M/S. India Meters Ltd vs State Of Tamil Nadu

3. Brief facts which are necessary to dispose of these appeals are recapitulated as under:

5. The appellant had filed two appeals before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madras and the appeals were registered as T.A. Nos. 766 of 1991 and 767 of 1991. Both the appeals were allowed by the said Tribunal.

6. The respondent aggrieved by the judgment of the said Appellate Tribunal filed two Revision Petitions before the High Court, which were registered as Tax Cases Nos. 979 of 1993 and 980 of 1993. Consequent upon the constitution of the Tamil Nadu Taxation Special Tribunal, under the TNGST Act, the Revision Petitions were referred to the said Tribunal.

7. The Tamil Nadu Taxation Special Tribunal, Chennai, by order dated 19th September, 2000 held that the freight charges formed part of sale price and the matter was remanded to the 4 Assessing Authority to work out the actual freight charges. Consequently, the order of the Appellate Assistant Commissioner (CT), Kancheepuram was restored and with the result the Revision Petitions filed by the respondent were allowed.

8. The appellant filed a Writ Petition in the High Court of Madras against the order of the Tamil Nadu Taxation Special Tribunal. It was urged in the High Court that the clause in the contract dealing with payment, provided that "payment for 100 per cent value of each consignment together with full excise duty and sales tax will be made in Central Payment, Madras, immediately on receipt of certified copies of acknowledgement of delivery challans from the Chief Store Keepers of the systems concerned, subject to purchase order terms."

11. The appellant, initially, did not include the freight charges in its taxable turnover. The original assessment was made without taking the freight charges into account for the year 1986-87. There was an inspection on 27.2.1987 in which the inspecting officer had found that the assessee had collected freight charges and insurance charges separately under the debit notes for a total sum of Rs.16,96,530/- but the same had not been shown in the monthly returns. The assessing authority, therefore, determined 50% of that amount of Rs.16,96,530/- as freight charges, after making allowance 6 for the insurance amount and levied tax on that amount of the freight, charged by the assessee forming part of the sale price. The assessee's appeal against that order having succeeded, a further appeal was preferred by the Revenue, which came to be allowed by the Tamil Nadu Special Taxation Tribunal. The assessee is now before us questioning the correctness of that order of the Tribunal.

15. The transfer of title to the goods as provided in clause 10 read with clause 6 of the agreement was to be at the place of delivery in the premises of the buyer. Though the contract mentioned the price of the electric meters as ex-factory price, the delivery was not at the factory gate. The specification of what the price 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.

29. The company claims that the amount spent by it for freight and for "handling charges" of goods from the factories to the warehouse at Ernakulam is liable to be excluded from the taxable turnover and the taxing authorities and the High Court were in error in refusing to allow the deduction.

41. When we apply the ratio of the judgments of the English Courts and of our Courts, the conclusion becomes obvious that the amount of freight and insurance charges incurred by the dealer forms part of the sale price.

42. We may reiterate that in this case, there was specific contract entered into by and between the parties and according to the relevant clause of the contract, the ownership of the goods will remain with the supplier till they are delivered at the destination station.

43. In view of the clear clause of the contract, no other view is possible. In our considered view, the High Court was totally justified in affirming the judgment of the Tribunal. No interference is called for. These appeals being devoid of any merit are dismissed with costs.

September 7, 2010.