Rajasthan High Court - Jaipur
Mewar Khaniz Udyog vs Commercial Taxes Officer Anti Evasion on 29 March, 1991
Equivalent citations: 1991(1)WLN153
JUDGMENT Milap Chandra Jain, J.
1. This revision petition has been filed by the assessee Under Section 15, Rajasthan Sales-tax Act, 1954 (hereinafter to be called 'the Rajasthan Act') against the order of the learned member, Rajasthan Sales-tax Tribunal, Ajmer dated July 6,1988 by which he has dismissed the appeal and confirmed the order of the Deputy Commissioner (Appeals), Commercial Taxes Department, Udaipur dated February 4,1988, confirming the assessment order levying tax on the freight charges and imposing penalty and interest thereon. The facts of the case giving rise to this revision petition may be summarised thus.
2. On December 17, 1986, the business premises of the petitioner was surveyed. It was noticed that the amounts of freight recovered from the buyers were not included in the taxable turn over. After giving notice to the petitioner and hearing it, assessment order Under Section 9, Central Sales-tax Act, 1956 (hereinafter to be called 'the Central Act') read with Section 7-B of the Rajasthan Act was passed for the assessment years 1986-87 and 1987-88. Penalty Under Section 16(1) (e) and interest Under Section 11-B of the Rajasthan Act were also imposed. First appeal before the Deputy Commissioner (Appeals), Udaipur and second appeal before the Rajasthan Sales-tax Tribunal were filed by the assessee and they were dismissed as said above.
3. It has been contended by the learned counsel for the assessee-petitioner that the findings of the learned lower authorities that the amounts recovered as freight charges by the assessee from its buyers formed parts of the sale price are against the terms and conditions of the contract which took place in between the assessee and its buyers and also against the material on record. He further contended that these authorities did not take into consideration that the freight was not charged simultaneously with the price of the goods supplied, it was separately charged and the definitions of 'sale-price' as given in Section 2(h) of the Central Act and Section 2(p) of the Rajasthan Act were not properly considered. He lastly contended that the learned member of the Tribunal has failed to correctly apply the decisions of the Hon'ble Supreme Court given in Hindustan Sugar Mills Ltd. v. State of Rajasthan (1979) 43 STC 13.
4. In reply, it has been contended by the learned counsel for the Revenue that the revision petition is not maintainable as no question of law is involved, there is a concurrent finding of fact of all the three authorities that freight was a component of the sale-price, contracts which took place in between the assessee-petitioner and its buyers have correctly been read, all documents on record have been taken into consideration and the law laid down in Hindustan Sugar Mills' case has correctly been applied.
5. It is the admitted case of the parties that the amounts of freight paid by the assessee-petitioner for transporting the goods from Udaipur to Asarwa (Ahmedabad) were separately recovered by the assessee from the buyers, these amounts were not included in the bills & vouchers through which the goods were sold and the buyers paid the amounts of freight. Section 2 (p) of the Rajasthan Act defines 'sale-price' as under:
(p) " Sale-price" means the amount payable to a dealer as consideration for the sale less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof other than the cost of freight of delivery or the cost of installation in case where such cost is separately charged and the expression "purchase price" shall be construed accordingly:
provided that in the case of a hire purchase agreement the market price of the goods on the date on which such goods were transferred under such agreement shall be deemed to be the sale price of the goods:
Provided further that the sale price in relation to a works contract shall be the amount payable in respect of its execution inclusive of the value of all goods and the labour and other charges involved in such execution.
6. Similarly, Section 2 of the Central Act defines 'sale price' as under:
2(h) "SALE PRICE" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for any thing done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged;
7. These definitions are similar so far as the present controversy is concerned. They clearly provide that if the cost of freight or delivery is separately charged, it will not be a part of the sale price. As already observed above, cost of freight was not included in the bills and vouchers and it was separately charged. The assessee-petitioner filed photostat copies (papers no. 69 to 74) of its debit notes sent to M/s Orient Paper Mills, Brijraj Nagar and M/s India Paper Pulp, Hazinagar (West Bengal). All of them are in same language. One of them (paper no. 69) runs as under:
MKU/85-86/25/83 17/3/1986
M/s Orient Paper Mills,
P.O. Brajrajnagar,
Dist. Sambalpur,
ORRISA.
