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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether freight charges incurred for transporting goods from the factory gate to the purchaser's destination, under contracts providing for ex-factory delivery and reimbursement of freight by the purchaser, form part of the sale price liable to sales tax.
Analysis: The contractual terms showed that the sale was completed ex-factory and that the assessee transported the goods on behalf of the purchasers, who were obliged to reimburse the freight. On that basis, the freight was incurred in a representative capacity and was not part of the consideration for the sale. The definition of sale price under Section 2(29) of the Bombay Sales Tax Act, 1959, as well as the clarificatory explanations relied upon, did not alter that position. The earlier binding view on identical facts also supported the same construction.
Conclusion: Freight charges reimbursed by the purchaser did not form part of the sale price and were not exigible to sales tax; the issue was answered in favour of the assessee and against the revenue.
Final Conclusion: The references were answered by holding that freight reimbursement under an ex-factory contract is outside the taxable sale price, so the assessee was entitled to succeed on the referred question.
Ratio Decidendi: Where a contract provides for ex-factory sale and the purchaser reimburses freight paid by the dealer for transportation undertaken on the purchaser's behalf, the freight does not constitute part of the sale price.
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