Tax Board held right in holding freight is part of Company's turnover, SC

Facts in Brief:

1. Assessee is Oil Company and is a Public Sector Undertaking of the Union of India. During the year under reference, the petitioner-assessee sold diesel to the Railways. The dispute revolves on a short point about the diesel being delivered by Road through containers by the petitioner-assessee to the Railways at the delivery point and whether the freight should be included as part of the sales turnover or not.

2. While the mode of transport was either through Railways or by road but in so far as the mode through Railways is concerned, there is no dispute. The dispute noticed above and raised by the respondent-Revenue finds support and all the three authorities in unison have come to the conclusion that in so far as the freight by road is concerned, it forms part of the sales turnover for the purposes of levy of sales tax and freight is required to be included in the sales turnover and thus sales tax is required to be levied.

3. The Assessing Officer (for short, 'AO'), after analyzing the evidence on record and the agreements entered into by and between the petitioner-assessee and the Railways, came to the conclusion that freight, being part of the bill (invoice), is required to be added while levying sales tax.

4. However, contention of the petitioner-assessee all throughout is that freight is entirely different and is separately reimbursable by the Railways and thus it cannot be added for the purposes of levy of sales tax.

5. Dissatisfied with the aforesaid finding and addition thereon, the matter was carried in appeal before the Deputy Commissioner (Appeals) (for short, 'DC(A)') by the petitioner-assessee and the DC(A) came to the conclusion that under Section 2(36) of the Rajasthan Sales Tax Act (for short, 'RST Act'), the petitioner-assessee was unable to satisfy that the freight charges were separately reimbursed, the freight was part of the bill amount and accordingly dismissed the appeal.

6. The matter was further carried in appeal by the petitioner-assessee before the Rajasthan Tax Board (for short, 'Tax Board'). The Tax Board also, after analyzing the material placed on record, the clauses of the agreements and the authorities cited before it, sustained claim of the respondent-Revenue in so far as the freight is concerned. However, in so far as penalty under Section 65 is concerned, it was deleted.

On appeal HC held as under,

7. The facts of the case rendered by the Hon'ble Apex Court in the case of State of Karnataka and another Vs. Bangalore Soft Drinks Pvt. Ltd. (supra) were that in that case the assessee was able to lead evidence that the delivery of the property has been made at the site of the factory and that subsequent transportation of the goods from the place of sale to the place of buyer was done or made at the instance of the wholesale buyer against the payment of freight charges paid separately by the buyers and on such finding of fact as well as the material placed on record that the freight was charged separately and paid separately, the Hon'ble Apex Court came to the said conclusion that the freight is not includible.

8. The other judgments relied upon by counsel for the assessee are also on the same lines and therefore, are inapplicable on the facts of the instant case.

9. Thus, in view of the categorical finding of fact by all the authorities in unison that the assessee was unable to lead any evidence of the freight being charged separately and having been paid separately, in view of the terms, quoted herein above and judgments of Hon'ble Apex Court in Hindustan Sugar Mills and India Meters Ltd., in my view, the Tax Board has rightly come to the conclusion that the freight is part of the turnover and sales tax is leviable on the part of the freight. 

Case Reference - M.Maheswary vs Commercial Tax Officer.