Sri Shekar Bhojanna S/O Bhojanna P.A. Holder, Yamaha Motors India (P) Ltd. Vs. the State of Karnataka, the Commissioner of Commercial Taxes - Court Judgment

Excerpt:
- sections 100 & 103: [d.v. shylendra kumar, j] second appeal held, scope of interference is only if it involves a wrongly decided substantial question of law. appreciation of evidence is definitely not a pure question of law. a question of law arises in manner in which evidence is recorded or if it is an improper appreciation of evidence. order 20, rule 18: [d.v. shylendra kumar, j] suit for partition evidence on record showed that properties form part of joint family to be shared amongst plaintiffs and defendants held, since schedule properties never formed subject-matter to any partition in family, theory of prior partition is highly improbable. a convenient arrangement of enjoying properties is not partition in law. however, suit being merely for partition of some of the properties of family and not all properties is not maintainable.orderaravind kumar, j.1. the petitioner has challenged the order dated 21.01.2009 passed by the karnataka appellate tribunal in sta no. 249/2007.2. the petitioner is a private limited company-engaged in the business and distribution of yamaha motor cycles and is transporting the vehicles from faridabad to bangalore, the vehicles are said to have been delivered to the dealers. the freight charges were not included in the invoice raised by the local dealers. the authorities during the course of the audit noticed that thea assessee had charged and collected vat charges @ 12.5% separately in the tax invoice on the basic value of the goods and that the same was not in accordance with rule 3(2) of the kvat rules 2003 (hereinafter referred to as the rules'). on issue of notice by the authorities, the assessee has filed a reply on 31.03.2006 and it is admitted therein to the following effect by the aasessee3. we are selling out motorcycle to dealers and we are showing freight amount separately on the invoices and we are not paying vat on freight amount. the reason far non payment of vat on the freight amount is that out form of sale in ex-factory/ex-depot sale. in other words toe are selling our motor cycles at our factory/depot gate and we arranged transport only on behalf of the dealers after sale and whatever we charge from the dealers on account of freight the same is paid to the transporters and also we wish to inform you that the dealer is liable to pay the vat on the freight and dealer margin and we lime confirmed from the dealers (copy enclosed). thus tax on freight charges are being paid to govt. and this turnover has not escaped from levy of tax on the motor cycles before brought on road under this circumstances no tax at our level is paid.thus, assessing authority has come to the conclusion that the goods are despatched from the depot and are handed over to the transporter, but not to the dealer or the consumer and the risk was with the assessee only till the delivery of goods. it is also held by the authorities that the transporter was appointed by the assessee itself and the freight charges were paid by the assessee only and hence, authorities have raised a demand for a sum of rs. 28,76,286/- being the difference of tax amount which was to be included in the total turnover which had escaped assessment by order dated 31.03.2006. the assessing officer has held that assessee had supplied the goods or made available the goods at the door-steps of the dealer and the customer and hence, the effective sale has taken place at the point of delivery of goods to the dealer or the customer and accordingly has passed the order.3. this order was in challenge before the first appellate authority in appeal no. 96/2007. the appellate authority after considering the contentions raised by the appellant has held that even at the stage of appellate proceedings, the assessee had failed to establish that the freight charges were paid at the instance of the buying dealers and that only actual freight charges paid to the transporter were recouped in the tax invoices with the documentary evidence and it has also held that the goods are sent through tarries and the appellant itself had arranged for the transportation and the risk of the goods continued till it was delivered at the place of the dealer. this conclusion was arrived at by the appellate authority after scrutiny with reference to the records. hence the appellate authority has come to the conclusion that freight charges are table to tax in the hands of the appellant as pre-sale expenses and vat is leviable/payable at each stage and series of sales.4. aggrieved by this order, the assessee went in further appeal before karnataka appellate tribunal in sta no. 249/2007 and re-iterated the contentions raised before the first appellate authority as also die assessing authority. the tribunal after considering the contentions raked by the appellant has on facts held that pre-sale expenditure is not an item of expenditure even if it is separately shown. it held that appellant had failed to produce any agreement entered into by it with the dealers to indicate that the freight charge is not a part of the sale price. it is also noticed that the appellant has failed to prove that they have entered into separate contract for undertaking the transportation of the vehicle and hence freight charges paid is excluding the sale price and it was paid at the instance of the buying dealer and has come to the conclusion that the appellant had miserably failed in proving