part of the dealer/supplier to transport the materials by truck from the supplier's mines to the BSP/purchaser, also arranging the loading, unloading into bunkers and proper stacking of the material in the bed is clearly stipulated, also alerting that the transportation charges would be paid only to the supplier along with the bills and never directly to the transporter. Even a cursory look at the above specific terms agreed between the parties shows that the purchaser would become the owner of the goods supplied by the dealer/supplier only on effecting the supply at the purchaser's end, and hence the sale will be complete only at the destination of the purchaser and never before. 16. The sale of a movable property is complete when the sale consideration is passed on and the property is handed over to the purchaser. This, going by the terms of annexure P/4 agreement, does never take place when the dolomite is sent by the dealer in the truck to the BSP, but only when it is delivered at the destination, followed by the payment of consideration with reference to the weight/quantity delivered at the door of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s complete, is quite evident from paragraphs 8 and 9 of the above judgment. We find it appropriate to extract the relevant portion of said two paragraphs for easy understanding of the case (pages 27 to 30 in 43 STC) : "8. Take for example, excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him, he always passes on the excise duty to the purchaser. Ordinarily, it is not shown as a separate item in the bill, but it is included in the price charged by him. The 'sale price' in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But, even so, it would be part of the 'sale price' because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or his place of business and selling them there, enter into a contract of sale f. o. r. destination rail way station. Where such a contract is made, the seller undertakes an obligation to put the goods on rail and arrange to have them carried to the destination railway station at his expense. The delivery of the goods to the purchaser in such a case is complete at the destination railway station and till then the risk continues to remain with the dealer. The freight is payable by the dealer since he has to arrange for the goods to be carried by rail to the destination railway station at his expense and there is no obligation on the purchaser to pay the freight. The purchaser is concerned only to pay the agreed price for the delivery of the goods at the destination railway station. The agreed price being inclusive of the freight, it would be a matter of indifference to the purchaser as to what is the amount of freight. Even if there is any fluctuation in the amount of freight, since the making of the contract, the purchaser would have no concern, because he is liable to pay only the agreed price which includes the freight, what ever it be. The dealer may, in such a case, pay the fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d proper. 20. With regard to the second ground raised, i. e., as to "reassessment", it is relevant to note 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. 21. The undisputed fact remains that the appellants/assessees did not show the freight charges as part of the turnover, presumably in view of the terms of the agreement as contained in "clause 13" as extracted above, giving the split up figures. Tax was sought to be worked out, as agreed by the parties, only with reference to the "unit price" exmines, inclusive of royalty and LWC (Labour Welfare Cess). It was thereafter that the freight charge was agreed to be added to fix the "landed cost" at the doors of the purchaser, it being door delivery. When the assessment was finalized in the original round, whether the freight shown sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose for initiating proceeding under section 147(b) of the Income-tax Act, 1961. The matter came up for consideration before the apex court, pursuant to a reference made by the Income-tax Appellate Tribunal directly under section 257 of the Act, 1961, as the "opinion" expressed on the question was divided among various High Courts. The assessee in the said case, which was a professional organization of newspapers, also owned a conference hall and rooms which were being let out on rent. In respect of the relevant assessment years, the rental income was assessed as "income from business" ; but later the internal audit party opined that the rental income ought to have been assessed as "income from the property" and not as "income from business". Based on the said opinion of the audit party, the Income- tax Officer treated it as the basis for reassessment under section 147(b) of the Act, 1961 ; which however was disagreed by the Appellate Assistant Commissioner, in appeal. But, on taking up the matter before the Tribunal, the appellate order was set aside and view of the Income-tax Officer was restored. On applying for reference, the Tribunal, taking note of the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emplate setting off the tax liability on paddy purchased within the State of Uttar Pradesh, with the tax liability on the inter-State sale of rice and that no deduction was permissible, in turn directing the assessment orders to be revived and pursued. Since the stipulated period for initiating proceedings under section 21(1) of the Act, 1948 had lapsed, sanction was sought for and obtained, followed by a notice under section 21(2) of the Act, 1948 as to why the reassessment be not effected. The assessee sought to challenge above circular and the notice by filing necessary proceedings, also contending that the proposed reassessment (under section 21 of the Act, 1948) was merely based on "change in opinion" and hence bad in law. The High Court upheld the circular and the show-cause notice, but interdicted the reassessment proceedings, holding that it was only on the basis of a "change of opinion". This was taken up by the State before the apex court, where the scope of section 21 for reassessment was subjected to detailed scrutiny. After referring to the provision of law and the precedents, the apex court held that, if an assessing authority forms an opinion during the original asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the assessing officer and no opinion was expressed by him ; by virtue of which, it is not a case of mere "change in opinion". 