1982 (11) TMI 144 - HC - VAT and Sales Tax

Summary

Issues:
Whether the freight charges separately mentioned in the sale invoice are includible in the turnover of the assessee or not?

Analysis:
The judgment by the High Court of Andhra Pradesh addressed the issue of whether the freight charges mentioned in the sale invoice should be included in the turnover of the assessee. The assessee, a fertilizer manufacturing firm, contended that the freight charges should be deducted under rule 6(g) of the Andhra Pradesh General Sales Tax Rules as post-sale charges. The first assessing authority and the appellate authority rejected this contention. The Sales Tax Appellate Tribunal also ruled against the assessee, stating that the freight charges cannot be deducted under the mentioned rule and that there was no evidence to prove they were post-sale charges.

The High Court analyzed the principle of determining whether charges are incurred before or after the sale, emphasizing that expenses incurred before the sale must be borne by the seller, while those after the sale must be borne by the customer. The Court referred to the Supreme Court decisions in Hindustan Sugar Mills Ltd. v. State of Rajasthan and Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh to illustrate scenarios where freight charges are included in the sale price. The Court highlighted that the sale is considered complete when goods reach the destination indicated by the customer.

Regarding the definition of "turnover," the Court cited the A.P.G.S.T. Act, emphasizing that turnover includes sums charged by the dealer for anything done before or at the time of delivery of goods. The Court further referenced the Supreme Court's ruling that the consideration for the sale of goods is crucial, regardless of how the amount is calculated. The absence of evidence showing that the sale was complete before goods transport or that there was an agreement for the purchaser to bear freight charges led the Court to uphold the Tribunal's decision.

The Court dismissed the argument that freight charges should be excluded from turnover based on constitutional grounds, stating that the constitutionality of a statute cannot be challenged in tax revision cases. The Court upheld the inclusion of freight charges in turnover based on previous Supreme Court decisions that defined turnover to include excise duty, sales tax, and freight charges. Consequently, the tax revision cases were dismissed, with no costs awarded to either party.