TaxTMI 
TaxTMI 
2015 (4) TMI 492
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....er reference, the petitioner-assessee sold diesel to the Railways. The dispute revolves on a short point about the diesel being delivered by Road through containers by the petitioner-assessee to the Railways at the delivery point and whether the freight should be included as part of the sales turnover or not. While the mode of transport was either through Railways or by road but in so far as the mode through Railways is concerned, there is no dispute. The dispute noticed above and raised by the respondent-Revenue finds support and all the three authorities in unison have come to the conclusion that in so far as the freight by road is concerned, it forms part of the sales turnover for the purposes of levy of sales tax and freight is required to be included in the sales turnover and thus sales tax is required to be levied. 3. The Assessing Officer (for short, 'AO'), after analyzing the evidence on record and the agreements entered into by and between the petitioner-assessee and the Railways, came to the conclusion that freight, being part of the bill (invoice), is required to be added while levying sales tax. However, contention of the petitioner-assessee all throughout is t....
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....ne Tap off point to the destination. It further transpired that the transport risk/insurance was entirely on the assessee and it had to bear other expenses which was reimbursable. He further contended that Clause 12(b) of the agreement specifically stated that other elements like freight etc. will be extra. He also drew attention of this Court to Clause 16.3 of the agreement which clearly specifies that "the reimbursement of freight will be on actual road freight or the freight rate as per Industry rate whichever is lower." Counsel stressed that on conjoint reading of the aforesaid clauses, it goes to show that the freight was reimbursable separately and could not be part of the sale transaction and thus the lower authorities have grossly erred in adding the freight as part of the turnover. In support of the said contention, counsel relied upon the judgments rendered in the case of Vinod Coal Syndicate Vs. Commissioner of Sales Tax : (1989) 73 STC 317 (SC); Board of Revenue (Taxes), Kerala Vs. K.P. Moideenkutty (Decd.): (1993) 90 STC 36 (SC); Hyderabad Asbestos Cement Products Ltd. Vs. State of Andhra Pradesh: (1969) 24 STC 487 (SC); Hindustan Sugar Mills Ltd. Vs. State of Raj. & o....
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....he dictates of the buyer had arranged for the vehicle in which the goods were to be supplied at the destination and thus, the freight was charged separately which was to be reimbursed separately and therefore, had no concern or connection with the sales turnover. It would be appropriate to quote Section 2(36) of the RVAT Act which provides ad-infra:- "Section 2 - Definitions 2(36) "sale price" means the amount paid or payable to a dealer as consideration for the sale of any goods less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any statutory levy or any sum charged for anything done by the dealer in respect of the goods or services rendered at the time of or before the delivery thereof, except the tax imposed under this Act; Explanation I.-In the case of a sale by hire purchase agreement, the prevailing market price of the goods on the date on which such goods are delivered to the buyer under such agreement, shall be deemed to be the sale price of such goods; Explanation II.-Cash or trade discount at the time of sale as evident from the invoice shall be excluded from the sale price but any....
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....ces of all items of the Rate Contract have been deregulated with effect from 01.04.2002 and are being fixed by Oil companies on import parity principle or any other basis considered appropriate, from time to time, depending on the market driven factors. The Master Price Lists (MPL) will be submitted by individual PSUs duly certified by their auditors to DGS&D with a copy to Chief Controller of Accounts, New Delhi." "CONSTITUENTS OF THE RATE BUILT UP a) Prices Ex-refinery/MI/Pipeline Taps/Depot rates b) Railway Freight Notional Railway Freight for all supplies made by rail from normal source of supply. Actual Railway Freight for alternate source of supply as per MOP&NG/OCC directives. Difference of Actual Railway Freight and Notional Railway Freight to be borne by the suppliers and claim subsidy from the OCC. However, if products come in Free Trade and Freight Subsidy is withdrawn by MOP&NG/OCC, the Actual Railway Freight shall be borne by the consignee. c) Excise Duty As per rates and applicability provided for by Government from time to time. d) Transportation by Road: Supplies made in Tank, Trucks by road from Refineries/MI/Pipeline/Tops/Depot shall be charged as certifie....
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....ap Off point to the Destination. However, in case, the Government decides to withdraw subsidy on additional Railway Freight, the same shall be borne by the Buyer. If supply point is changed at the instance of the buyer to avail CST or other benefits, the buyer will bear the actual Rail Freight." Price build up will be as under: a) Ex-Depot price plus delivery charges/ Octroi / Local levies/ Surcharges Transportation charges at actual Sales Tax and any other levy as applicable from time to time. b) Un country supplies: For delivery in bulk tank wagons/ buyer's tank lorries/ containers Exfirm's operated depot: Firm's depot selling prices as applicable to the general trade on the date of delivery." "27.Deliveries AT Consignee's Premises: i) In call cases, quantities filled and dispatched/delivered Ex-your depots above will count for payment. Variation in volume after despatch will be to the buyer's account. The consignee may, if desired, verify (supervise) the filling at your depot and check your seals on the vehicles and may also put additional seals of their own, if considered necessary. ii) Supplies will be subject to accessibility by road and suitability ....