DEBIT NOTE
Being the amount debited to your account on account of Transportation
charges cash paid by us on behalf of you from Udaipur to Asarwa (Ahmedabad)
24.840 Tons @ Rs. 110/- P.M.T. Soapstone powder supplied to you vide our
Bill No.MKU/85-86/248 dated 17.3.1986.
2,732.40
Total 2,732.40
(Rs. Two thousand Seven hundred thirty two & paisa forty only).
For M/s MEWAR KHANIZ UDYOG,
sd/-
PROPRIETOR.
CC: Accounts Sections.
The assessee has also filed transport receipts (papers No. 31 to 50 and 52) issued by the Transport Corporation of India. The receipts show that goods were sent to Tuli (Nagaland) and that mention "basis of booking-to pay" and the challan attached with these transport receipts do not include the freight charges. These documents leave no doubt that the assessee did not include the freight charges in the sale-price.
8. The learned member of the Tribunal has relied upon conditions no. 2, 4 and 6 of letter No. IPP/PUR/CH.S-1/55 dated December 21, 1985 sent by India Paper Pulp, Hazinagar to the assessee which has been quoted in the order and has held that according to these conditions transportation charges upto Asarwa were passed from the buyer to the seller as consideration in the goods and reimbursement of the expenses, they were in addition to the basic price and thus were part of the sale-price. The point for consideration in this case was not whether the delivery was made at Udaipur or Asarwa by the assessee to M/s India Paper Pulp, Hazinagar as it is not disputed that the assessee transported the goods from Udaipur to be unloaded at Railway yard, Asarwa for further transportation to Hazinagar Railway Station. It is also not in dispute that initially freight was paid from Udaipur to Asarwa and subsequently it was recovered by the assessee from M/s India Paper Pulp by sending debit notes. The question for consideration before the Tribunal was whether the freight was a component of the sale-price or was independent of it. Condition no. 2 speaks about the delivery of goods at Asarwa. It does not speak either about the sale-price or the payment of freight charges. Condition no. 4 clearly specifies the basic price to be Rs. 435/- per metric ton. This has been repeated in condition no. 6(3). This aspect of the case was not considered by the Tribunal. Even in Hindustan Sugar Mills v. State of Rajasthan, (1979) 43 STC 13, it has been observed as under:
There may be a case where the contract of sale may not be f.o.r. destination railway station, but the price alone may be so. Where such is the case, the contract does not have all the incidents of a f.o.r. destination railway station contract, but merely the price is stipulated on that basis. The terms of such a contract may provide that the delivery shall be complete when the goods are put on rail and thereafter it shall be at the risk of the purchaser. Such a stipulation would make the railway agent of the purchaser for taking delivery of the goods. The freight in such a case would be payable by the purchaser though the price agreed upon is f.o.r. destination railway station. The price of the goods receivable by the dealer would, in that event, be the for destination railway station price less the amount of freight payable by the purchaser to the dealer for the sale of the goods and the amount of freight being payable by the purchaser would not be included in the "sale price" within the meaning of the first part of the definition. The position would be the same even if the dealer pays the freight and obtains railway receipt 'freight pre paid' and claims the full f.o.r. destination railway station price in the bill. The amount representing freight would not be payable as part of the consideration for the sale of the goods but by way of reimbursement of the freight which was payable by the purchaser but in fact disbursed by the dealer and hence it would not form part of the 'sale price.
In view of these facts, circumstances and authoritative observations, it is very difficult to hold that the amount of the freight formed part of the sale price within the meaning of Section 2(p) of the Rajasthan Act and Section 2 of the Central Act. As such it is difficult to maintain the order of the learned Member of the Tribunal.
9. Consequently, the revision petition is allowed. The orders of the Commercial Taxes Officer, Anti Evasion, Udaipur dated August 28, 1987, of the Deputy Commissioner (Appeals), Udaipur dated February 4, 1988 and of the Tribunal dated July 6, 1988 are set aside. No. order as to costs.