TaxTMI 
TaxTMI 
1977 (8) TMI 67
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....livered at their destination they hire the expert services of the appellant which are know as 'after sale service' for which the appellant charges them separately. At times the customers require the goods to be packed in a separate kind of packing for which special kind of packing is provided for which separate charges are made in the bill. In certain cases these charges for special packing are made out in the regular bill (hereinafter referred to as White Bill) whereas in certain cases these charges are shown as service charges which are included in the other debit notes (hereinafter referred to as Yellow Bill.) Besides providing for this packing facility, the appellant also undertakes on behalf of the purchasers the work of handling goods, loading and unloading, providing for iron strapping and binding and also service in the form providing for lafa, that is, planks for the protection of the glass. For these services separately rendered, separate service charges are recovered from the customers by preferring separate bill (Yellow Bill) showing such service charges. So far as the special packing charges included in the White Bill are concerned, the appellant has recovered separate....
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.... the appellant was not entitled to purchase timber against declarations in Form 19. So, so far as the purchases of timber against Form 19 are concerned, the STO levied purchase tax of Rs. 7,470 under s. 16 of the Act. 5. In addition to taxing of packing materials and handling charges and levying purchase tax for contravention of declarations in Form 19, further penalties were levied, one under s. 45(1) of the Act for an amount of Rs. 10,000 and of Rs. 45,592 under 45(6) of the Act, the latter being levied because the difference between the amount of tax assessed and the amount of tax paid exceeded 20 per cent of the tax paid before assessment. 6. The appellant was accordingly assessed by the STO against which the appellant had preferred first appeal before the learned Asstt. CST. The learned Asstt. CST, however, confirmed the order passed by the STO in all respects and dismissed the appeal filed before him. It is against this order of the learned Asstt. CST passed in first appeal that the appellant has approached this Tribunal in the present send appeal. 7. Shri S.L. Mody, learned Advocate appearing on behalf of the appellant, very strongly contended before us that the pac....
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....charges (one or two dimensions fractional as the case may be). 11. Open delivery. 12. Unloading. 13. Inspection charges at destination. 14. Services of your branch office. 15. Finance charges. 16. Freight. 17. Transportation charges. 18. Other local taxes as applicable. These services may be charged consolidated. (c) We have confirmed the same as under : "Kindly refer to your letter dated …………… We are willing to provide the services mentioned in our Works No. 2 on extra charges." Besides this, the learned Advocate submitted that even before the STO it was contended that "after the sale of glass some customers are asking for more services on the cost basis and these after sale services are based only on cost basis. Moreover, if we will not give these services after sale, if will be more difficult for the buyers to get such services at their cost, and they will have to incur more expenses. Under the orders under reference for which assessment is being made, we have spent Rs. 70,00,000 for such after sale services. We have recovered only Rs. 50,00,000 from the customers. This shows that particular services are not our business, but our rea....
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.... of glass sold in square meter. It was further clarified by the learned Advocate that where there is a mention of double or triple packing, it does not mean that double quantity or triple quantity of packing material is provided. It only means that single packing is provided and double and triple means two/three bundles or packing cases. In other words, it can be safely said that so far as extra charges for packing are concerned, the quality of packing in all the cases is similar. This is obvious because when the appellant recovered various charges in the form of handling charges, loading, unloading and delivery charges at destination, iron strapping and lafa charges, etc. the appellant undertakes to deliver glass in a packed condition at the destination of the purchaser. So far as the inter-State sales are concerned, as stated above, the appellant was not able to produce a single copy of order received from the customers. When asked to clarify as to how the goods are delivered, the learned Advocate clarified that the purchasers rely on the appellant. The appellant undertakes to do everything on behalf of the customers for safe delivery of the glass at the destination of the custom....
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....nts which are charged are for service rendered to the customers in general and such service charges cannot be equated to the consideration for the transfer of property in the goods, the High Court held that because these charges did not form part of consideration, they could not be treated as part of 'sale price'. So far as this principle as laid down by the Gujarat High Court is concerned, we are in agreement. The next decision cited by the learned Advocate is that of Madras High Court in Srinivasa Timber Depot & Ors. vs. Dy. CTO, Choolai Division, Madras-29 & Ors. 23 STC 158 (Mad) wherein the question that came up for consideration was whether Lot Cooli charges collected from the customers of timber depots would form a part of turnover and they should be treated as "any sums charged for anything done by the assessee in respect of the goods". As page 160 of the Report, it was observed that : "…………What is chargeable to tax is not any sum charged at the time of or before the delivery of the goods, but any sum, charged for transfer of property in the goods, involved in anything done by the dealer in respect of the good at the time specified by the Explanation………" ....
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....fore, need not discuss the same over again. The other decisions cited by the learned Advocate are of this Tribunal in the cases of Pure Beverages Ltd. vs. The State of Gujarat (S.A. no. 267 of 1973, decided on 15th Jan., 1975) and Gujarat State Co.-operative Marketing Society Ltd. vs. The State of Gujarat (S. As. Nos. 268 & 269 of 1973, decided on 26th Sept., 1974). In the case of Pure Beverages Ltd. the question was whether transport and handling charges recovered by the appellant from the purchasing mills formed part of sale price. After going through various authorities, it was held that what should be seen is whether the transport and handling charges are recovered before the transfer of property or thereafter. After coming to a conclusion that these charges were recovered after the sale was complete, it was held that they did not form a part of sale price. A similar question which arose in the case of Gujarat State Co-operative marketing Society was whether carrying charges recovered by the appellant from its customers formed a part of sale price under the Bombay Act, of 1959. Relying on the decision of this Tribunal in the case of Khirchand Sunderji Sanghavi vs. The State of ....
