2001 (11) TMI 979 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether freight charges incurred by the seller should be included in the taxable turnover for sales tax assessment.

Analysis:
The judgment dealt with the inclusion of freight charges in the taxable turnover for sales tax assessment. The assessee sold electric meters to the State Electricity Board under a contract specifying that ownership of the goods would remain with the supplier until delivery at the destination station. The contract also detailed payment terms, including the ex-factory price, excise duty, and sales tax. The assessing authority initially did not include freight charges in the taxable turnover. However, after an inspection revealed that freight charges were collected separately but not accounted for, the authority levied tax on 50% of the freight charges. The Tribunal allowed the Revenue's appeal, leading the assessee to challenge this decision.

The assessee contended that as per Rule 6(c) of the Tamil Nadu General Sales Tax Rules, freight charges, when specified and charged separately, should be deducted from the dealer's turnover. The assessee relied on a Supreme Court decision emphasizing that only the price actually received should be taxable. However, the Court noted that in this case, the seller was obligated to pay the freight for delivery to the buyer's premises, making it part of the sale price.

The Court also referenced other cases where freight charges were considered part of the sale price if incurred before the completion of the sale. It was highlighted that the definition of "turnover" and "sale" in the Act encompassed the amount for which goods are sold, indicating that expenses like freight incurred by the seller before completing the sale should be included in the turnover.

Moreover, the judgment discussed previous decisions that examined the treatment of freight charges in taxable turnover, emphasizing that charges incurred by the seller before completing the sale should be considered part of the pre-sale expenses. Ultimately, the Court upheld the Tribunal's decision to include the freight charges in the taxable turnover, dismissing the writ petition challenging the same.