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United Timber Corporation Vs. Commissioner, Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case Number Sales Tax Reference Nos. 657, 658, 659, 660 and 661 of 1970
Judge
Reported in[1972]29STC646(All)
AppellantUnited Timber Corporation
RespondentCommissioner, Sales Tax
Appellant Advocate R.R. Agarwal and ; Bharatji Agarwal, Advs.
Respondent Advocate Standing Counsel
Excerpt:
- .....the assessee. the judge (revisions) sales tax upheld the plea, and referring to the definition of 'sale price' in section 2(h) of the central sales tax act he came to the conclusion that the freight should not have been excluded from the turnover of sales.3. a dealer is liable to pay sales tax calculated by reference to his turnover, and section 2(j) of the central sales tax act defines 'turnover' as 'the aggregate of the sale prices received and receivable' by the dealer in respect of the sale of any goods in the course of inter-state trade and commerce. section 2(h) defines 'sale price' as :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.....
Judgment:

R.S. Pathak, J.

1. In this and the connected references the Judge (Revisions) Sales Tax has referred the following question for the opinion of this court:

Whether on the facts and circumstances of the case discussed in my judgment dated 28th Feburary, 1970, the cost of railway freight could be excluded from the turnover and could not be held liable to sales tax under the Central Sales Tax Act ?

2. The assessee is a dealer in timber. He was assessed under the Sales Tax Act for the assessment years 1960-61 to 1964-65. For the assessment years 1960-61 and 1961-62, the assessing authority rejected the account version disclosed by the assessee and assessed him on an enhanced turnover. On appeal, the appellate authority maintained the rejection of the account version, but reduced the amount of assessed turnover. For the assessment years 1962-63, 1963-64 and 1964-65 also the Sales Tax Officer rejected the account version and enhanced the turnover. But on appeal the appellate authority accepted the book version. The Commissioner of Sales Tax applied in revision to the revising authority raising the contention that in all the five cases the appellate authority had erred in excluding the cost of freight from the turnover of the assessee. The Judge (Revisions) Sales Tax upheld the plea, and referring to the definition of 'sale price' in Section 2(h) of the Central Sales Tax Act he came to the conclusion that the freight should not have been excluded from the turnover of sales.

3. A dealer is liable to pay sales tax calculated by reference to his turnover, and Section 2(j) of the Central Sales Tax Act defines 'turnover' as 'the aggregate of the sale prices received and receivable' by the dealer in respect of the sale of any goods in the course of inter-State trade and commerce. Section 2(h) defines 'sale price' as :

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 cases where such cost is separately charged.

4. The expression 'sale price' therefore refers to the amount payable as consideration for the sale of goods and it will not include cost of freight where such cost is separately charged. The Judge (Revisions) has found that the bills issued by the assessee in the present case were drawn up in the same terms as the bills which were considered by the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 S.T.C. 827 (S.C.). In that case, the Supreme Court held that having regard to the terms in which the bills were drawn up the freight charged could not be excluded. It was observed that under Rule 5(1)(g) of the Turnover and Assessment Rules the dealer was entitled, in the determination of his net turnover, to the deduction from his gross turnover of

all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold :

(i) freight....

5. In the specimen bill considered by the Supreme Court, the dealer had set out the quantity sold by weight and the price per pound and thereafter the total amount of the price was shown. 'From the total price the railway freight was shown as a deduction and the balance remaining represented the amount on which sales tax was computed. The Supreme Court observed :

From the contents of this invoice it would be seen that the appellant has charged a price inclusive of the railway freight and would therefore be outside the terms of Rule 5(1) (g) which requires that in order to enable a dealer to claim the deduction it should be charged for separately and not included in the price of goods sold.

6. Apparently, inasmuch as the sale consideration was shown as a single indivisible amount inclusive of the freight charge it could not be said that the freight had been charged for separately. The circumstance that there was a subsequent reduction of the amount on account of freight made no difference.

7. Reliance was placed by the assessee on Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 S.T.C. 487 (S.C.). A somewhat similar question was raised in that case also, but the Supreme Court pointed out that there was a condition in the contract between the parties which required the purchaser to pay for the freight and although the price shown as the sale consideration included the charge on account of freight the subsequent reduction on that account from the price was in conformity with the contractual condition that the purchaser should pay for the freight. It could not be said, therefore, that having regard to the terms of the contract the price could include the charge on account of freight. In accordance with the terms of the contract, the price shown in the bill should not have been calculated by including the charge on account of freight. The assesses relies greatly on the decision in that case, but we find the case to be entirely distinguishable from the present case.

8. There is no material nor any finding on the record before us to indicate that the conditions of the contract between the assessee and the purchasers included a stipulation that the purchaser must pay for the freight. We find that before the Judge (Revisions) reliance was placed upon what is described as general custom in the timber trade of excluding the freight from the price The contention was not accepted by the Judge (Revisions). An attempt has been made before us on the part of the assessee to show that a contractual condition existed, but having regard to the specific finding given by the Judge (Revisions), we are unable to entertain that plea at this stage. If there was such a condition, it was for the assessee to have raised that plea before the sales tax authorities.

9. We are of opinion that the case is covered by the view taken by the Supreme Court in Tungabhadra Industries Ltd. [1960] 11 S.T.C. 827 (S.C.) and the Judge (Revisions) is right in holding that the amount on account of freight cannot be deducted from the sale consideration disclosed by the assessee.

10. The question referred is answered in the negative, in favour of the State and against the assessee. The Commissioner of Sales Tax is entitled to his costs, which we assess at a consolidated sum of Rs. 100 in all the cases. Counsel's fee is assessed at the same figure.


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