Andhra HC (Pre-Telangana)
The State Of Andhra Pradesh vs Andhra Pradesh Paper Mills Limited on 20 June, 1988
Equivalent citations: [1988]71STC296(AP)
Author: B.P. Jeevan Reddy
Bench: B.P. Jeevan Reddy
JUDGMENT Jeevan Reddy, J.
1. The question that arises in this tax revision case is whether the freight charges are not liable to be included in the turnover of the assessee. The assessee, Andhra Pradesh Paper Mills, Rajahmundry is a manufacturer of paper. For the assessment years 1970-71, 1971-72 and 1972-73, the assessee claimed exemption in respect of the turnover representing freight charges and certain other items. In this case we are concerned only with the freight charges. The plea was negatived by the assessing authority. Before the Tribunal, the first of the two questions which arose for consideration related to the inclusion of freight charges in the taxable turnover. The Tribunal held that having regard to the stipulations between the parties, the facts of the case fell within the second of the three categories of cases mentioned in the decision of the Supreme Court (Hindustan Sugar Mills' case [1979] 43 STC 13). In other words, though the freight charges were included in the sale bill, that was only by way of accommodation by the assessee. Freight charges were really payable by the buyer. Title to the goods passed the moment the goods were put on rail. The department however contended that clause 4(e) in the agreement between the parties should make a difference. According to the department, by virtue of the said clause, the title to the goods passes to the buyer only on the expiry of seven days from the date of arrival of goods at the destination point. This contention was rejected by the Tribunal. Clause 4(e) reads as follows :
"Buyers will inspect the goods immediately on arrival thereof and will within 7 days from the date of arrival give sellers notice of any matter or thing by reason whereof they may allege that the goods are not in accordance with the contract. If buyers fail to give such notice the goods will be deemed to be in all respects in accordance with the contract and buyers will not be entitled thereafter to put in any claim against sellers."
2. We are of the opinion that the said clause cannot be understood in the manner contended for by the department. This clause does not have the effect of postponing the transfer of title in the goods to the buyer till after the expiry of seven days from the date of their arrival at the destination point. All this clause says is that within 7 days of the arrival at the destination point, the buyer can inform the assessee of any defect in the goods and that after the expiry of the said period he cannot do so. We agree with the Tribunal that this clause cannot make any difference to the position obtaining under the other clauses, which provide that title to the goods passes, the moment the goods are put on rail. As stated above, the freight charges were payable by the purchaser though by way of accommodation and understanding, the assessee paid them first and recovered and recouped the same from the purchaser later.
3. The tax revision case accordingly fails and is dismissed. No costs. Advocate's fee Rs. 150.
4. Petition dismissed.