HYDERABAD INDUSTRIES LIMITED Vs. COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) Being aggrieved by the order of the Tamil Nadu Sales Tax Appellate Tribunal, (Additional Bench), Chennai, in T.A.No.870 of 1993, pertaining to the assessment year 1988-1989, the Revenue filed Tax Case (Revision) No.147 of 2000 before the Tamil Nadu Taxation Special Tribunal, Chennai, and the same was allowed by an order dated 24.01.202. The writ petitioner/assessee, questioning the said order, has filed Writ Petition No.6169 of 2002. Writ Petition No.6170 of 2002 is filed by the petitioner against the order passed by the Tamil Nadu Taxation Special Tribunal in T.C.(Appeal) No.40 of 1997, which in turn was filed by the assessee/petitioner, against the order of the Joint Commissioner, Commercial Taxes, Chennai, in Reference No.M3/616/95.

(2.) The Tamil Nadu Taxation Special Tribunal, Chennai, disposed of the Tax Case (Revision) as well as the Tax Case (Appeal), by a Common Order dated 24.01.2002, since the issue involved in both the cases is common.

(3.) The case of the petitioner, as found in the affidavit filed in support of the writ petition (WP.6169/2002), can be set out as under:- The petitioner is a Public Limited Company, incorporated under the provisions of the Companies Act, 1956, with registered office at Hyderabad and having sales depot all over India, including the one at Chennai. The petitioner, who has registered itself as a dealer under the provisions of the Tamil Nadu General Sales Tax Act, 1959, is a manufacturer of Asbestos cement sheets etc. The products of the petitioner are marketed by effecting sales to stockists and consumers directly. The petitioner entered into an agreement with its dealers, which contains various clauses and out of which, Clauses-4, 5, 8 to 10 and 19 would be relevant for the purpose of this case. Clause-8 stipulates that in case of products despatched by railway wagons/lorries railway freight/lorry freight shall be payable by the stockists and the amount of freight shown on railway receipt/lorry receipt and/or any other sum mutually agreed upon shall be deducted from the invoice of the Company. Clause-9 stipulates that the price of the said products supplied to the stockists shall be current general list price charged by the company Ex-works/Free on rail/on road less freight and discount if any. The wholesale price list, governing the sale of the petitioners products, also contains the terms and conditions, according to which, the prices in the said list are on F.O.R. Destination basis for supplies of minimum one wagon/lorry and that the amount of rail/lorry freight as shown in the RR/LR shall be payable by the purchaser at the destination and the same shall be deducted from the company's invoice to arrive at the prices of the product. Thus, according to the petitioner, the sale of the products effected by it is an ex-factory/ex-depot sale with all the risk and responsibility ceasing on delivery of goods to the carrier. The price alone, being the F.O.R. Price, where the purchasers arrange for their own transport, or where the goods are sent on freight to pay basis, the price/cost of the product/goods (which is F.O.R. Price) is required to be reduced by the element of cost of transporation is built therein. Considering the fluctuating market conditions and the consequent transport charges from time to time, the petitioner evolved a scale of rate on the basis of distance in Kms., and per tonne basis to commensurate the transport charges. The rate of scale of transport charges evolved by the petitioner is informed to all the customers and wherever the customers arrange for their own transport, depending on the place of delivery and the distance of such place from the petitioner's factory/depot, the applicable scale of rate is adopted and a deduction is given from the F.O.R. Price to arrive at Ex-factory sale price of the products and such deduction from the price of products is allowed to all customers arranging the mode of conveyance by themselves. The transport rebate as evolved by the petitioner on the basis of distance and tonnage by mutual agreement with the stockists is changed from time to time, whenever there is substantial changes in the transport rate in the market. Hence, the scale evolved by the petitioner cannot be said to be a notional amount but is in relation to the cost of transporation, if the goods are carried by the customer on his own, without the element of profit. The assessing authority, for the assessment year 1988-1989, determined the taxable turnover at Rs.1,86,36,922.49, as compared to the taxable turnover of Rs.1,80,90,025.87, reported by the petitioner in the returns filed. The difference between the taxable turnover determined by the Assessing Authority and the returns filed by the petitioner is to the extent of Rs.5,46,896.62 and according to the petitioner, the said sum represents deductions in various invoices during the assessment year, representing transport rebate allowed. The contention of the petitioner is that such rebate is not a part of the sale price and the deduction claim of transport rebate is separately shown and it is not part of the sale price. The Assessing Authority rejected the contention of the petitioner and re-determined taxable turnover by disallowing the claim of transport rebate and levied a penalty of Rs.54,689/-. The aggrieved assessee filed an appeal before the Appellate Assistant Commissioner (CT)-II, Madras, however, that was dismissed by an order dated 6.9.1991. The petitioner filed further appeal before the Tamil Nadu Sales Tax Appellate Tribunal, Chennai, in T.A.No.870 of 1993 and the 2nd respondent/Tribunal held that the 'transport rebate' or freight charges never formed part of the sale price of the goods sold and deleted the addition of the amount representing transport charges from the taxable turnover. The penalty imposed on the petitioner was also deleted. The Revenue, being aggrieved by the said order of the 2nd respondent, in T.A.No.870 of 1993 dated 28.3.1994, filed a Revision under Section-38 of the Act before the Tamil Nadu Taxation Special Tribunal viz., the 3rd respondent. The 3rd respondent allowed the Tax Case (Revision) filed by the Revenue holding that the transport rebate allowed or freight charges allowed are to be included in the taxable turnover of the assessee in terms of Sec.2(q) and Sec.2(p) of the Tamil Nadu General Sales Tax Rules, 1959. The said order of the Tamil Nadu Taxation Special Tribunal, which is dated 24.01.2002, is challenged in Writ Petition No.6169 of 2002.