Facility charges linked to gas supply form part of sale price and attract VAT under the contract.

A monthly facility charge recovered under gas supply agreements was held to form part of the sale price for VAT purposes because it was intrinsically linked to the supply, operation and maintenance of the plant, pipelines and meters used to deliver the gases. The court read the contracts as a whole and found the charge was not a standalone reimbursement, but part of the consideration for making the goods available for sale. Applying the statutory definition of sale price, it held that amounts charged for things done in respect of the goods before delivery are taxable, and a tax-avoidance arrangement could not defeat the levy.

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Issues: Whether the monthly facility charge recovered from the buyer formed part of the sale price of gases and was exigible to value added tax under the Jharkhand Value Added Tax Act, 2005.

Analysis: The agreements provided for two separate charges, namely gas price and facility charge, but the facility charge was found to be intrinsically linked with supply of gases. The charge varied with the wholesale price index and was connected with the provision, operation and maintenance of the plant, pipelines and meters used for supplying the gases. The Court read the contract as a whole and held that the facility charge was not a standalone reimbursement, but a component of the consideration passing from buyer to seller in relation to the sale of gases. It also applied the statutory definition of sale price, including amounts charged for anything done in respect of the goods before delivery, and held that an arrangement intended to avoid tax could not defeat the levy.

Conclusion: The facility charge formed part of the sale price and was liable to VAT.

Final Conclusion: The writ petitions failed and the assessment orders as affirmed by the Tribunal were sustained.

Ratio Decidendi: Where a charge is contractually connected with the supply of goods and is recovered as part of the commercial arrangement for making the goods available for sale, it constitutes part of the sale price for VAT purposes, even if separately named in the agreement.

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