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....PC, BPC & MPRL minus a discount of Rs. 150,00 per KI (before Excise duty & Sales tax). State specific cost for the product destination state is inclusive and other elements like freight etc. will be extra. PSUs should indicate the ex-supply location price, and state specific cost and other charges separately in their MPL." "16.Freight shall be payable as under:- 16.1 In case Dispatches by Rail transport: HSD Oil when consigned to the Railways will be exempted from the condition of pre-payment of freight and will be booked as freight to pay without levy of 'To pay' surcharge on freight as destination. The other surcharges wherever applicable shall also be leviable (autority Railway board's letter No.TCR/1078/2006/15 dt.4.12.2006). 16.2.In case of dispatches by rail, the date of RR (Railway-Receipt) will be taken as the date of delivery. 16.3. In case of delivery by Road: (a) Delivery charges of Rs. 44/kl are included in price for delivery within 39 km of round trip distance (RTD). No separate freight charges should be claimed for such locations. (b) Any location beyond 30 Kms round trip distance (RTD) the freight charges at applicable rates will be as per prevaili....
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....y at consignees' storage/ consumer pumps, it prescribes that price built up will be exdepot price plus delivery charges/octroi/local levies/ Surcharges, Transportation charges at actual Sales Tax and any other levy as applicable from time to time and it will be the responsibility of the assessee and the IOC/BPC/HPC shall be responsible & liable for any shortage, damages or deterioration to the consignment in transit if the same is to be carried in their own or contractor's truck's/tank lorries to the destination station and as per the terms and conditions of DGS & D, the rate contract, as noticed earlier and specifically mentioned herein above, it was the duty of the assessee to deliver the goods at the destination. Therefore, in my view, the Tax Board has rightly come to the conclusion that the freight is includable in the sale price and accordingly, in my view, the Tax Board was justified in coming to the conclusion to which it has reached. On perusal of the terms and conditions of DGS & D rate contract, it goes to show that the assessee shall be liable and responsible to pay for any shortage, damage and deterioration during the consignment of the goods in the way upt....
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.... of the Control order be satisfied ? How would it be possible to give effect to Cl. (9) if what is realised by the assessee is not F.O.R. destination railway station price but that price less the amount of freight? How would the assessee claim to be entitled to be reimbursed under the proviso to Cl. (9) if he has not incurred any expenditure on the freight'? The entire statutory scheme would become unworkable. The scheme of the Control order clearly proceeds on the basis that the freight is payable by the producer and he recovers it from the purchaser as part of the F.O.R. destination railway station price. The provision in the contract that the delivery to the purchaser shall be complete as soon as the goods are put on rail and payment of the freight shall be the responsibility of the purchaser is wholly inconsistent with the scheme of the Control order and must be held to be excluded by it. The Control order is paramount: it has overriding effect and if it stipulates that the freight shall be payable by the producer, such stipulation must prevail, notwithstanding any term or condition of the contract to the contrary. The conclusion is, therefore, inevitable,- that the amount ....
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....amount of freight forms part of the 'sale price' within the meaning of the first part of the definition and it is not necessary for the State to invoke the inclusive clause and in fact the State has not done so. The exclusion clause is, therefore, irrelevant and cannot be called in aid by the assessee. We 'may point out that even if the exclusion clause were read as an exception to the first part of the definition which, as we have pointed out, cannot be done, it cannot avail the assessee. It is only where the cost of freight is separately charged that it would fall within the exclusion clause and in the context of the definition as a whole, it is obvious that the expression ".... cost of freight.... is separately charged" is used in contradiction to a case where the cost of freight is not separately charged but is included in the price. It is not intended to apply to a case where the cost of freight is part of the price but the dealer chooses to split up the price and claim the amount of freight as a separate item in the invoice. Where the cost of freight is part of the price, it would fall within the first part of the definition and to such a case, the exclusion claus....
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....be seen that the freight was charged separately and was paid separately by the principals (Railways). 18. In the case of Hyderabad Asbestos Cement Products Ltd. Vs. State of Andhra Pradesh (supra), the Hon'ble Apex Court found that the company sent goods to outstation customers by railway under railway receipts with freight to pay and the company made out an invoice at the catalogue rate, and the customer paid the amount of the invoice less the freight for releasing the railway receipt and took delivery of the goods on payment of the railway freight. The result was that the net price received by the company was the catalogue rate less the railway freight charged in respect of the goods transported to the destination and on such finding of fact, it was held that there was no obligation on the part of the company to pay the freight and the price received by the company for the sale of the goods is the invoice amount less the freight. 19. Counsel for the assessee has also relied upon judgment rendered in the case of Hindusthan Sugar Mills Ltd. Vs. State of Rajasthan and ors. (supra), which has also been relied upon by counsel for the Revenue and in view of facts given herein abo....