Case Law Details
Global Resources Company Vs State of Jharkhand (Jharkhand High Court)
Jharkhand High Court held that as per Explanation-III to section 2(xlviii) of JVAT Act sale price shall not include cost for transport of goods from seller to buyer provided such cost is separately charged to buyer.
Facts-
The Petitioner is a Company, engaged in purchase and sale of ores and minerals, rocks, processed minerals, pyroxenite, duly registered under the provisions of JVAT Act. The Petitioner used to sell its finished products to various customers within the state and outside the state of Jharkhand including M/s Tata Steel Ltd. The goods were being supplied by the Petitioner pursuant to the Purchase orders issued from the parties including M/s Tata Steel Ltd. and there has been no written contract for sale between the Petitioner and its Purchaser.
The petitioner is aggrieved by the order passed by AO who while making assessment for the period 2010-11 had included transportation cost (Rs.61,52,526.00/-) in the total G.T.O and assessed the tax liability. The appeal filed by the petitioner before the learned JCCT was also rejected and thereafter, the petitioner challenged the order before the learned tribunal who upheld the orders of tax authorities.
Conclusion-
Held that appears that the tax authorities as well as the learned tribunal misdirected themselves in reading only Explanation-II to Section 2(xlviii) of the JVAT Act and ignored Explanation-III which categorically indicates that the sale price shall not include the cost for transport of goods from the seller to the buyer provided such cost is separately charged to the buyer. Thus the orders of tax authorities as well as the learned tribunal suffer from illegality and incorrect application of the provision of the JVAT Act to the facts of the present case.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
Heard learned counsel for the parties.
2. The instant writ application has been preferred for following reliefs:-
A) For issuance of any appropriate writ or a writ in the nature of certiorari for quashing and setting aside the Judgment dated 02.03.2016 (Annexure-6) passed by the learned Commercial Taxes Tribunal in revision petition bearing no. JR 154 of 2014 relating to Financial Year 2010-11 to the extent it relates to confirmation of sales tax liability on Transportation charges/freight charges which according to the petitioner did not for a part of the sale price;
B) For issuance of any appropriate writ or a writ in the nature of certiorari for quashing and setting aside order dated 30.08.2014 (Annexure-3) relating to the Financial year 2010-11 passed by the Joint Commissioner of Commercial Taxes (Appeal), Jamshedpur Division, Jamshedpur, in Appeal case no. SG-VAT-A-02-2014-15 contained in memo no. 474 dated 30.08.2014 to the extent it relates to tax liability on transportation charges/freight charges;
C) For issuance of any appropriate writ or a writ in the nature of certiorari for quashing and setting aside the Assessment Order dated 10.09.2013 (Annexure-1,) relating to the Financial Year 2010-11 passed by the Learned Deputy Commissioner of Commercial Taxes, Singhbhum Circle, Jamshedpur, whereby and whereunder the said authority has rejected the claim of transportation charges/freight to the extent of Rs.61,52,526/- and treated it as a part of Gross Turnover/sale price and levied sales tax @ 12.5% treating freight as a part of sale price;
D) For issuance of any appropriate writ or a writ in the nature of certiorari for quashing and setting aside the demand notice no. 7340 dated 10.09.2013 (Annexure-2) relating to the Financial Year 2010-11 issued by the Deputy Commissioner of Commercial Taxes, Singhbhum Circle, Jamshedpur to the extent it relates to imposition of Sales Tax on claim of freight;
E) For issuance of any appropriate writ or a writ in the nature of mandamus directing the Deputy Commissioner of Commercial Taxes, Singhbhum Circle, Jamshedpur to pass fresh order on the claim of the petitioner to the extent it relates to freight charges realized by the petitioner from its purchasers and shown and charged separately in the invoices after considering the materials an after hearing the petitioner within a stipulated time framed as may be fixed by this Hon’ble Court.
3. The brief fact of the case is that the Petitioner is a Company, engaged in purchase and sale of ores and minerals, rocks, processed minerals, pyroxenite, duly registered under the provisions of JVAT Act. The Petitioner used to sell its finished products to various customers within the state and outside the state of Jharkhand including M/s Tata Steel Ltd. The goods were being supplied by the Petitioner pursuant to the Purchase orders issued from the parties including M/s Tata Steel Ltd. and there has been no written contract for sale between the Petitioner and its Purchaser.
The petitioner is aggrieved by the order dated 10.09.2013 passed by the Assessing Officer who while making assessment for the period 2010-11 had included transportation cost(Rs.61,52,526.00/-) in the total G.T.O and assessed the tax liability. The appeal filed by the petitioner before the learned JCCT was also rejected vide its order dated 30.08.2014 and thereafter, the petitioner challenged the order before the learned tribunal who vide its order dated 2nd March, 2016 upheld the orders of tax authorities.
