Freight charges and import-linked sales outside taxable turnover where charges are separately billed and contract of import governs

Freight and pumping charges separately shown in invoices and purchase orders, where charged outside the price of goods and on an ex-works basis, were excluded from taxable turnover. Sales were also treated as sales in the course of import because the foreign import was occasioned by the contract with the ultimate purchaser and was inextricably linked to that contract, bringing them within the import exemption. As the underlying tax additions on freight and import sales failed, the consequential penalty under the cited provisions could not survive and was deleted.

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Issues: (i) Whether freight and pumping charges separately shown in the invoices could be included in the taxable turnover of ready mix cement concrete; (ii) whether the sales were exempt as sales in the course of import under section 5(2) of the Central Sales Tax Act, 1956; (iii) whether penalty under section 9(2-A) of the Central Sales Tax Act, 1956 read with section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959 was sustainable.

Issue (i): Whether freight and pumping charges separately shown in the invoices could be included in the taxable turnover of ready mix cement concrete.

Analysis: The governing principle was that where freight, delivery, or transportation charges are separately charged and are not part of the price of goods, they fall outside the definition of sale price under section 2(h) of the Central Sales Tax Act, 1956. The invoices and purchase orders showed separate charging of freight and pumping charges, and the transaction was treated as completed on delivery ex-works. The same reasoning had already been applied in the earlier decision concerning the assessee.

Conclusion: The freight and pumping charges could not be included in the taxable turnover and the issue was decided in favour of the assessee.

Issue (ii): Whether the sales were exempt as sales in the course of import under section 5(2) of the Central Sales Tax Act, 1956.

Analysis: The relevant test was whether the import of goods was occasioned by the contract of sale and was inextricably linked to that contract. The record showed that the foreign import was made pursuant to the contract with the ultimate purchaser, and the movement of the goods into India was an incident of that contract. The principle applied was that such sales fall within the course of import and are exempt from taxation.

Conclusion: The sales were held to be in the course of import and the issue was decided in favour of the assessee.

Issue (iii): Whether penalty under section 9(2-A) of the Central Sales Tax Act, 1956 read with section 12(3)(b) of the Tamilnadu General Sales Tax Act, 1959 was sustainable.

Analysis: The penalty was consequential to the tax demand. Since the tax additions on freight and on import sales were not sustainable and had been deleted, the basis for penalty disappeared. The Tribunal had also recorded that penalty under the cited provision was not warranted on the facts found.

Conclusion: The penalty was rightly deleted and the issue was decided in favour of the assessee.

Final Conclusion: The Revenue's challenge failed on all substantial questions, and the assessment additions as well as the consequential penalty were not sustained.

Ratio Decidendi: Freight, delivery, and transportation charges separately charged are excluded from sale price, sales occasioned by and inextricably linked to a contract of import are exempt under section 5(2), and consequential penalty cannot survive when the underlying tax demand is set aside.

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