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Rajasthan Trading Corporation Vs. Commissioner, Board of Revenue (Commercial Taxes), Madras - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberT.C. (A) No. 14 of 1978
Judge
Reported in[1984]56STC113(Mad)
ActsTamil Nadu General Sales Tax Act, 1959 - Sections 34
AppellantRajasthan Trading Corporation
RespondentCommissioner, Board of Revenue (Commercial Taxes), Madras
Appellant AdvocateK. Ramagopal, Adv.
Respondent AdvocateK.S. Bakthavatsalam, Additional Government Pleader
Cases ReferredState of Tamil Nadu v. Parry
Excerpt:
.....allowed. - - the assessing authority called for the accounts and refixed the total as well as the taxable turnover at rs. 2. the inclusion of the transport charges in the taxable turnover was objected to by the appellant in its appeal before the appellate assistant commissioner, before whom the appellant produced its books of account as well as affidavits obtained from persons to whom the appellant had supplied the blue-metal to the effect that the customers had agreed to pay separately and independently for the supply of blue-metal and the charges for transport. strong reliance was also placed on the judgment in state of tamil nadu by the deputy commissioner (c. on the materials placed before us, we are of the view that in this case the requirements of rule 6(c)(i) of the.....ratnam, j. 1. the appellant is a dealer in blue-metal jelly. in the course of its business, it sold blue-metal jelly obtained from its quarry. for the assessment year 1974-75, the appellant reported in its monthly a-2 returns a total turnover of rs. 9,67,244.31 out of which exemption was claimed in respect of a turnover for rs. 2,09,168.56 by the appellant as transport charges. the assessing authority called for the accounts and refixed the total as well as the taxable turnover at rs. 10,15,711. in doing so, the assessing authority negatived the claim for deduction of the transport charges made by the appellant under rule 6(c)(i) of the tamil nadu general sales tax rules, 1959 (hereinafter referred to as the rules), on the ground that the blue-metal was delivered by the appellant at the.....
Judgment:

Ratnam, J.

1. The appellant is a dealer in blue-metal jelly. In the course of its business, it sold blue-metal jelly obtained from its quarry. For the assessment year 1974-75, the appellant reported in its monthly A-2 returns a total turnover of Rs. 9,67,244.31 out of which exemption was claimed in respect of a turnover for Rs. 2,09,168.56 by the appellant as transport charges. The assessing authority called for the accounts and refixed the total as well as the taxable turnover at Rs. 10,15,711. In doing so, the assessing authority negatived the claim for deduction of the transport charges made by the appellant under rule 6(c)(i) of the Tamil Nadu General Sales Tax Rules, 1959 (hereinafter referred to as the Rules), on the ground that the blue-metal was delivered by the appellant at the site of the buyer and the sale price included transport charges incurred prior to sale, and therefore could not be deducted under rule 6(c)(i) of the Rules.

2. The inclusion of the transport charges in the taxable turnover was objected to by the appellant in its appeal before the Appellate Assistant Commissioner, before whom the appellant produced its books of account as well as affidavits obtained from persons to whom the appellant had supplied the blue-metal to the effect that the customers had agreed to pay separately and independently for the supply of blue-metal and the charges for transport. With reference to this claim of the appellant, the departmental representative was asked to verify the records produced and he submitted a report that the appellant had confirmed by the production of the affidavits the oral contract entered into by the appellant with its customers for the supply of blue-metal. Taking this and the other materials into account, the Appellate Assistant Commissioner was of the view that the agreement between the appellant and the buyer for the supply of blue-metal at a fixed cost and the payment of transport charges specified separately had been established even by the bills produced by the appellant, and therefore, the transport charges collected separately should be deducted in ascertaining the taxable turnover. Ultimately, the Appellate Assistant Commissioner refixed the total and taxable turnovers at Rs. 9,82,505 and Rs. 7,73,236 respectively.

