NARAYANI RAO Vs. COMMISSIONER OF COMMERCIAL TAXES

JUDGEMENT

(1.) The following question has been referred for the consideration of the Full Bench, by a Division Bench of this Court:

(2.) The petitioner's husband (hereinafter referred as 'dealer') was carrying on business in silica sand, and was registered as a dealer under the provisions of the Karnataka Sales Tax Act, 1957 ('the Act' for short). The instant case pertains to the assessment year 1 st July 1981 to 30th June 1982. The Assessing Authority accepted the claim of the dealer that the freight charges which were specified and charged separately were to be excluded under Rule 6(4)(f) cf the Karnataka Sales Tax Rules, 1957, ('the Rules' for short) to arrive at the taxable turnover in respect of silica sand sold by the dealer to the various purchasers. It is stated in the assessment order that the dealer extracted silica sand and sold it to various purchasers and at the time of the sale he collected freight charges separately by raising debit bills. These freight charges were not shown in the same bills. The assessment order further stated that the sale price fixed with the buyers was at the point of extraction of the silica sand and the buyers agreed to pay transport charges separately from the place of extraction to the factory of the buyers. For the present purpose it is unnecessary for us to traverse the facts in detail.

(3.) The Deputy Commissioner of Commercial Taxes took up the matter suo moto and revised this order and held that these freight charges were not deductible under Rule 6(4)(f). According to the Deputy Commissioner, a mere stipulation of the condition to transport silica sand on behalf of the buyers will not change the real character of the same; the condition of weighment at the place of buyers, testing for quality of goods proves that the buyer has reserved the right of rejecting the goods if such goods were not upto the standard expected. According to the Deputy Commissioner the agreement entered into between the dealer and others in some cases appear to have been made only to see that the freight charges were split up in order to claim the deduction from the total turnover of the dealer. The Appellate Tribunal affirmed this order. After referring to the terms and conditions of some of the contracts the Appellate Tribunal held that the amount payable by the purchaser to the dealer included freight charges and therefore the same shall form part of the sale price irrespective of the fact whether the cost of freight is shown separately as payable by the purchaser or not. The Appellate Tribunal thereafter agreed with the finding of the Deputy Commissioner that for all practical purposes the place of sale shall be regarded as the place where the goods were made available to the buyers. The Appellate Tribunal opined that the purchasers did not intend that the sale of silica sand should be completed only at the pit head by drawing samples.