A division bench of the Bombay High Court, on Monday, held that insurance charges and carrying charges do not form part of the sale price under section 2(29) of the Bombay Sales Tax Act, 1959.
A bench comprising Justices R.K Deshpande and Manish Pitale was hearing a departmental appeal against the order of the Maharashtra Sales Tax Tribunal wherein the Tribunal held that insurance charges and carrying charges do not form part of the sale price under section 2(29) of the Bombay Sales Tax Act, 1959.
In the present case, assessee is a dealer in cotton bales and is registered with both Bombay Sales Tax Act and Central Sales Tax Act. For the period under consideration, the assessee claimed deduction towards insurance and freight/carrying charges. Assessee argued that the same do not constitute ‘sale price’ as defined under Section 2(29) of the BST Act and Section 2(h) of the CST Act.
Before arriving at a conclusion, the bench discussed the decision in Hindustan Sugar Mills vrs. State of Rajasthan and others wherein the Apex Court held that the amount of freight paid by the purchaser and shown in the bill as deducted from the agreed price would form part of “sale price”.
Upholding the Tribunal order, the bench observed that in the present case, passing of the property in goods to the buyer is at the place and time of spot delivery. “After the sale is complete, even if the assessee sellor retains the possession of the goods sold and incurs the expenditure of insurance and carrying the goods at the destination of the buyer, he performs these functions in his capacity as a ‘bailee’, as contemplated by Section 148 of the Indian Contract Act, 1872, who shall be entitled to reimbursement of such expenses from the ‘bailor’, as specified under Section 158 therein. Such charges of insurance and carrying incurred by the assessee sellor cannot, therefore, constitute a ‘sale price’ within the meaning of Section 2(29) of the BST Act.”
Read the full text of the Judgment below.