that the risk of transit was with the buyers and not with the appellant and the delivery was completed at the depot and rejected the appeal by order dated 21.01.2009 which is at annexure-a.5. aggrieved by the said order dated 21.01.2009 the petitioner hat preferred this revision and has contended that: (a) tribunal grossly erred in not taking into consideration the invoice dated 23.06.2005 which was produced before assessing authority, wherein it is clearly mentioned by the petitioner that freight and insurance cost from depot to dealer is to be borne by the dealer itself and contends that this has to be construed as separate and distinct contract, (b) it is also contended that the freight paid by the dealer is a separate amount and is not to be included in the total taxable turnover as contemplated under rule 3(2) of the rules.6. in this connection the learned counsel for the petitioner has relied upon the decision of kurkunta and seram stones (p) ltd. v. state of karnataka reported in 1993 87 kar 105 , to contend that the rub is to be read so as to exclude the freight charges from the total taxable turn over.7. we have given our anxious consideration to the arguments advanced by the learned counsel for the petitioner and our findings are as follows.8. ira so far as the first issue is concerned, all the three authorities have come to the conclusion that the petitioner has not been able to demonstrate that there was a separate and distinct contract entered into by the assessee with the dealers to demonstrate that transportation charges are paid by them. on the contrary, the authorities have come to the conclusion on examination of records as also on the basis of the reply given by the assesses itself that the freight charges were not included in the total taxable turnover and the assesses though fixed uniform selling rate in respect of various models of vehicles throughout the stats, it had fixed the freight charges at different rates and had charged the same in the tax invoices depending upon the distance of the place of the dealer located in the various parts of the state. the dealars have paid the freight charges changed by the appellant in terms of the invoices raised by the petitioner, which had not been included in the total taxable turnover.9. this is the clear finding given by the first appellate authority while considering the contention raised toy the petitioner with regard to the invoice. we do not find any ground to deviate from the said findings of foot. further the tribunal has also held that the petitioner had taken the risk of transportation during the transit till the vehicles/goods were delivered to the door-steps of the local dealers and has come to the conclusion that the assessing authority has rightly included the freight charges to the total taxable turnover. in view of the above, we are of the opinion that it does not call for our interference with the findings of all the three authorities.10. in so far as the decision relied upon by the assessee to contend that the cost of freight of delivery is included by the dealer not in his capacity as the seller, but as a matter of convenience and on behalf of the purchaser and that it is independent of the cost of the element of the goods in question for the seller, it is to be noticed by us that 1st appellate authority in its order dated 8.12.3006 has held as follows:7. (d) on perusal of the various documents tendered by the appellant at the time of reassessment and at the time of appeal hewing proceedings such as invoices raised by the appellant, sale invoices raised by the dealers, circulars issued by the appellant to all dealers regarding the price of various models of motor cycles etc., it is noticed that the appellant has fixed uniform selling rate in respect of various models through out the state. in order to maintain the uniformity in rate, freight charges at different rates have been charged in the tax invoices depending on the distance of the place of the dealers located in various parts of the state, the dealers have paid the freight charges charged by the appellant.11. in the wry same judgement, their lordships have noticed that in the decision of hindustan sugar mills ltd. reported in [1979] 43 stc 13, to the following effect:the sate price was statutorily fixed under the provisions of &w; cement control order, 1967. there was a provision fir reimbursement of the amount of expenditure actually incurred by the manufacturer on freight. however, the amount of freight had to be paid to the manufacturer initially as part of the sate price and since this freight became part of the sale price statutorily fixed, the supreme court held that the freight was to be treated as part of the taxable turnover.12. in view of this decision of the hon'ble supreme court and the findings of all the three authorities that the aseessee had failed to prove that there was any independent contract entered into with the dealers to hold that the freight charges were independent of the transaction and could not be included in the total taxable turnover, cannot be accepted and the same is liable to be rejected. one another reason as found by the authorities was that the freight charges were not collected on the basis of actuals, but on a assumption depending upon the distance of the local dealers show-room from the assessee's distribution point and varied from local distributor to distributor and was nevertheless was added in the invoices and the net amount was shown.13. hence strf is not admitted, it rejected at the stage of admission.

