2010 (6) TMI 739 - HC - VAT and Sales Tax

Tribunal decision on insurance charges upheld under Central Sales Tax Act

The court upheld the Tribunal's decision that insurance charges were not part of the 'sale price' under the Central Sales Tax Act, 1956, and should be ... Whether, on the true and correct interpretation of the definition of 'sale price', as contained in clause (h) of section 2 of the Central Sales Tax Act, 1956, the Tribunal was justified in law in holding that the insurance charges will not form part of sale price, because the parties did not intend it to be so? Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in taking a stand different from that taken by the Division Bench of the Tribunal and refusing to refer the issue of insurance charges to a Larger Bench for decision, on the ground that 'had the documentary evidence been placed before the Division Bench, the Division Bench would have come to a different conclusion' when the Division Bench has based its decision only on the interpretation of statutory definition of 'sale price' as contained in clause (b) of section 2 of the Central Sales Tax Act, 1956, and has nowhere in its judgment stated that its decision in respect of insurance charges is on account of non-production of any documentary evidence? Held that:- The Tribunal, after examining the entire transaction between the respondent and its buyers, on the basis of the documents produced before it by the respondent, has come to a correct conclusion that the insurance is not intended to be treated as part of the 'sale price' and the insurance charges have to be borne by the buyers independently and separately and such insurance charges are not to be included in the sale price. In view thereof, the submissions made on behalf of the Revenue cannot be accepted. We are also of the view that the Tribunal, in view of the evidence submitted by the respondent, was entitled to take a different view from its earlier view, pertaining to the same issue, in respect of the different assessment years. We therefore answer the questions set out in paragraph 2 of this judgment in the affirmative, i.e., in favour of the respondent and against the Revenue Issues Involved:1. Interpretation of 'sale price' under the Central Sales Tax Act, 1956 concerning insurance charges.2. Tribunal's deviation from its previous decision without referring the issue to a Larger Bench.Issue-wise Detailed Analysis:1. Interpretation of 'sale price' under the Central Sales Tax Act, 1956 concerning insurance charges:The primary question was whether insurance charges form part of the 'sale price' under section 2(h) of the Central Sales Tax Act, 1956. The Tribunal had previously ruled that insurance charges should not be included in the sale price if the parties did not intend it to be so. The Revenue argued that the definition of 'sale price' under section 2(h) includes any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery, excluding only the cost of freight or delivery and installation, if separately charged. Therefore, insurance charges should be included in the sale price as they are incurred before delivery.The respondent countered that the agreements, quotations, invoices, and marine cover notes clearly indicated that insurance charges were to be borne by the buyer separately and were not included in the sale price. The Tribunal, upon reviewing these documents, concluded that the insurance charges were explicitly excluded from the sale price and were to be paid independently by the buyer. The Tribunal's decision was supported by the Bombay High Court's judgment in Commissioner of Sales Tax, Maharashtra State, Bombay v. Ballarpur Industries Ltd., which distinguished between different types of contracts concerning the inclusion of freight and insurance charges in the sale price.The court upheld the Tribunal's view, noting that the documentary evidence clearly showed that the insurance charges were not intended to be part of the sale price. The agreements specified that the quoted price was exclusive of packing, carriage, freight, and insurance charges, and the delivery was to be taken ex-works, meaning the risk transferred to the buyer at the seller's premises.2. Tribunal's deviation from its previous decision without referring the issue to a Larger Bench:The second issue was whether the Tribunal was justified in taking a different stand from its previous decision without referring the matter to a Larger Bench. The Tribunal had previously included insurance charges in the sale price due to the lack of documentary evidence. However, in the present case, ample documentary evidence was provided, leading the Tribunal to a different conclusion.The Revenue argued that the Tribunal should have referred the matter to a Larger Bench, as the previous decision was based on the statutory definition of 'sale price' and not on the lack of documentary evidence. The respondent contended that the Tribunal was justified in taking a different view based on the new evidence presented.The court agreed with the respondent, stating that the Tribunal, based on the new documentary evidence, was entitled to take a different view from its earlier decision. The Tribunal's conclusion that the insurance charges were not part of the sale price was based on a thorough examination of the agreements, quotations, invoices, and marine cover notes, which clearly indicated that the insurance charges were to be borne separately by the buyer.Conclusion:The court concluded that the Tribunal was correct in its interpretation that insurance charges were not part of the 'sale price' and should be borne separately by the buyer. The Tribunal was also justified in taking a different view from its previous decision based on the new documentary evidence. The court answered the questions in favor of the respondent and against the Revenue, upholding the Tribunal's decision.