26. In the case dealt with by the Division Bench of the Telangana and Andhra Pradesh High Court in Kumar's Metallurgical Corporation Ltd. [2018] 406 ITR 386 (T&AP), the appellant/assessee, who was engaged in the trade of pig iron had gone for public issue in the relevant assessment year. The issue was oversubscribed and the excess application money obtained was kept in short term deposits in various banks and earned interest of more than Rs. 1 crore. The appellant/assessee claimed deduction of Rs. 85.60 lakhs being the expenditure incurred by way of interest, advertisement, business promotion, printing and stationery, share application forms, travelling and other expenses and the assessing officer allowed the deduction. But, later the assessing officer effected reassessment under section 147 of the Act, 1961 on the basis of an audit objection, which was put to challenge contending that there was no new material, but for a change in opinion. Various rulings rendered by the apex court including Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) ; [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and actually paid by the purchaser at the destination did not form part of the sale price. But, here, it is very relevant to note that the Bench had referred to the different situations of sale and the burden to transport the materials, to infer whether the "freight" would form the part of the sale price. In the said context, the specific conditions as borne by the terms of contract, particularly condition Nos. (6) and (7) involved in the said case were extracted in paragraph 3, as reproduced below (page 196 in 54 STC) : "(6) All goods ordered shall be despatched by goods train. All additional costs for despatch of goods by any other means shall be borne by the buyer. All risks including damages, loss, pilferage, theft, fire accident, etc., shall pass on to the buyer with the delivery of goods to carrier or his agent and the company shall in no way be responsible for any or all loss or damage notwithstanding that the goods were not despatched on carrier's risk. (7) Demurrage incurred on the consignment due to non-payment, late payment or late delivery of the documents are to be borne by the buyer. In case the documents are not retired, the company shall hold the buyer respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in the sale note, we are of the opinion that although the price charged was f.o.r. destination railway station, the contract was not f.o.r. destination railway station. A reading of clauses (6) and (7) of the sale note which are reproduced above go to show that all risks including damages, loss, pilferage, theft, fire acci dent, etc., passed on to the buyer with the delivery of goods to the carrier and the assessee was thereafter in no way responsible for any loss or damage. Similarly, demurrage incurred on the consignment due to non-payment, late payment or late delivery of the documents was to be borne by the buyer. The aforesaid terms make it clear that the delivery of the goods was complete at the loading station when the goods were delivered to the carrier. We have earlier stated that the freight was invariably deducted from the price in the bills and was paid by the buyer as the railway receipts were obtained 'freight to pay'. Thus, on a correct appraisal of the contract, freight included in the f.o.r. destination price was payable by the buyer as the goods were carried by the carrier from the loading station to the destination station as the agent of the buyer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would give arbitrary power to the assessing officer to open concluded assessment on mere change in opinion. There is no dispute that, there cannot be any reassessment merely on "change of opinion". According to us, the said judgment does not come to the rescue of the appellants/assessees in any manner, in view of the black and white difference in the factual context. 29. Coming to the law declared by the apex court, which was cited and relied on from part of the State/Revenue in Larsen & Toubro Ltd. v. State of Jharkhand [2017] 103 VST 1 (SC) ; [2017] SCC Online SC 347, the court was examining the scope of the word "information" used in section 19 of the Bihar Finance Act, 1981 (for short, "the State Act") and it was held that the said term is used in the widest amplitude and should not be construed narrowly. The point for consideration as dealt with in paragraph 4 of the said judgment was whether, on the information given by the audit team of the Auditor General, Bihar, the assessing authority was satisfied that reasonable ground existed to believe that a part of the turnover of the appellant company had escaped assessment within the meaning of section 19 of the State Act ; base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of which the earlier assessing authority passed the order and the successor assessing authority proceeded, were same. The question still is as to whether in the present case, the assessing authority was satisfied or not." 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. The finding in para graphs 27 and 28, as above, clearly supports the State/Revenue in the instant case. 30. With regard to the third point, i. e., if at all there is any additional burden to satisfy the tax on the freight as well (treating the same as part of the "sale price" defined under section 2(u) of the Act, 1994), by virtue of the terms of the agreement, it has to be satisfied by the Respondent-BSP/purchaser itself and not by the appellants/dealers ; there is a strong objection from the part of the purchaser/BSP, as put forth by the learned counsel, that no such prayer or pleading has ever been raised in these proceedings. 31. We have gone through the averments in the writ petitions a ..... 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