Judgment:
ORDER

Aravind Kumar, J.

1. The petitioner has challenged the order dated 21.01.2009 passed by the Karnataka Appellate Tribunal in STA No. 249/2007.

2. The petitioner is a private limited company-engaged in the business and distribution of Yamaha Motor Cycles and is transporting the vehicles from Faridabad to Bangalore, The vehicles are said to have been delivered to the dealers. The freight charges were not included in the invoice raised by the local dealers. The authorities during the course of the audit noticed that thea assessee had charged and collected VAT charges @ 12.5% separately in the tax invoice on the basic value of the goods and that the same was not in accordance with Rule 3(2) of the KVAT Rules 2003 (hereinafter referred to as the Rules'). On issue of notice by the authorities, the assessee has filed a reply on 31.03.2006 and it is admitted therein to the following effect by the aasessee

3. We are selling out motorcycle to dealers and we are showing freight amount separately on the invoices and we are not paying VAT on freight amount. The reason far non payment of VAT on the freight amount is that out form of sale in Ex-factory/Ex-depot sale. In other words toe are selling our motor cycles at our factory/depot gate and we arranged transport only on behalf of the dealers after sale and whatever we charge from the dealers on account of freight the same is paid to the transporters and also we wish to inform you that the dealer is liable to pay the VAT on the freight and dealer margin and we lime confirmed from the dealers (copy enclosed). Thus tax on freight charges are being paid to Govt. and this turnover has not escaped from levy of tax on the motor cycles before brought on road under this circumstances no tax at our level is paid.

Thus, assessing authority has come to the conclusion that the goods are despatched from the depot and are handed over to the transporter, but not to the dealer or the consumer and the risk was with the assessee only till the delivery of goods. It is also held by the authorities that the transporter was appointed by the assessee itself and the freight charges were paid by the assessee only and hence, authorities have raised a demand for a sum of Rs. 28,76,286/- being the difference of tax amount which was to be included in the total turnover which had escaped assessment by order dated 31.03.2006. The assessing officer has held that assessee had supplied the goods or made available the goods at the door-steps of the dealer and the customer and hence, the effective sale has taken place at the point of delivery of goods to the dealer or the customer and accordingly has passed the order.

3. This order was in challenge before the First Appellate Authority in Appeal No. 96/2007. The Appellate Authority after considering the contentions raised by the appellant has held that even at the stage of appellate proceedings, the assessee had failed to establish that the freight charges were paid at the instance of the buying dealers and that only actual freight charges paid to the transporter were recouped in the tax invoices with the documentary evidence and it has also held that the goods are sent through tarries and the appellant itself had arranged for the transportation and the risk of the goods continued till it was delivered at the place of the dealer. This conclusion was arrived at by the appellate authority after scrutiny with reference to the records. Hence the appellate authority has come to the conclusion that freight charges are table to tax in the hands of the appellant as pre-sale expenses and VAT is leviable/payable at each stage and series of sales.

4. Aggrieved by this order, the assessee went in further appeal before Karnataka Appellate Tribunal in STA No. 249/2007 and re-iterated the contentions raised before the First Appellate Authority as also die Assessing Authority. The Tribunal after considering the contentions raked by the appellant has on facts held that pre-sale expenditure is not an item of expenditure even if it is separately shown. It held that appellant had failed to produce any agreement entered into by it with the dealers to indicate that the freight charge is not a part of the sale price. It is also noticed that the appellant has failed to prove that they have entered into separate contract for undertaking the transportation of the vehicle and hence freight charges paid is excluding the sale price and it was paid at the instance of the buying dealer and has come to the conclusion that the appellant had miserably failed in proving that the risk of transit was with the buyers and not with the appellant and the delivery was completed at the depot and rejected the appeal by order dated 21.01.2009 which is at Annexure-A.