3. Exercising suo motu revisional powers under section 34 of the Tamil Nadu General Sales Tax Act, 1959, the Board of Revenue proposed to restore the turnover relating to transport charges amounting to Rs. 2,13,454 and called for the objections of the appellant in this regard. In answer to this, the appellant maintained that there were two distinct and separate contracts entered into between the appellant and the buyers of blue-metal and that the blue-metal had to be supplied at a fixed price and that the transport charges specified had also to be paid separately and that there was no consolidated contract for the sale of blue-metal at the site. Apart from placing reliance upon the affidavits given by the buyers to the effect that the transport charges were charged for and paid separately, the appellant also contended that there was a post-sale agreement for payment of transport charges which varied from transaction to transaction depending upon the place of the buyer. The Board relied upon an order book stated to have been maintained by the dealer and concluded that the sale was complete when the goods were delivered at the site of the buyer and this would show that the contract was a consolidated one for the supply of blue-mental at the site inclusive of the price of materials and transport charges, and therefore, the affidavits relied on by the appellant and the other materials could not be relied upon. In addition, the Board proceeded to apply the decision in State of Tamil Nadu, by the Deputy Commissioner (C.T.), Madras Division, Madras-6 v. Rajasthan Trading Corporation, Madras-17 [T.C. No. 306 of 1971 dated 25th March, 1976 (Madras High Court) in relation to the appellant for the assessment year 1966-67] to hold that the transport charges should also be included in the taxable turnover. In the result, a sum of Rs. 2,13,454 being the transport charges received by the appellant and was included in the taxable turnover of the appellant, the correctness of which is disputed in this appeal.

4. Before this Court, the learned counsel for the appellant contended that normally the blue-metal ordered for by the buyers used to be delivered ex-quarry and if a buyer desired to have delivery at site, then the cost of the blue-metal supplied and the transport charges were specified and charged for separately without including it in the price of the goods sold, and therefore in this case rule 6(c)(i) of the Rules stood attracted enabling the appellant to claim a deduction of the transport charges. Reliance in this connection was also placed on the decisions in Gordon Woodroffe and Company (Madras) Private Limited v. State of Tamil Nadu [1979] 44 STC 485, Balkrishna Brick Works v. State of Tamil Nadu [1982] 49 STC 251, Ramco Cement Distribution Company (P.) Ltd. v. State of Tamil Nadu [1982] 51 STC 171 and Vadivel Mudaliar and Sons v. State of Tamil Nadu [1983] 52 STC 189.

5. On the other hand, the learned Additional Government Pleader contended that really there are no two separate and independent bargains, but that the transaction is a composite one for the supply of blue-metal by delivery at the site, and therefore, no exclusion of the turnover referable to transport charges can be availed of by the appellant under rule 6(c)(i) of the Rules. Strong reliance was also placed on the judgment in State of Tamil Nadu by the Deputy Commissioner (C.T.), Madras Division, Madras-6 v. Rajasthan Trading Corporation, Madras-17 (T.C. No. 306 of 1971 dated 25th March, 1976 - Madras High Court) and Tungabhadra Industries Ltd. v. Commercial Tax Officer : [1961]2SCR14 , Dyer Meakin Breweries Ltd. v. State of Kerala : (1970)3SCC253 , and State of Tamil Nadu v. Parry & Company (Madras) [1976] 38 STC 122.

6. Before considering the claim of the appellant to the deduction of transport charges from its total turnover, it is necessary to ascertain the actual terms of the contract between the appellant and its customers. Earlier, a reference has been made to the filing of a series of affidavits by the appellant before the Appellate Assistant Commissioner. Apart from it, specimen copies of the bill books and the invoices had also been made available and there is no dispute regarding this. It only remains to scrutinise these materials to ascertain the precise terms of the contract between the parties. We proceed to examine the specimen of a bill dated 30th April, 1974. It is seen therefrom that the delivery of the blue-metal was ex-quarry and no transport charge has been separately shown. That means that the bargain between the parties was only for the supply of blue-metal ex-quarry and the appellant had also collected sales tax on the value of the blue-metal. This is an instance of delivery of blue-metal by the appellant ex-quarry where no transport charges have at all been included. In fact, in the explanation submitted before the Board, the appellant had given numerous instances of delivery of blue-metal ex-quarry. But the Board had not referred to any of them. It is also seen from the invoice book that in case the delivery of the blue-metal has to be effected at site, the cost of the blue-metal is separately indicated in the bill and sales tax is also collected by the appellant only on the value of the blue-metal supplied and with reference to the transport charges, it is charged for and indicated in the bill by the appellant without its being included in the price of the goods sold. In other words, the pattern of the transactions as disclosed by the invoices in this case would establish that with reference to the supply of blue-metal by the appellant, normally the delivery is ex-quarry, but that in the event of the customer requiring delivery at the site, an independent bargain has been entered into by the appellant to deliver the blue-metal at the site of the customer on the payment of transport charges, which, however, varied depending upon the distance to be covered. A careful scrutiny of the bills and the invoices relating to the delivery at the site reveals that with reference to the supply of one unit of blue-metal there are two bargains, namely, the supply of blue-metal at a particular rate in respect of which sales tax is collected by the appellant from the customer and an independent bargain with reference to the transport charges not included in the price of the blue-metal but shown separately as a distinct item. On the materials placed before us, we are of the view that in this case the requirements of rule 6(c)(i) of the Rules are fully satisfied and the appellant is, therefore, entitled to a deduction of the transport charges to the tune of Rs. 2,13,454.

