ASIAN PAINTS LTD. REP. BY SRI NADEEM M. KARBHARI AREA MANAGER Vs. JOINT COMMISSIONER OF COMMERCIAL TAX AND STATE OF KARNATAKA, THROUGH ITS PRINCIPAL SECRETARY, FINANCE DEPARTMENT

JUDGEMENT

(1.) PETITIONER has sought for a writ of certiorari to quash the rectification orders dated 12.01.2011 and the original order dated 18.12.2010 passed under Section 69(1) of the Karnataka Value Added Tax Act for the assessment years 2005 -2006 and 2006 -2007 passed by the 1st Respondent at Annexure A and also to set aside the demand of VAT, interest and penalty imposed by the Respondent as per Annexure A1.

(2.) THE Petitioner -company is incorporated under the Indian Companies Act, 1956 registered under the Karnataka VAT Act of 2003. The Asst. Commissioner of Commercial Taxes, Bangalore undertook assessment for the period 2005 -2006 and 2006 -2007, concluded the assessment and, orders were passed in December 2006 and October 2008 for the period 2005 -2006 and 2006 -2007 respectively., According to the Petitioner, once again the Respondent initiated suomoto proceedings under Section 63A of the KVAT Act and issued show cause notice on 11.11.2010 as per Section 63A of the KVAT Act to levy VAT on freight charges incurred by the Petitioner notwithstanding the fact that VAT was already paid by the Petitioner on sale price which already included freight charges since the price was an all inclusive price. He replied to the said notice stating that demand of VAT on freight charges cannot be sustained in so far as their products are all sold on all inclusive price and no amounts are collected as freight charges. However, the Respondent passed a revisional order under Section 63A of the KVAT Act stating that, Petitioner did not tile certain details and also raised the demand of Rs. 2.8 crores and Rs. 3.9 crores for the years 2005 -2006 and 2006 -2007 respectively, as freight charges. Aggrieved by the said order, an application was filed by the Petitioner for rectification of the mistake regarding quantification of tax. However, the Respondent passed a rectified order dated 12.01.211 stating that the issue pertaining to levy of VAT on freight amount is a debatable issue and cannot be rectified under Section 69 of the KVAT Act, which order is under challenge in these petitions.

(3.) THE learned Counsel for the Petitioner has relied upon the Division Bench decision of this Court rendered in STA No. 84/09 disposed of on 8.7.2010 wherein it is observed, the dealer collects freight charges as part of total order value, though it is specifically mentioned what is the cost component to the said transportation charges, collecting the value before effecting sale of goods, when the sale of goods becomes complete only after the delivery of goods and therefore, it becomes a taxable turn over. If after transfer of title on the goods by delivery of goods for which he has already collected the tax and after delivery, if he receives the transportation charges, then the said amount does not form the part of taxable turn over as it is not a part of the sale consideration or paid prior to the sale of goods. It is the grievance of the Petitioner that, already tax has been collected even on the transportation charges.