5. Aggrieved by the said order dated 21.01.2009 the petitioner hat preferred this revision and has contended that: (a) tribunal grossly erred in not taking into consideration the invoice dated 23.06.2005 which was produced before Assessing Authority, wherein it is clearly mentioned by the petitioner that freight and insurance cost from depot to dealer is to be borne by the dealer itself and contends that this has to be construed as separate and distinct contract, (b) It is also contended that the freight paid by the dealer is a separate amount and is not to be included in the total taxable turnover as contemplated under Rule 3(2) of the Rules.

6. In this connection the learned Counsel for the petitioner has relied upon the decision of Kurkunta and Seram Stones (P) Ltd. v. State of Karnataka reported in 1993 87 Kar 105 , to contend that the rub is to be read so as to exclude the freight charges from the total taxable turn over.

7. We have given our anxious consideration to the arguments advanced by the learned Counsel for the petitioner and our findings are as follows.

8. Ira so far as the first issue is concerned, all the three authorities have come to the conclusion that the petitioner has not been able to demonstrate that there was a separate and distinct contract entered into by the Assessee with the dealers to demonstrate that transportation charges are paid by them. On the contrary, the authorities have come to the conclusion on examination of records as also on the basis of the reply given by the assesses itself that the freight charges were not included in the total taxable turnover and the assesses though fixed uniform selling rate in respect of various models of vehicles throughout the Stats, it had fixed the freight charges at different rates and had charged the same in the tax invoices depending upon the distance of the place of the dealer located in the various parts of the State. The dealars have paid the freight charges changed by the appellant in terms of the invoices raised by the petitioner, which had not been included in the total taxable turnover.

9. This is the clear finding given by the first appellate authority while considering the contention raised toy the petitioner with regard to the invoice. We do not find any ground to deviate from the said findings of foot. Further the Tribunal has also held that the petitioner had taken the risk of transportation during the transit till the vehicles/goods were delivered to the door-steps of the local dealers and has come to the conclusion that the assessing authority has rightly included the freight charges to the total taxable turnover. In view of the above, we are of the opinion that it does not call for our interference with the findings of all the three authorities.

10. In so far as the decision relied upon by the assessee to contend that the cost of freight of delivery is included by the dealer not in his capacity as the seller, but as a matter of convenience and on behalf of the purchaser and that it is independent of the cost of the element of the goods in question for the seller, it is to be noticed by us that 1st Appellate Authority in its order dated 8.12.3006 has held as follows:

7. (d) On perusal of the various documents tendered by the appellant at the time of reassessment and at the time of appeal hewing proceedings such as invoices raised by the appellant, sale invoices raised by the dealers, circulars issued by the appellant to all dealers regarding the price of various models of motor cycles etc., it is noticed that the appellant has fixed uniform selling rate in respect of various models through out the State. In order to maintain the uniformity in rate, freight charges at different rates have been charged in the tax invoices depending on the distance of the place of the dealers located in various parts of the State, The dealers have paid the freight charges charged by the appellant.

11. In the wry same judgement, their lordships have noticed that in the decision of Hindustan Sugar Mills Ltd. reported in [1979] 43 STC 13, to the following effect:

The sate price was statutorily fixed under the provisions of &w; Cement Control Order, 1967. There was a provision fir reimbursement of the amount of expenditure actually incurred by the manufacturer on freight. However, the amount of freight had to be paid to the manufacturer initially as part of the sate price and since this freight became part of the sale price statutorily fixed, the Supreme Court held that the freight was to be treated as part of the taxable turnover.

12. In view of this decision of the Hon'ble Supreme Court and the findings of all the three authorities that the aseessee had failed to prove that there was any independent contract entered into with the dealers to hold that the freight charges were independent of the transaction and could not be included in the total taxable turnover, cannot be accepted and the same is liable to be rejected. One another reason as found by the Authorities was that the freight charges were not collected on the basis of actuals, but on a assumption depending upon the distance of the local dealers show-room from the assessee's distribution point and varied from local distributor to distributor and was nevertheless was added in the invoices and the net amount was shown.

13. Hence STRF is not admitted, it rejected at the stage of admission.