ACC LTD. Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The assessee has preferred these petitions challenging the order passed by the Karnataka Appellate Tribunal, which confirmed the order passed by the appellate authority as well as the original authority, who held that the sale is complete only when the goods are delivered at the works site of the customers and therefore, the pumping charges collected by the assessee constitute pre-sale; expenses and included in the sale price of goods sold by the assessee. The subject-matter of these petitions is the assessment year 2005-06 (April, 2005-March, 2006). The assessee is a public limited company registered under the provisions of the Karnataka Value Added Act, 2003 (for short hereinafter referred to as "the Act") and is engaged in the manufacture and sale of cement including ready mix concrete. The assessee had effected sale of ready mix concrete (RMC) to its customers and had filed its returns as per the provisions of the Act and had claimed exemption on the charges collected by it for pumping ready mix concrete at the customers' site. The assessing authority, Deputy Commissioner of Commercial Taxes, issued a notice under section 39 of the Act proposing to levy tax on the turnover relating to pumping charges of RMC. The authority further proposed to levy penalty and interest under the Act for the alleged short-payment of tax in respect of the same. The assessee filed a detailed reply and also documentary evidence and contended that the turnover relating to pumping charges was a post-sale expenses and therefore, the same was not liable to sales tax and consequently, requested the authority to drop the proposal made in the notice. The assessing authority after considering the contention of the assessee and looking into the documents produced by them held that until and unless RMC is taken to the point where it is put to use at the site of the buyer, the property in goods will not be passed on to the buyer. The sale transaction of RMC gets completed only after it is pumped to the point where it is finally put to use, which includes pumping charges constituting pre-sale expenses and hence form part of taxable turnover. Therefore, overruling the assessee's objections, the assessing authority levied tax and also demanded interest as well as the penalty. Aggrieved by the said order of the assessing authority the assessee preferred an appeal to the Joint Commissioner of Commercial Taxes (Appeals). The Appellate Commissioner on a re-appreciation of the entire material on record held that ready mix concrete is manufactured with its ingredients like jelly, cement, sand, etc., and in order to avoid hardening of the RMC after a certain period of time, due to exposure to moisture, chemicals are added to keep the RMC in a liquefied stature till its delivery to the customers depending upon the distance the vehicle carrying RMC is to reach the customer's place. If the RMC is hardened, it becomes unusable and therefore it is mandatory that every customer has to utilize the services of the assessee for transportation of RMC from the manufacturing place to the customer's site and pump the RMC at the required and specified place. As per the definition of "turnover" as defined under section 2(36) of the KVAT Act, 2003 anything done at the time of delivery or prior to delivery of goods would constitute part of the turnover. The sale is complete only when the goods are delivered at the work site of the customers and not at the factory premises or business premises of the assessee. Thus, the pumping charges collected by the assessee constitutes pre-sale expenses and includable in the sale price of goods sold by the assessee. Accordingly, he upheld the order of the assessing authority and dismissed the appeal. Aggrieved by the same, the assessee preferred an appeal to the Karnataka Appellate Tribunal. The Tribunal held that RMC being a product having special characteristics, till delivery it must be protected from atmosphere. Hence, the property in goods, viz., RMC does not pass to the buyer till the delivery of RMC. Therefore, all expenses prior to such delivery constitute the sale price and therefore the Tribunal declined to interfere with the well-considered order passed by the lower authorities and dismissed the appeal. Aggrieved by the said order, the assessee has preferred these revision petitions.

(2.) The learned counsel for the petitioner assailing the impugned order contends that it is not obligatory on the part of the assessee to pump the RMC so as to deliver the goods to the customers. An option is given to the customer to have the services of pumping the RMC or not to utilise the services of pumping provided by the assessee. The price fixed for pumping is an expenditure of costs of RMC to be supplied to the customers' site. From the invoice raised, this fact is clear and therefore, the service charges collected from the customers for pumping the RMC from the vehicle to the site cannot be construed as pre-sale expenses and cannot be included in the sale price. In support of his contention, he relies on the judgment of the apex court as well as the judgment of this court and contends in the facts of this case, the service charges collected by the assessee for pumping RMC cannot be included in the sale price. Therefore, the impugned order is liable to be set aside.

(3.) Per contra, the learned Government Advocate appearing for the respondent contends that all the charges incurred till the delivery of RMC to the customers' site form part of the sale price and when it is supplied to the customers' site by availing of the service of pumping, the delivery takes place only after pumping and therefore the pumping charges are in the nature of pre-sale expenses. Delivery, is complete only when RMC comes out of the other end of the pumping machine and therefore, orders passed are legal and valid and do not call for interference.