2023 (9) TMI 512 - HC - VAT and Sales Tax

Court rules freight charges not part of sale price for tax; transportation services not taxable under CST Act.

The Court ruled in favor of the petitioner/assessee, setting aside the orders of the M.P. Commercial Tax Appeal Board, the appellate authority, and the ... Levy of tax - freight charged separately from the buyer would fall part of the sale price or not - activity of transportation is an activity of service or not - freight charges collected separately as the carrier of the goods - Appellate Authority can exercise the power under Section 47 of the VAT Act, while taking Suo Moto Revision of the Appellate order under Section 3A of the VAT Act while passing the impugned order or not - HELD THAT:- Few substantial questions of law No.1, 2 & 3 were answered by Orissa High Court in the case of M/s Utkal Moulders [2021 (4) TMI 84 - ORISSA HIGH COURT ], where it was held that the freight shown in the sale bill separately is part of the sale price. It is held that the Petitioner is entitled to claim deduction of the freight charges from the taxable sales turnover. Other substantial questions of law are squarely covered and answered in the decision of Goldie Glass Industries [ 2017 (8) TMI 1451 - MADHYA PRADESH HIGH COURT] where it was held that Section 3A was inserted in the Statute to provide for appointment of Appellate Authority by the State Government not below the rank of Deputy Commissioner of Commercial Tax. It is further clear from Sections 46 and 47 that from the order of Dy. Commissioner of Commercial Tax (Appeal), no further appeal or revision lies. In other words, the order passed by the Dy. Commissioner of Commercial Tax (Appeal) is final and is not amenable to suo-motu revisional powers conferred by Section 47 of the Act. All the five substantial questions of law are answered in favour of the petitioner/assessee - petition disposed off. Issues Involved:1. Whether the freight charged separately from the buyer forms part of the sale price and if tax levied on the freight component is legally correct.2. Whether the activity of transportation, being a service, can be taxed under the CST Act.3. Whether the freight charges collected separately should be excluded from the sales turnover for the purpose of computing sales tax/VAT.4. Whether the Appellate Authority can exercise power under Section 47 of the VAT Act while taking Suo Moto Revision of the Appellate order under Section 3A of the VAT Act.5. Whether the mandates and interpretation held in Goldie Glass Industries vs. State of MP apply to the present case.Summary:Issue 1: Freight Charges as Part of Sale PriceThe Court examined whether the freight charged separately from the buyer would fall part of the sale price and if the tax levied on the freight component is legally correct. The Orissa High Court in M/s Utkal Moulders vs. State of Orissa concluded that freight charges, when separately shown in the invoice, do not form part of the sale price. The freight charge for further transportation of the goods to the purchaser's site was not part of the sale price as per Section 2(h) of the CST Act. The Court found this reasoning applicable to the present case.Issue 2: Taxability of Transportation ServicesThe Court addressed whether the activity of transportation, being a service, is taxable under the CST Act. It was argued that service tax and VAT are mutually exclusive, and transportation services should not be taxed under the CST Act. The Court referred to the Orissa High Court's decision, which supported the exclusion of freight charges from the taxable turnover.Issue 3: Exclusion of Freight Charges from Sales TurnoverThe Court considered whether the freight charges collected separately should be excluded from the sales turnover for computing sales tax/VAT. The Orissa High Court's decision in M/s Utkal Moulders held that freight charges, when separately invoiced, should not be included in the sale price. The Court found this applicable to the present case, supporting the exclusion of freight charges from the sales turnover.Issue 4: Appellate Authority's Power under Section 47 of VAT ActThe Court examined whether the Appellate Authority can exercise power under Section 47 of the VAT Act while taking Suo Moto Revision of the Appellate order under Section 3A of the VAT Act. The decision in Goldie Glass Industries vs. State of MP clarified that the order passed by the Deputy Commissioner of Commercial Tax (Appeal) is final and not amenable to suo-motu revisional powers under Section 47 of the Act. The Court found this reasoning applicable to the present case.Issue 5: Applicability of Goldie Glass Industries JudgmentThe Court considered whether the mandates and interpretation held in Goldie Glass Industries vs. State of MP apply to the present case. Despite the pending SLA(C) No.16541/2018 before the Apex Court, no stay had been granted against the decision. Therefore, the decision in Goldie Glass Industries was applicable to the present case.Conclusion:The Court answered all five substantial questions of law in favor of the petitioner/assessee. The orders of the M.P. Commercial Tax Appeal Board, the appellate authority, and the Assessing Officer were set aside. However, the execution of the order is subject to the outcome of the pending SLA(C) and any future orders by the Apex Court regarding the Orissa High Court's decision in M/s Utkal Moulders' case. No order as to costs.