Freight charges held part of taxable turnover where no separate transport contract or reimbursement was proved.

Freight charges separately shown in invoices were held includible in taxable turnover under rule 3(2) of the Karnataka Value Added Tax Rules, 2003 because the assessee did not prove any separate contract for transportation on behalf of dealers. The freight was charged by the assessee itself, varied with distance, and was not shown to be mere reimbursement under an independent arrangement. As the risk in transit remained with the assessee until delivery, the freight formed part of the transaction value liable to tax. The inclusion of freight in taxable turnover was therefore upheld.

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Issues: Whether freight charges separately shown in invoices were liable to be included in the taxable turnover under rule 3(2) of the Karnataka Value Added Tax Rules, 2003.

Analysis: The assessee failed to establish that there was any separate and distinct contract with the dealers under which transportation was arranged on their behalf and freight was outside the sale price. On the record, freight was charged by the assessee itself, varied according to distance, and was not shown to be actual reimbursement under an independent arrangement. The authorities also found that the risk of transit continued with the assessee until delivery, and therefore the freight formed part of the transaction value liable to tax.

Conclusion: The freight charges were rightly included in the taxable turnover and the assessee's challenge failed.

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