1995 (2) TMI 428 - HC - VAT and Sales Tax

Freight & Insurance Charges Excluded from Taxable Turnover: High Court Decision

The High Court of Allahabad upheld the Sales Tax Tribunal's decision that separately billed freight and insurance charges should not be included in the ... Taxable turnover - definition of turnover under U.P. Sales Tax Act and Central Sales Tax Act - separately charged freight and insurance excluded from turnover - inclusion of excise duty in taxable turnover - authority of precedent in interpreting turnoverTaxable turnover - separately charged freight and insurance excluded from turnover - definition of turnover under U.P. Sales Tax Act and Central Sales Tax Act - authority of precedent in interpreting turnover - Whether handling, freight and insurance charges billed separately by the dealer form part of the taxable turnover of the assessee. - HELD THAT: - The Court examined the statutory definitions of 'turnover' in the U.P. Sales Tax Act and the 'sale price' concept in the Central Sales Tax Act, noting that both expressly treat sums charged for things done by the dealer at or before delivery as includible except where cost of freight or delivery or cost of installation is separately charged. Applying those definitions, the Court held that freight and insurance, when billed separately, are excluded from taxable turnover. The Court relied on this Court's earlier decisions and the Supreme Court's affirmation in Vinod Coal Syndicate, and explained that the exception in Hindustan Sugar Mills arose from special regulatory circumstances (the Cement Control Order) and does not apply here. On the material findings of fact recorded by the Tribunal that the freight and insurance were charged separately, the Court found no error in law or fact in the Tribunal's conclusion excluding those charges from turnover. [Paras 8, 9, 10]Freight and insurance charges separately billed by the dealer do not form part of the taxable turnover; the revisions are without merit and are dismissed.Final Conclusion: The High Court dismissed the revisions; the Tribunal correctly excluded separately charged freight and insurance from the assessee's taxable turnover, and the petitions are dismissed. Issues:1. Whether freight and insurance charges separately billed by the assessee should be included in the taxable turnover.Analysis:The High Court of Allahabad heard revisions under the U.P. Sales Tax Act, 1948, filed by the Commissioner, Trade Tax, U.P., against an order by the Sales Tax Tribunal, Ghaziabad, regarding the assessment years under the U.P. Sales Tax Act, 1948, and Central Sales Tax Act, 1956. The assessee, a limited company engaged in the manufacture and sale of A.C.S.R. conductors, wire, etc., had not included amounts received for freight and insurance charges in its taxable turnover. The assessing authority disagreed and included these charges in the turnover. The Deputy Commissioner (Appeals) and the Sales Tax Tribunal partially allowed the appeals, holding that while excise duty was part of the turnover, separately charged freight and insurance charges were not. The department challenged this decision, arguing that the charges should be included based on the contract terms. The counsel for the assessee contended that as per the Acts and precedent cases, separately charged charges should not be included in the turnover.The counsel for the department argued that the Tribunal's decision was erroneous and contrary to the Acts. They cited the case law of Hindustan Sugar Mills Ltd. v. State of Rajasthan to support their position. On the other hand, the counsel for the assessee relied on various judgments, including Vinod Coal Syndicate v. Commissioner of Sales Tax U.P., to assert that charges separately billed should not be part of the turnover. They also differentiated the Hindustan Sugar Mills case based on the Cement Control Order. The court examined the definitions of 'turnover' under the U.P. Sales Tax Act and Central Sales Tax Act, which exclude separately charged charges from the turnover. The court referenced previous cases like M.P. Traders and J.P. Cement, Bareilly, where this principle was upheld. The court also mentioned the Supreme Court's decision in Vinod Coal Syndicate, affirming the exclusion of separately charged charges from the turnover. The court clarified the interpretation of turnover in the Hindustan Sugar Mills case based on the later decision in Ramco Cement Distribution Co. Pvt. Ltd.Ultimately, the court upheld the Tribunal's decision, stating that separately charged freight and insurance charges should not be included in the taxable turnover. The court found no error in the Tribunal's conclusion and dismissed the revisions, emphasizing that the charges were billed separately and, therefore, should not form part of the turnover.