According to the Jharkhand High Court (HC), the cost of transporting goods from the seller to the buyer is not included in the selling price under the Value Added Tax Act, 2005. The orders were invalidated by the acting chief justice’s bench and justice deepak roshan, who determined that the decisions made by the tribunal and the authorities were both unlawful.
Petitioner M/s. Global Resources Company, engaged in purchase and sale of ores and minerals, rocks, processed minerals, pyroxenite, duly registered under the provisions of Jharkhand Value Added Tax Act, 2005.
The petitioner is aggrieved by the order passed by the Assessing Officer (AO) who while making assessment for the period 2010-11 had included transportation cost (Rs.61,52,526.00) in the total G.T.O and assessed the tax liability.
The appeal filed by the petitioner before the learned Joint Commission on Commerce and Trade (JCCT) was also rejected the order and thereafter, the petitioner challenged the order before the learned tribunal who vide its order dated 2nd March, 2016 upheld the orders of tax authorities.
Amrita Sinha, the petitioner’s counsel, claimed that the petitioner owns two trucks or vehicles for the purpose of delivering the goods, and that there is a clear understanding and custom between the petitioner and its intra-state customers that the transportation costs/freights will be charged separately and in no way constitute a part of the “sale price.”
Further asserted that even as per Explanation III to section 2(xlviii) i.e. “sale price” the cost of transportation of the goods from the seller to the buyer will not form part of the “sale price”, provided such cost is separately charged to the Buyer.
Counsel further argued that this practice of the petitioner was duly accepted by the respondent-Department for the previous year andalso in subsequent years, wherein the respondent-Department had themselves treated freight as not being part of the “Sale price” under the JVAT Act which is evident from the earlier Assessment Order for the period 2009- 10, 2011-12, 2012-13 (Annexure-7 series).
However, the authority below has only treated the transportation cost/freight as part of the “Sale price” for the period 2010–2011, or the period under consideration, basing their decision entirely on Explanation–II and omitting Explanation–III to the aforementioned clause.
The bench observed that the Petitioner performs a dual role, one as the seller of the goods and other as carrier of the goods, having collected freight charges separately from the buyer.
Furthermore it appeared that the tax authorities as well as the tribunal misdirected themselves in Explanation-III which categorically indicates that the sale price shall not include the cost for transport of goods from the seller to the buyer provided such cost is separately charged to the buyer.
The division bench concluded that the orders of tax authorities and the tribunal is an illegal and incorrect application of the provisions of the JVAT Act to the facts of the present case.
The HC overturned and annulled the disputed orders. Further instructed to evaluate the materials and the petitioner’s arguments before delivering a new ruling on the petitioner’s claim insofar as it relates to freight charges that the petitioner received from its customers and that are shown and charged separately on the invoices.
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