4. Ms. Amrita Sinha, learned counsel for the petitioner submits that the petitioner owns two vehicles/trucks for the purpose of delivery of the goods with a clear understanding and practice between the petitioner and its intra-state buyers that the transportation charges/freights will be charged separately and that such charges in lieu of the service provided to them will no way form part of the “sale price”.
She further submits that under the purchase orders issued by M/s Tata Steel Ltd. in favour of petitioner, Clause (3) of the Purchase Order deals with freight, wherein it is clearly stipulated that the freight will be payable on actual or as per the stipulated condition, whichever is lower, against submission of documentary evidence.
She contended that even as per Explanation III to section 2(xlviii) i.e. “sale price” the cost of transportation of the goods from the seller to the buyer will not form part of the “sale price”, provided such cost is separately charged to the Buyer. In the present case, the cost of transportation/freight is separately charged from the Seller which is evident from the tax invoices annexed to the supplementary affidavit being Annexure-8 series from which it is evident that two tax invoices are being issued; one with respect to cost of goods and other with respect to transportation cost.
She further submits that this practice of the petitioner was duly accepted by the respondent-Department for the previous year andalso in subsequent years, wherein the respondent-Department had themselves treated freight as not being part of the “Sale price” under the JVAT Act which is evident from the earlier Assessment Order for the period 200910, 2011-12, 2012-13 (Annexure-7 series). However, the authority below only for the period 2010-11 i.e., period under consideration has treated the transportation cost/freight as part of “Sale price” after relying upon
Explanation-II and by completely ignoring Explanation –III to the said section.It is submitted that in the present facts of the case, the petitioner performs a dual role, one as the seller of the goods and other as carrier of the goods, having collected freight charges separately from the buyer. The clause (3) of the purchase orders (Annexure-4 series) specifically states that the freight will be payable on actual, meaning thereby that the price of the goods is not inclusive of the transportation cost/freight. The freight charges were recovered by the petitioner in the capacity as carrier of the goods and did not form part of the sales turnover of the petitioner. It is further stated that as per purchase order if the goods are delivered to SMD Jamshedpur,the same need to be delivered free of delivery charges.
She lastly submits that in view of the specific provisions and also the terms of contract, the order passed by the Tax authorities including that of the learned tribunal requires interference.
5. Mr. Yogesh Modi, learned A.C. to A.A.G.-1A submits that the petitioner has filed all returns and also VAT Audit report in form JVAT 409 according to which, after examining them, aggregate turnover of Rs. 1, 21,08,979.96 and transport receipt of Rs. 61, 52, 526.00 was found mentioned. He further submits that the petitioner buys and resales goods which are generally mined. He is neither involved in the transaction of manufactured goods nor in manufacture goods for re-sale.
He further submits that the petitioner was aggrieved by assessment order passed under section 35(6) of JVAT Act, 2005 because the assessing officer included receipt of transport charges Rs. 61,52, 526.00as taxable turnover of the firm.The appeal has been filed against the said order in the court of JCCT (Appeal), Jamshedpur Division, Jamshedpur. The appellate court has mentioned in its order that the petitioner was bound by a contract through purchase order that the transaction would deem to be completed after the goods were delivered to the purchaser (M/s Tata Steel Ltd., Jamshedpur). The nature of the contract itself implies that the amount payable to the petitioner as valuable consideration in respect of sale of goods till delivery is made, is part of sale price of the goods so delivered. This point is again explicitly mentioned in the judgment of learned Commercial Taxes Tribunal, Jharkhand, Ranchi.
In crux, the claim of the revenue is that separate invoices for transportation cost would not be a ground to deduct from the total GTO and that there is no illegality in the order of the tax authorities.
6. Having heard learned counsel for the parties and after going through the documents/judgments available on record the only issues involved in this case is whether the tribunal was justified in holding that the freight charges forms part of the “sale price” as per Section 2(xlviii) of the JVAT Act, when the same is being separately charged to the buyer.
7. Before going into the merit of the matter, it is pertinent to analyze the definition of “sale price” as defined in section 2(xlviii) of the JVAT Act which is quoted herein below:-
“2(xlviii) “Sale Price” means the amount payable to a dealer as valuable consideration in respect of the sale or supply of goods, and shall not include tax paid or payable under this Act, by a person in respect of such sales.
Explanation I- The amount of duties or fees or any sum levied or leviable or charged on the goods under the Central Excise Act, 1944(1 of 1994), or the Customs Act 1962 (52 of 1962) or the State Excise Act or any law shall be deemed to be part of the sale price of such goods, whether such sum are paid or payable by or on behalf of the seller or the purchaser or any other person.
Explanation II- Sale price shall include any amount charged by the dealer for anything done in respect of the goods at the time of, or before delivery thereof to the buyer. Explanation III- Sale price shall not include the cash discount, if shown separately; and allowed by the dealer in the ordinary course of trade practice. It shall also not include the cost for transport of the goods from the seller to the buyer, provided such cost is separately charged to the buyer.
