1984 (9) TMI 263 - HC - VAT and Sales Tax

Court Excludes Transportation Charges from Sale Price for Tax Calculation

The court held that transportation charges for naphtha should not be included in the sale price for calculating Central sales tax. It was determined that ... - Issues Involved:1. Whether the Central sales tax is payable on transportation charges for naphtha.2. Whether Central sales tax is payable on the excise duty charged by IOC to IEL (not pressed at the hearing).Issue-wise Detailed Analysis:1. Whether the Central sales tax is payable on transportation charges for naphtha:The primary issue in this case is whether the transportation charges for naphtha can be included in the 'sale price' for the purpose of calculating Central sales tax under the Central Sales Tax Act. The relevant provisions of the Act define 'turnover' and 'sale price,' with Section 2(h) specifying that 'sale price' includes any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof, excluding the cost of freight or delivery if separately charged.The petitioner, IEL, argued that the transportation charges should not be included in the sale price, relying on the Supreme Court decision in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh, which held that if freight is separately charged and identifiable, it should not be included in the sale price. In contrast, the State of Bihar cited Hindustan Sugar Mills Ltd. v. State of Rajasthan, where the Supreme Court held that freight formed part of the sale price due to the statutory nature of the Cement Control Order.The court analyzed the terms of the agreement between IEL and IOC, particularly Clause 5 and Clause 7, which indicated that transportation charges were separately charged and identifiable, unlike the composite sale price in the Hindustan Sugar Mills case. The court found that the transportation charges for naphtha were distinct and should not be included in the sale price for the purpose of Central sales tax.Consequently, the court held that the transportation charges of naphtha for the period of the agreement could not be included in the computation of the sale price. It was determined that all sums recovered by IOC from IEL as sales tax on transportation charges must be excluded from the turnover computation. This also implied that the sums collected by the Bihar sales tax authorities were liable to be refunded.2. Whether Central sales tax is payable on the excise duty charged by IOC to IEL (not pressed at the hearing):This issue was not pressed by IEL during the hearing, and thus, the court did not address it in detail.Refund of Sales Tax:The court noted that there was no specific prayer for refund in the petition. Although the petitioner argued that a general prayer for relief should cover the refund, the court disagreed, stating that an order for refund requires a specific writ of mandamus, which was not prayed for in the petition. The court granted leave for the petitioner to file a supplementary affidavit regarding the refund, but IOC did not file any affidavit in response. The court highlighted certain disputes between IOC and IEL concerning the computation of sales tax, which were not detailed on oath.Ultimately, the court decided not to order a refund in this application due to the lack of a specific prayer for refund and the absence of an affidavit from IOC. However, the court allowed the petitioner to make a fresh application for refund with proper materials and notice to the appropriate parties.Conclusion:The application succeeded, and the court issued a writ of certiorari quashing the assessment orders that included transportation charges in the sale price. The court also issued a writ of mandamus directing the reassessment of past and future assessments in light of the judgment. The writ petition was allowed with no order as to costs.