TMI Blog1984 (9) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... CE The price or prices of naphtha shall be determined in accordance with the pricing formula laid down by the Government of India or as allowed by the Government of India from time to time in respect of: (i) naphtha produced indigenously and (ii) imported naphtha. ........................ The price or prices so charged shall be exclusive of transfer charges [chargeable in accordance with clause 7(ii) of this agreement] excise duty and all other taxes and levies, which shall be recovered by the SELLER from the BUYER at actual rates prevailing and levied by concerned agencies from time to time." The material portion of clause 7(ii) referred to above is in the following terms: "7(ii) The cost of transferring naphtha by pipe-line from the point of its manufacture to the fence of the fertilizer factory shall be assumed to be the same as the railway freight for the equivalent distance as applicable from time to time for naphtha and shall be borne by the BUYER." In March, 1974, the State of Uttar Pradesh assessed IOC to sales tax for the assessment year 1969-70 under the State Act on total turnover of IOC including therein the sale of naphtha by IOC to IEL under the above me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is not a matter that arises for consideration on the present writ petition filed by IOC." It is because of the fact that this question mentioned above was kept open by the Supreme Court that the present petition has been filed in this Court. Two issues have been raised in the present writ petition. First, whether the Central sales tax is payable on transportation charges for naphtha; and second, whether Central sales tax is payable on the excise duty charged by IOC to IEL. It may be noted that the second question was not pressed at the time of the hearing by IEL. Before I go into the controversy raised in the petition it may be noted that the following pleadings were used by the parties: (i) Writ petition filed by IEL and a shareholder verified an affidavit affirmed by the shareholder on the 22nd July, (sic) 1981. (ii) Supplementary affidavit filed by IEL with leave of court affirmed by Samarjit Ghosh on the 10th April, 1981. (iii) Affidavit-in-opposition of IOC affirmed by Himadri Kanti Lahiri on the 9th May, 1984. (iv) Affidavit-in-opposition of the State of Bihar and respondent No. 2 affirmed by Om Prakash Sultania on the 7th May, 1984. (v) Affidavit-in-rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to pay". It made out an invoice at the catalogue rate and the customers paid the amount of invoice less the freight for realising the railway receipt and took delivery of the goods on payment of the railway freight. The result was that the net amount received by the company was catalogue rate less the railway freight charged in respect of the goods transported to the destination. In a sample invoice which was relied upon by the State of Andhra Pradesh in that case, the company had made out the invoice at the catalogue rate deducting discount therefrom, charged sales tax on the balance and thereafter they deducted the railway freight. The question that arose for consideration was whether the deduction in respect of railway freight would be allowed for assessment of sales tax under the provisions of the Andhra Pradesh General Sales Tax Act, 1957. It may be noted that the provisions of the Andhra Act are very similar to the provisions of this Act. The Supreme Court laid considerable emphasis on clauses IV and XVI of the contract, which are in the following terms: "Clause IV. The price of the said production supplied to the stockists would be the current general gross list price ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich said that no producers shall sell any other variety of cement at a price exceeding Rs. 214.65 per metric ton free on railway, destination railway station plus excise duty paid thereon. The Cement Control Order ensured that cement was available throughout country at a uniform price. The contract which the assessee had with the purchasers provided, inter alia, that although the price of cement was on the basis of f.o.r. destination railway station, the consignments would be despatched "freight to pay" and credit accorded in the bill for the cement of freight payable. The question that arose for consideration was whether the amount of freight deducted from the f.o.r. destination railway station price in the invoices made out by the assessee and paid by the purchasers formed part of the "sale price" within the meaning of the Rajasthan Act and section 2(h) of the Central Act. The High Court was of the view that the freight formed part of the sale price and was therefore includible in the total turnover. The Supreme Court held that the scheme of the Control Order was that the freight was payable by the purchaser and he recovered it from the seller as part of the f.o.r. destina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the freight was separately charged or whether it was part and parcel of the sale price which the customer paid to the assessee-dealer." Another decision of a Division Bench of the Orissa High Court in the case of Orient Paper Mills Ltd. v. State of Orissa reported in [1975] 35 STC 84; 1974 Tax LR 2224 was relied upon by Mr. Gupta for the same proposition. Applying the above principles to the facts of the present case it was submitted by Mr. Gupta that the clauses of the contract between the IEL and IOC particularly the last sub-paragraphs of clause 5 and clause 7 thereof clearly indicate that the freight charged in the instant case is an identifiable and separate element. It does not form part of the composite sale price unlike the price fixed under the Cement Control Order which is a uniform price throughout the country. This, it was submitted, is the basic difference between the instant case and the Hindustan Sugar Mills case [1979] 43 STC 13 (SC); 1978 Tax LR 2258. It was pointed out that the price of naphtha is not controlled. On the contrary, the transportation charges are charged in addition to the price of naphtha as fixed by the Government. In the first supplementary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the petition as framed does not include a prayer for refund. Mr. Gupta thereupon prayed for leave to file a second supplementary affidavit placing on record the relevant facts regarding refund and prayed for appropriate relief with regard thereto. As indicated above, such leave was granted to Mr. Gupta's client. IOL also asked for leave to file a supplementary affidavit in answer to the affidavit of the petitioner. Such leave was also granted. It was recorded on behalf of the State of Bihar that they did not want to file any further supplementary affidavit. Pursuant to such leave the petitioner has filed a second supplementary affidavit. The IOC however has not filed any supplementary affidavit. In the supplementary affidavit a highly complicated procedure has been indicated for the eventual refund of sales tax to IEL. It has been prayed that all assessment orders passed by the State of Bihar on IOC in respect of sales of naphtha to IEL under the agreement dated 9th February, 1970, for the period between September, 1969, to the 31st December, 1980, in so far as it levies sales tax on transportation or delivery charges be quashed and set aside. All appeals (if any) filed by IO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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