7. It only remains to refer to the decisions relied on by the learned Additional Government Pleader since, on an examination of the materials in support of the case of the appellant, we have held that two independent bargains relating to the supply of blue-metal and the transport thereof to the site, if so desired by the customer, are made out in each transaction of sale where the delivery is at the site of the buyer. In Tungabhadra Industries Ltd. v. Commercial Tax Officer : [1961]2SCR14 , exemption was claimed in respect of freight on the ground that it had been separately charged for. This was rejected by all the authorities as well as the High Court. While dealing with the claim for exemption, the Supreme Court pointed out that factually the railway freight had been included in the price and had been later deducted, and therefore, it would be outside the terms of rule 5(1)(g) which required that in order to enable a dealer to claim the deduction, it should charged for separately and not included in the price of the goods sold. Such is not the case here, and therefore, this decision cannot be of any assistance to the State. The principle of the decision in Dyer Meakin Breweries Ltd. v. State of Kerala : (1970)3SCC253 is also, in our opinion, inapplicable, as in that case the exemption was claimed in respect of freight and handling charges for the transport of goods from the factories to the warehouse at Ernakulam. The Supreme Court held that these expenses were really in the nature of pre-sale charges or charges incidental to the sale for transporting the goods from the factories to the warehouse of the company at Ernakulam, and therefore, such expenditure for making the goods available to the intending customers at the place of sale would not be covered by rule 9(f) of the Kerala General Sales Tax Rules, 1963. Earlier, we have found that in this case the nature of the transactions revealed by the bills and the invoices disclose a twin bargain, one for the supply of blue-metal at a price with reference to which sales tax had also been collected by the appellant and the other for payment of transport charges not forming part of the price of the goods but separately shown for delivery of the blue-metal at the place of the customer, if so desired. This factual position would also render the decision in Dyer Meakin Breweries Ltd. v. State of Kerala : (1970)3SCC253 , inapplicable to the present case. The decision in State of Tamil Nadu v. Parry & Company (Madras) [1976] 38 STC 122 proceeded on the basis that there should be evidence to show that freight was not intended to be included in the price in the bargain between the dealer and the purchaser and that if the bargain between the parties was for payment at a particular price, the circumstances that the dealer had cut up the price into separate items would not enable the dealer to get deduction of the freight from the total taxable turnover. Even this decision is inapplicable in this case, where, as already seen, there are two independent and separate bargains disclosed by the bill books and the invoices and the other materials, one relating to the supply of blue-metal and the other in respect of delivery of the blue-metal at the place of the customer on payment of charges billed for separately and not included in the price. No doubt, State of Tamil Nadu, by the Deputy Commissioner (C.T.), Madras Division, Madras-6 v. Rajasthan Trading Corporation, Madras-17 (T.C. No. 306 of 1971 dated 25th March, 1976 - Madras High Court) related to the appellant, though for the year 1966-67. But this Court had proceeded on the footing that the contract was for delivery at the site at a particular rate per unit, which was included in the price for delivery at the site and in that view it was held that the price included the transport charges and the mere dissection of the price into different heads by the appellant will not enable the appellant to deduct the transport charges as not includible in the taxable turnover. We have earlier found that the appellant had shown the transport charges separately and the price did not include the transport charges and that with reference to the supply of blue-metal to the customers two distinct and separate bargains are discernible, one relating to the supply of blue-metal at a particular price on which sales tax had also been charged for by the appellant and the other relating to the payment of charges for transport shown separately and not forming part of the price. We are, therefore, of the opinion that none of the decisions relied on by the respondent would in any manner assist in sustaining the addition made by the Board.

8. In view of the factual situation arrived at, on a consideration of the materials placed, we do not think it necessary to elaborate upon the cases relied on by the appellant. We, therefore, hold that the appellant is entitled to a deduction of transport charges of Rs. 2,13,454. The appeal is allowed. The order of the Board is, therefore, set aside and that of the Appellate Assistant Commissioner is restored with costs. Rs. 250 counsel's fee.


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