2002 (7) TMI 762 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of grinding charges, loading and unloading charges, transport charges, and freight charges in the taxable turnover.
2. Levy of penalty for non-disclosure of turnover.

Detailed Analysis:

1. Inclusion of Charges in Taxable Turnover:

The primary issue in this case was whether grinding charges, loading and unloading charges, transport charges, and freight charges should be included in the taxable turnover of the assessee for the assessment years 1987-88 and 1988-89. The assessee argued that these charges were post-sale expenses and should not be part of the sale price. However, the assessing officer determined that these charges were pre-sale expenses and included them in the taxable turnover.

The court referred to the definition of "sale price" under section 2(h) of the Central Sales Tax Act, which includes any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery, excluding the cost of freight or delivery if separately charged. The Supreme Court's decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan was cited, which held that freight and handling charges, even if shown separately, form part of the sale price if they are part of the consideration for the sale.

The court found that the assessee had issued pro forma invoices at the time of dispatch, which included a lump sum amount covering sales tax, freight, and handling charges, indicating that these were part of the sale consideration. The assessee failed to provide evidence of a separate agreement for the sale of raw materials and subsequent grinding. Consequently, the court held that the charges in question were part of the sale price and should be included in the taxable turnover.

2. Levy of Penalty:

The second issue was whether the penalty for non-disclosure of turnover was justified. The Appellate Assistant Commissioner had set aside the penalty, finding no willful default by the assessee. The Sales Tax Appellate Tribunal upheld this decision, noting that the assessee had disclosed the turnover in its accounts and there was no deliberate omission in the return filed.

The court agreed with the Tribunal, stating that the penalty was not warranted as there was no willful non-disclosure. It was considered a bona fide mistake by the assessee, and there was a legitimate doubt regarding the inclusion of the disputed amounts in the sale price. The court upheld the cancellation of the penalty, affirming that the assessee had acted in good faith.

Conclusion:

The court allowed the tax revision petitions regarding the inclusion of charges in the taxable turnover, holding that these charges were part of the sale price. However, the court dismissed the revision petition concerning the penalty, upholding the Tribunal's decision to cancel the penalty due to the absence of willful non-disclosure by the assessee.