TMI Blog2010 (6) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... ry evidence? Held that:- The Tribunal, after examining the entire transaction between the respondent and its buyers, on the basis of the documents produced before it by the respondent, has come to a correct conclusion that the insurance is not intended to be treated as part of the "sale price" and the insurance charges have to be borne by the buyers independently and separately and such insurance charges are not to be included in the sale price. In view thereof, the submissions made on behalf of the Revenue cannot be accepted. We are also of the view that the Tribunal, in view of the evidence submitted by the respondent, was entitled to take a different view from its earlier view, pertaining to the same issue, in respect of the different assessment years. We therefore answer the questions set out in paragraph 2 of this judgment in the affirmative, i.e., in favour of the respondent and against the Revenue - Sales Tax Reference No. 9 of 2001, REFERENCE APPLICATION NO. 2, 3, 4 and 5 OF 1997 - - - Dated:- 18-6-2010 - DAGA V.C. AND KATHAWALLA S.J. JJ. For the Appellant : V.A. Sonpal, A Panel Counsel, For the Respondent : Ms. N.R. Badheka The judgment of the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. Consequently, penalty imposed under section 30(2)(c), Explanation-I was deleted. Against this common order four second appeals were preferred on various grounds. 5. In the second appeals, it was, inter alia, contended on behalf of the respondent that both, the lower authorities have committed an error in treating insurance charges as part of the sale price by imposing tax thereon. However, the Revenue strenuously argued that the insurance charges shall form part of the sale price and both the lower authorities are justified in imposing tax on the insurance charges charged by the respondent to the purchasers on machinery. After perusing the documentary evidence adduced by the respondent including the terms and conditions contained in the agreements between the respondent sellers and the purchasers of the machinery and the case law cited by both the sides, the Tribunal, contrary to its earlier view in the case of the very same respondent, by its judgment dated October 5, 1996, gave its finding in favour of the respondent-assessee by holding that the assessing authority has committed an error in treating the amount of insurance charges as part of the sale price and by levyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will frustrate the purpose of the Act. The claim that the delivery is ex-factory is not true where insurance charges are recovered. Even if, the delivery is exfactory, the insurance charges paid before or at least at the time the goods are loaded on the carriage ought to be added to the sale price. Again, the risk is accepted by the respondent, if insurance is taken. The insurance policy is taken in the name of the respondent. All these facts leave no scope to contend that the sale price is to be calculated by excluding the insurance charges. 9. It is also submitted that the definition of sale price under section 2(29) of the BST Act specifically provides for exclusion of insurance charges which is absent in the CST Act. Therefore it can be safely inferred that in the CST Act sale price is not exclusive of insurance charges. The conclusion by the Tribunal that the sale price does not include insurance charges is paradoxical and perverse and deserves to be set aside. In support of its submission, the applicant has, inter alia, relied on the decision of the honourable Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC) . 10. It is also sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) The terms of delivery set out in the quotation clearly states that the delivery of equipment will be made at our work. We shall, if so required by you arrange for transportation from our works at your site on your behalf and at your cost . The column referring to price specifically states that the quotation only refers to the goods and articles specified therein and are based on the cost of the present day labour and material. In the column referring to insurance it is specifically stated that the same to be covered as per the instructions of the buyer at extra cost. Invoice: (viii) The specimen of sale invoice makes it clear that in addition to the prices of spares, the excise duty and packing charges are added and on the total amount, Central sales tax is charged at the rate of four per cent against C form. The loading charges and the insurance charges are charged separately. 13. It is submitted that the evidence on record pertains to various different parties. However, the terms are identical in nature. The price is always quoted ex works and unpacked. The delivery is always stated to be at works. Insurance is always stated to be governed as per the risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailway receipt on the basis of 'freight to pay' and requests the purchaser to pay the freight at the time of taking delivery of the goods from the railway at the destination railway station and gives the purchaser credit for the amount of the freight against the agreed price. When the purchaser pays the freight in such a case, it would be as a part of the agreed price and not as freight vis-a-vis the seller. The amount of freight paid by the purchaser and shown in the bill as deducted from the agreed price would, in such a case, form part of the 'sale price'. The position would, however, be different in the second type of f.o.r. contracts, where the contract of sale is not f.o.r. destination railway station but the price alone is so. In such a case, the contract does not have all the incidents of an f.o.r. destination railway station contract, but merely the price is stipulated on that basis. The terms of such a contract may provide that the delivery shall be complete when the goods are put on rail and thereafter it shall be at the risk of the purchaser. Such a stipulation would make the railway the agent of the purchaser for taking delivery of the goods. The fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion railway station price. The provision in the contract that the delivery to the purchaser shall be complete as soon as the goods are put on rail and payment of the freight shall be the responsibility of the purchaser is wholly inconsistent with the scheme of the control order and must be held to be excluded by it. The Control Order is paramount: it has overriding effect and if it stipulates that the freight shall be payable by the producer, such stipulation must prevail, notwithstanding any term or condition of the contract to the contrary. The conclusion is, therefore, inevitable that the amount of freight forms part of the sale price within the meaning of the first part of the definition.' 9. This position was reiterated by the Supreme Court in its recent decision in Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu [1993] 88 STC 151 (SC). Referring to its decision in Hindustan Sugar Mills Ltd. [1979] 43 STC 13 (SC), it is observed: '. . . This court, after referring to the above contentions, pointed out that, if the terms and conditions of the contract had stood alone, the assessee might have been entitled to succeed in excluding the freight charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced before the Tribunal as well as this court. Under clause1 of the terms and conditions pertaining to PRICE, PAYMENT AND TRANSFER OF PROPERTY, IN GOODS an express agreement is reached by and between the respondent and its purchaser/s as follows: . . . unless otherwise agreed, the quoted price is exclusive of the charges payable on packing, carriage freight and insurance. . . Clause 3 of the terms and conditions pertains to DELIVERY . Subclause (A) to clause 3, inter alia, provides that The delivery of machinery/ equipment is to be taken at the works of the company. If, however, the equipment/machinery is desired to be delivered at a particular site, the same can be arranged at the discretion of the company at the buyers' risk and cost, irrespective of which the delivery shall be construed as complete at the works of the company. 21. Relevant terms and conditions found in the quotation issued by the respondent pertaining to the delivery and insurance are as under: DELIVERY : Delivery of the equipment will be made at our works. We shall if required by you, arrange for transportation from our works to your site on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the insurance charges would be charged separately and therefore it cannot be construed to be forming part of the sale price . Again, the Marine Cover Note further goes to show that the declaration for insurance is to be made immediately after the dispatch of the goods. Since the delivery is ex-works and the amount acknowledged in the Marine Cover Note is only a deposit, the Tribunal was correct in reaching a conclusion that the insurance came into force after the dispatch of the goods. This finding as well as explanation of the respondent that the amount of insurance charges was paid by the buyer subsequently after adjusting the amount of deposit mentioned in the Marine Cover Note is also supported by the addendum to the Cover Note, by which addendum the sum insured was increased by ₹ 10,000 and thereby the insurance company collected extra sum for the additional premium. The decisions cited by the respondent also supports its case. 24. Under the circumstances, we are of the view that the Tribunal, after examining the entire transaction between the respondent and its buyers, on the basis of the documents produced before it by the respondent, has come to a correct conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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