1993 (10) TMI 332 - HC - VAT and Sales Tax

Court Resolves Turnover Dispute, Tax Rates, & Writ Petitions

Diamond Cements (Unit of Mysore Cement Ltd.) Versus State of Haryana

Diamond Cements (Unit of Mysore Cement Ltd.) Versus State of Haryana - [1994] 92 STC 457 (P&H) Issues Involved:1. Inclusion of handling and freight charges in the turnover.2. Effect of the repeal of clause (vii) of proviso to section 15(1) of the Haryana General Sales Tax Act, 1973.3. Rate of sales tax applicable to jute bags used for packing cement.Issue-wise Detailed Analysis:1. Inclusion of Handling and Freight Charges in the Turnover:Mr. Mohan Jain, counsel for the petitioner, argued that the sale was completed at Faridabad upon delivery of the goods, and thus, the Assessing Authority was not justified in including the handling charges and freight charges in the turnover. The judgment states, 'If it is held that the sale was completed at Faridabad, obviously, the freight charges and handling charges are not to be added in the turnover. If the sale was completed at the destination station where the goods were to be supplied, obviously such charges were to be included in the turnover.' The court concluded that this question depends upon the proof of facts and must be resolved by the appellate authority, as it involves disputed facts that cannot be determined in the writ petitions.2. Effect of the Repeal of Clause (vii) of Proviso to Section 15(1) of the Act:The petitioner contended that after the omission of proviso (vii) to section 15(1) of the Act, the rate of tax to be charged should be as provided in section 15(1) of the Act, i.e., as per the notification of the State Government on different goods at different rates. The court noted, 'Proviso (vii) as reproduced above, was omitted from the principal Act by Haryana Act 13 of 1988 which came into force on April 11, 1988. Thus, for the assessment year in question it is to be taken that clause (vii) as reproduced above did not exist in the principal Act.' The petitioner argued that in the absence of any such notification, tax on goods should be 8 paise in a rupee under section 15(1)(b). The court acknowledged the contention but emphasized that the intention behind the transaction must be established to determine the applicable tax rate.3. Rate of Sales Tax Applicable to Jute Bags Used for Packing Cement:The petitioner argued that the tax on the value of the gunny bags should be 4 paise in a rupee as per item 'O' of the notification, and not 12 paise treating the value of the gunny bags as the value of the cement. The court referenced the Supreme Court's decision in Jamana Flour & Oil Mill (P.) Ltd. v. State of Bihar, where it was held that the price of gunny bags should be separately ascertained and taxed at a different rate. The court also considered the decision in Raj Sheel v. State of Andhra Pradesh, which stated, 'The question in every case will be a question of fact as to what are the nature and ingredients of the sale.' The court concluded that if the transaction is found to be a composite sale of cement bags, tax should be charged at 12 per cent on both cement and bags. If it is found to be separate sales of cement and bags, tax should be 12 per cent on cement and 4 per cent on bags. The authorities under the statute must decide these questions of fact based on the material produced and the intention of the parties.Conclusion:The court held that the petitioner must seek remedy through appeals under the Act to resolve the issues involving disputed facts. The effect of the repeal of proviso (vii) would mean that if the articles sold were separate, they would be taxed at 12 per cent and 4 per cent respectively. The writ petitions were disposed of accordingly.