Explanation IV- For the purpose of this clause, the expression “Sale price” shall mean, the maximum retail price, as referred to in clause (xxxiii) of Section 2 of this Act, for a dealer, selling goods, specified in Drugs (Prices Control), Order, 1995 to any other dealer.”
Emphasis Supplied
Thus, the definition of “Sale price” is the amount payable to a dealer as valuable consideration in respect of the sale or supply of goods. Further explanation attached to the said section deals with the inclusion and exclusion of the amount charged.Explanation-II says that “any amount charged by the dealer for anything done in respect of goods at the time of or before the delivery thereof to the buyer” shall form part of “sale price”. Whereas, the explanation-III specifically mentions that the cost of transport of goods from the seller to the buyer be not form part of the “sale price”, provided such cost is separately charged to the buyer.
8. The Respondent department has heavily relied on Explanation-II as quoted above which deals with the expression “any amount charged by the dealer for anything done in respect of the goods at the time of or before the delivery thereof to the buyer and have completely ignored the documents produced in order to show that the cost of transportation was separately charged.
The Madras High Court in the case of Sri Srinivasa Timber Deport versus Deputy Commercial Tax Officer reported in (1969) 23 STC 158 has interpreted the aforesaid expression i.e. “any amount charged by the dealer for anything done in respect of the goods at the time of or before the delivery thereof to the buyer”, which is quoted herein below:-
“In the explanation referred to, if understood in the context, as it should be, ‘any sums charged for anything done by the dealer in respect of the goods’ can only relate to something done by the dealer in respect of the goods which involves transfer of property in the goods and for consideration. The further condition is that something should have been done in respect of the goods at the time of, or before the delivery of, the goods. So, what is chargeable to tax is not any sum charged at the time of, or before the delivery of, the goods, but any sum charged for transfer of property in the goods, involved in anything done by the dealer in respect of the goods at the time specified by the explanation. The explanation read in the abstract is, of course, of wide scope and may possibly take in any sum charged for anything done by the dealer in respect of the goods whether or not it involved also transfer of property in the goods. But, as we said, the fact that it is an explanation to the definition of ‘turnover’ and the ‘turnover’ is but the aggregate amount of the consideration of sales shows that it has to be read in the context and not de hors it.”
9. It appears that in the present facts of the case the Petitioner performs a dual role, one as the seller of the goods and other as carrier of the goods, having collected freight charges separately from the buyer. Clause (3) of the purchase order (Annexure-4 series) specifically indicates that the freight will be payable at actual; meaning thereby, the price of the goods is not inclusive of the transportation cost/freight.
Further, the freight charges were recovered by the petitioner in the capacity as carrier of the goods and did not form part of the sales turnover of the petitioner. Even as per purchase order if the goods are delivered to SMD Jamshedpur,the same needs to be delivered free of delivery charges. Thus, the real intention can also be gathered by the Act of the seller and buyer.
It was never the intention of the parties viz the Petitioner and the Purchaser that freight charges were to form part of the sale price of goods sold by the Petitioner and for that purpose separate books were maintained, separate invoices were issued with respect to transportation bill and for sale of goods.Further, the present practice was being adopted by the Petitioner since 2005 and the Respondent Department duly accepted the said practice as evident from the earlier and subsequent Assessment Orders under JVAT Act.
10. In view of the aforesaid discussion and after going through the orders passed by the tax authorities it appears that the tax authorities as well as the learned tribunal misdirected themselves in reading only Explanation-II to Section 2(xlviii) of the JVAT Act and ignored
Explanation-III which categorically indicates that the sale price shall not include the cost for transport of goods from the seller to the buyer provided such cost is separately charged to the buyer. Thus the orders of tax authorities as well as the learned tribunal suffer from illegality and incorrect application of the provision of the JVAT Act to the facts of the present case.
11. Consequently, the Judgment dated 02.03.2016 (Annexure-6) passed by the learned Commercial Taxes Tribunal in revision petition bearing no. JR 154 of 2014 relating to Financial Year 2010-11 to the extent it relates to confirmation of sales tax liability on Transportation charges/freight charges vide order dated 30.08.2014 (Annexure-3) passed by the Joint Commissioner of Commercial Taxes (Appeal), Jamshedpur, Assessment Order dated 10.09.2013 (Annexure-1,) and the consequential demand notice no. 7340 dated 10.09.2013 (Annexure-2), are hereby, quashed and set-aside.
The matter is remitted back to the Deputy Commissioner of Commercial Taxes, Singhbhum Circle, Jamshedpur to pass a fresh order on the claim of the petitioner to the extent it relates to freight charges realized by the petitioner from its purchasers and shown and charged separately in the invoices after considering the materials and after hearing the petitioner.
It is made clear that the entire exercise shall be completed within a period of twelve weeks from the date of receipt/production of copy of this order.
As a result, the instant writ application stands allowed.
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