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....able in the absence of any identification between the goods purchased from registered dealers and used in the manufacture of goods consigned outside. So far as this point is concerned, we are of the view that the ST Authorities were justified in levying purchase tax of Rs. 95,925. 11. The next contention of the learned Advocate was that levy of purchase tax of Rs. 7,470 on the purchases of timber which was used in the manufacture of crates used for packing of glass is not proper. The contention of the learned Advocate in this regard was that the glass is a fragile article and it cannot be sold without being properly packed. The conditions of Form 19 are that the goods purchased should be used as raw or processing materials or as consumable stores in the manufacture of goods for sale. The goods manufactured are for sale and, therefore, unless the goods are put into salable condition, the process of manufacture cannot be held to be complete. It was the submission of the learned Advocate that the process of manufacture is not completed till the goods are not put into salable condition and in order to put the goods into salable condition, packing materials are absolutely necessary a....
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....he goods are sold packed in any packing material, the packing material will be merged in the packed material sold and there would be no question of separate sale of packing material. In our opinion, this decision does not help the Revenue. It was be observed that much water has flown since this decision was rendered in December, 1968 and the concept of law has undergone much change and where the price of packing material is substantial or where from the circumstances is appears that an implied contract for sale of packing material as such can be inferred, there is an independent sale of the packing materials. Thereafter the learned Government Agent invited our attention to certain observations made by K. Chaturvedi in his Book on Central ST Act, Fourth Edition, 1975 at pages 186 to 189. The relevant observations at page 187 are in respect of weighting charges where it has been held in Sarju Prasad Pritam Lal vs. Judge Revisions (14 STC 884), that : "Weighing charges dues charged separately from buyers, in addition to the price of goods sold are part of the proceeds of sale, being a "sum charged for any thing done by the dealer in respect of the goods at the time of delivery ther....
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....he determination of the question of `sale price' in the light of the above definition when considered along with the decisions cited by both the parties, would be as under : (1) There must be a sale of goods in the sense of transfer of property. (2) The sale must be for the amount of valuable consideration paid or payable. (3) The amount paid or payable before the transfer of property would form a part of sale price. (4) The phrase 'any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof" shall have to be interpreted accordingly. This means that whatever is done before the transfer of property would form a part of sale price unless specifically excluded. (5) The charges recovered after the transfer of property though in respect of goods at the time of or before the delivery, shall not form a part of sale price. 15. On the principles stated above, it was held that weighting charges are part of sale price, because unless the purchaser paid the weighing charges as a part of consideration, the seller would not have parted with the possession of goods. On similar basis it was urged that Adat, Dalali, bank commis....
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.... nature they have to be properly packed. The staff or labourers of the appellant being specialized in this matter, a Representative of the appellant accompanied the transport vehicle and ensured safe delivery of the goods at the premises of the purchasing dealers. It was further clarified by the learned Advocate that for this purpose, the appellant has recovered unloading and other charges at destination. This shows that the appellant undertakes the responsibility of delivering the goods in a proper condition at the destination of the purchasing dealers and for this purpose its Representative accompanied the transport vehicle. 17. We have gone through the copies of various bills produced by the appellant before us and we find that substantial amounts have been recovered by way of special packing charges and also by way of other charges in the nature of handling, loading, unloading, delivery, binding and lafa charges. Take, for example, bill dt. 6th Feb., 1973 issued in favour of Jaya Frame Works of Davangiri. The price of goods inclusive of excise is Rs. 2,190. Extra charges for special packing is Rs. 1,539 and handling and other charges are of Rs. 401. This means that packing a....
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....by", whereas in majority of other cases in the column of "goods despatched by", the name of the transport company has been mentioned. We have tried to co-relate the packing and other charges with the value of the goods. But we could not find that there is any rational basis for this and it appears that these charges have been recovered on some arbitrary basis. 18. In his affidavit filed by the Managing Director, a part of which has been reproduced above, he has admitted that because if is very difficult and costly and becomes more or less difficult for the purchasers to engage their own men after taking delivery of loose glass from the appellant's factory, the appellant is requested for giving after-sale-services like, packing, loading, unloading, Lafa charges, etc. In a statement given before the STO on 31st Oct., 1975 the appellant had stated that the customers want certain after-sale-service because it is more difficult for the purchasers to get such services at their cost. 19. As stated above, it is to be decided whether the packing charges shown in the White Bills from a part of sale price and also whether the other charges shown in Yellow Bills form a part of sale price....
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....nt because it was difficult and costly for them to take delivery and remove the goods at their destination, the purchasers desired to have the goods delivered at their destination. From the conduct of the appellant as a selling dealer as well as the purchasing dealers, it is clear beyond all doubt that an implied agreement was there to deliver the goods at the destination of the purchasing dealers. In order to decide as to when the property in the goods passed, or when the purchasers wanted the property to pass to them, we may ask the question to ourselves whether the purchasers would have accepted the delivery ex factory where the appellant as a selling dealer was not prepared to give so-called after sale services ? The obvious answer to this would be in the negative. This is because the goods being fragile, the purchasers would not be prepared to take the risk or breakage during transit and, therefore, the purchasers wanted that the goods should be delivered at their destination for which they were prepared to pay the charges made by the selling dealer, that is, the appellant. In interpreting the nature of a transaction, we have to took into the substance of the matter and not th....