TMI Blog2017 (10) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent intention appears, the rules contained in Sections 20 to 24 are the rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. It is thus, the transfer of right to use the goods is deemed to be sale of goods, attracting the incidence of tax. In the present case, passing of the property in goods to the buyer is at the place and time of spot delivery. After the sale is complete, even if the assesseesellor retains the possession of the goods sold and incurs the expenditure of insurance and carrying the goods at the destination of the buyer, he performs these functions in his capacity as a 'bailee', as contemplated by Section 148 of the Indian Contract Act, 1872, who shall be entitled to reimbursement of such expenses from the 'bailor', as specified under Section 158 therein. Such charges of insurance and carrying incurred by the assesseesellor cannot, therefore, constitute a 'sale price' within the meaning of Section 2(29) of the BST Act. The Tribunal was justified in holding that the insurance charges and carrying charges do not form part of the sale price for the reason that the sale was completed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over in the previous year exceeds a certain limit shall be liable to pay tax on his taxable turnover, subject to the provisions of that Act. It considers the definition of Taxable turnover under Section 2(s) to mean that part of the turnover , which remains after deducting the aggregate amount of proceeds of certain categories of sales and turnover according to Section 2(t), mean the aggregate of the amount of sale prices received or receivable by a dealer in respect of the sale or supply of goods...... . 4] The Court considers the definition of sale price given in Section 2(p). The relevant portion of it is reproduced below; . the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in case where such costs is separately charged. The Apex Court considers that the aforesaid definition is in two parts. The first part says that 'sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would, therefore, clearly form part of sale price and fall within the first part of the definition. 7] In para 10 of the said decision, the Court, however, deals with a distinctive case where the contract of sale may not be F.O.R. destination railway station, but the price alone may be so. The Court holds that the contract does not have all the incidents of a 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 agent of the purchaser for taking delivery of the goods. The freight in such a case would be payable by the purchaser though the price agreed upon is F.O.R. destination railway station. The Court holds that the amount representing freight would not be payable as part of the consideration for the sale of the goods but by way of reimbursement of the freight which was payable by the purchaser, but, in fact, disbursed by the dealer and hence it would not form part of the 'sale price'. 8] In paragraph 16, the Apex Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal has in the present case recorded the finding that it is the case of spot delivery and the burden of the buyer is to collect the goods and convey them to whichever destination he chooses and if, in order to facilitate this, the assessee renders the services to the buyer, the charges in respect of insurance and carrying are the post sale charges which canot be legally included in the sale price. The Tribunal, therefore, takes the view that the charges of insurance and freight/carrying charges in the present case levied by the assessee after delivery of the goods do not form part of the sale price and should, therefore, be exempted from the sale. 11] In the order of reference, the Tribunal considers the decision of the Apex Court in the case of Hindustan Sugar Mills Limited, cited supra, and holds that the insurance charges paid by the assessee may form part of sale price as they are not excluded from the definition of sale price under the Central Act. After considering the decision of the Apex Court in Central Wines vrs. Special Commercial Tax Officer, reported in 65 STC 48 delivered by the Apex Court, it holds that it is possible to take a view that the insuranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealer as consideration for sale and not as to what is the net consideration retainable by the dealer. The latter part of the definition of 'sale price' in the present case also contains a clause of exclusion of the amount of the cost of insurance for transit or of installation when such cost is separately charged. It will, therefore, have to be held that the exclusion clause does not operate as an exception to the first part of the definition and it merely enact an exclusion out of the inclusion clause and takes out some thing which would otherwise be within the inclusive clause. It has to be held that the exclusion clause can be availed of by the assessee only if the State seeks to rely on the inclusive clause for the purposes of bringing the particular amount within the definition of sale price . 15] In the order of reference, the Tribunal has held that it is possible to take a view that the insurance and carrying charges incurred by the buyer after sale of goods constitute a sale price because the seller has retained the possession even in case of spot delivery. This is also the contention raised by Shri Ukey, the learned Additional Government Pleader. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be at the factory gate, therefore, does not in the context of the term subject to which the sale was agreed to be effected, render it the point or the location at which the sale can be said to have been completed. Had the sale been completed at the factory gate, the expenses incurred thereafter by way of freight charges would then be capable of being regarded as expenditure which was in the nature of a post sale expenditure and, if paid by the seller, regarded as an amount paid by such seller on behalf of the buyer . In view of above, it is clear that if the sale was completed in the present case at the point of spot delivery, the expenses incurred thereafter by way of freight or carrying charges are capable of being regarded as expenditure which was in the nature of post sale expenditure and even if paid by the seller, it is regarded as an amount paid by such seller on behalf of the buyer, which cannot constitute the component of sale price. 18] Section 19 of the Sale of Goods Act, 1930, dealing with the property passes when intended to pass, being relevant is reproduced below : 19. Property passes when intended to pass. (1) Where there is a contract for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges in respect of insurance and carrying are, therefore, post sale charges and cannot, therefore, be legally included in the sale price of the goods. 20] In the present case, passing of the property in goods to the buyer is at the place and time of spot delivery. After the sale is complete, even if the assessee sellor retains the possession of the goods sold and incurs the expenditure of insurance and carrying the goods at the destination of the buyer, he performs these functions in his capacity as a 'bailee', as contemplated by Section 148 of the Indian Contract Act, 1872, who shall be entitled to reimbursement of such expenses from the 'bailor', as specified under Section 158 therein. Such charges of insurance and carrying incurred by the assessee sellor cannot, therefore, constitute a 'sale price' within the meaning of Section 2(29) of the BST Act. 21] In view of above, we hold that in the facts and circumstances of this case, the Tribunal was justified in holding that the insurance charges and carrying charges do not form part of the sale price for the reason that the sale was completed at the point of spot delivery and the insurance and carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X
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