M/S. S. Chandar vs State Of Orissa
2021 Latest Caselaw 11837 Ori

                 IN THE HIGH COURT OF ORISSA AT CUTTACK

                                    STREV No.74 of 2006

            M/s. S. Chandar                         ....             Petitioner
                                       Mr. Jagabandhu Sahoo, Senior Advocate
                                          -versus-
            State of Orissa                           ....         Opposite Party
                                                           Mr. S.S. Padhy, ASC

                        CORAM:
                        THE CHIEF JUSTICE
                        JUSTICE A.K. MOHAPATRA

                                          ORDER

17.11.2021 Order No. Dr. S.Muralidhar, CJ.

09. 1. In the present revision petition which arises out of an order dated 18th September 2006 passed by the Orissa Sales Tax Tribunal, Cuttack (Tribunal) in SA Nos.2054-2055 of 1992-93 (State of Orissa v. M/s. S. Chander) and S.A. Nos.625-626 of 1992-93 (M/s. S. Chander v. State of Orissa) for the assessment year 1987-88, the following questions of law were framed for consideration by this Court by its order dated 4th December, 2006:

(i) Whether in the facts and circumstances of the case, the Tribunal is justified to direct addition of transportation charges to the sale price of the goods under the provisions of Orissa Sales Tax Act?

(ii) Whether in the facts and circumstances of the case, there is nexus to sustain enhancement of turnover made by the Tribunal?

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2. At the outset, Mr. Jagabandhu Sahoo, learned Senior Advocate appearing for the Petitioner states that the Petitioner is not pressing Question No.(ii) and is only pressing Question No.(i).

3. Relevant to Question (i), the Sales Tax Officer (STO), Sambalpur in the assessment order dated 31st January 1990 for the aforementioned year noted the submissions of the Petitioner (dealer) that the goods were delivered at factory site to the buyer who transported the goods (cement) at his own cost. The case of the Petitioner was that it, therefore, was not liable to pay tax on the transportation charges since it had not received any payment for transportation of cement. Nevertheless, the STO concluded that the total cost of the goods including transit and incidental expenditure till the delivery of the goods at the destination point of the purchaser would constitute the actual sale price. It was concluded that the dealer was in fact incurring the transportation charges, but was passing on the same "with a view to avoiding tax".

4. The matter then went in an appeal to the Assistant Commissioner of Sales Tax (ACST). The ACST by the order dated 30th March 1991 agreed with the dealer that "there is absolutely no evidence that the Appellant used to transport the cement to the customers' place and collected freight charges and avoided payment of tax on the same (freight charges)." Accordingly, the tax assessed by the STO on transportation charges was deleted by the ACST.

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5. The matter then travelled to the Tribunal at the instance of both the Department (as far as the above issue of transportation charges was concerned) and the Dealer (as far as the other issues were concerned). By an order dated 23rd May 2000, the Tribunal allowed the appeal filed by the State and dismissed the appeal filed by the dealer. The dealer was in fact not present before the Tribunal when the above order was passed. The dealer's application for restoration of the appeal was dismissed by the Tribunal by the subsequent order dated 15th/22nd August, 2002.

6. The dealer then filed W.P.(C) No.4717 of 2002 in this Court. By a judgment dated 6th August 2003, this Court set aside the above orders of the Tribunal and remanded the matter to the Tribunal for a fresh hearing.

7. It was thereafter that the impugned order dated 18th September 2006 was passed by the Tribunal. On the issue of transportation charges, the Tribunal observed as under in the impugned order:

"6. First we shall examine whether the transportation charges should form part of the sale price. The term "Sale Price" means the amount payable to a dealer as consideration for the sale or supply of any goods, less any sum allowed as cash discount according to ordinary trade practice, but including any sum charged for anything done by the dealer in respect of the goods at the time of, or before delivery thereof. So, the point of delivery of the goods to the buyers is to be determined. The transactions, i.e. sales of cement, are admittedly intra-State sales. Those are not being inter-State sales it is to be construed that the

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buyers used to get delivery of the goods only after the goods reached the respective destinations of the buyers inside Orissa. A sale inside Orissa cannot be said to take place when the goods are in another State. Undisputedly, the dealer's agent or staff used to receive the goods from M/s Modi Cement Ltd. at Balodabazar, Madhya Pradesh. So, the only possible and permissible conclusion is that it was the dealer who, in fact, caused the goods to be transported to be delivered to the buyers in Orissa and the payment of transportation charges must be deemed to have been borne by the dealer. So, even if the buyers are shown to have paid the transportation charges to M/s C.P. Singhal that should get included in the sale price of the goods on the footing that the transportation costs are sums charged for anything done by the dealer in respect of the goods at the time or before delivery thereof. Because it is the dealer who transported the goods through M/s C.P. Singhal from MP to the buyer's places in Orissa and for that thing done some amount has been charged in the form of transportation cost. Consequently, the transportation charges are liable to be included in the sale price of the goods in question."

8. Thereafter, the present revision petition was filed by the Petitioner.

9. This Court has heard the submissions of Mr. Jagabandhu Sahoo, learned Senior Advocate appearing for the Petitioner and Mr. S.S. Padhy, learned Additional Standing Counsel for the Opposite Party- Department.

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10. Mr. Sahoo relies on the judgment of the Supreme Court in Vinod Coal Syndicate v. Commissioner of Sales Tax U.P., Lucknow [1989] 73 STC 317. While interpreting a nearly identical definition of expression "turn over" under Section 2 (i) of the U.P. Sales Tax Act with reference to the Explanation II thereof, the Supreme Court held as under:

"Plainly, the legislature intended that where the cost of freight was charged separately, that amount could not be included in the turnover of a dealer. That is what was done in this case. The freight was separately charged and was paid accordingly by the principals. The High Court erred in including the cost of freight in the taxable turnover of the appellant."

11. In the present case also from the order of the ACST, it is plain that there was no evidence to show that the dealer had separately charged and collected the transportation charges. The impugned order of the Tribunal proceeds on surmises. Particularly the conclusion of the Tribunal that "the payment of transportation charges must be deemed to have been borne by the dealer" is unacceptable in the absence of any documentation to support such an assumption.

12. With there being no evidence placed on record to show that the transportation charges were in fact collected by the Petitioner, it is not possible to sustain the above conclusion of the Tribunal. Consequently, the question is answered in the negative, in other words, in favour of the dealer and against the Department. It is held that the Tribunal was not justified in directing addition of the

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transportation charges to the sale price of the goods under the OST Act.

13. The impugned order of the Tribunal and that of the STO are accordingly set aside and the order of the ACST is restored. The revision petition is disposed of in the above terms.

14. An urgent certified copy of this order be issued as per rules.

(Dr. S. Muralidhar) Chief Justice

( A.K. Mohapatra ) Judge

S.K. Guin