Separately charged freight is excluded from sale price when transport cost is recovered independently from the buyer.
Freight and transportation charges separately recovered from the buyer were held not to form part of the sale price under the Jharkhand VAT definition, because the statute expressly excludes transport cost from seller to buyer when separately charged. Separate purchase order terms, invoices, books of account, and consistent assessment treatment showed that the freight was recovered independently and not as part of the consideration for the goods. The tax authorities and Tribunal erred by relying on the inclusionary limb while ignoring the express exclusion. The assessment, appellate, and Tribunal orders were therefore unsustainable to that extent.
Issues: Whether freight and transportation charges separately charged to the buyer formed part of the sale price under Section 2(xlviii) of the Jharkhand Value Added Tax Act, 2005.
Analysis: The definition of sale price includes amounts charged for anything done in respect of the goods at or before delivery, but its Explanation III specifically excludes the cost of transport from the seller to the buyer where such cost is separately charged. The purchase order terms, separate invoices, separate books, and the consistent treatment in earlier and subsequent assessments showed that freight was recovered separately and was not intended to form part of the consideration for the sale of goods. The tax authorities and the Tribunal erred in relying only on the inclusionary explanation and in ignoring the express exclusion for separately charged transport costs.
Conclusion: Freight charges separately recovered from the buyer did not form part of the sale price. The assessment and appellate orders, as well as the Tribunal's order, were unsustainable to that extent.
Ratio Decidendi: Where transport cost is separately charged to the buyer, it is excluded from sale price under the governing definition and cannot be added to taxable turnover merely because delivery was part of the transaction.
TaxTMI 
AI Drafter ✕
TaxTMI 
