The Division Bench of the Kerala High Court comprising Justice Antony Dominic and Justice Dama Seshadri Naidu, recently held that the transportation charges and mobilization charges realized by the Assessee through separate agreements in connection with the same transaction would form part of the Assessable Value.
The assessee is a dealer registered under the Kerala General Sales Tax Act and is engaged in the business of production and sale of Ready Mix Concrete. The Assessee has filed a Revision Petition relating to AY 2003-04 by raising an issue that whether transportation charges and mobilization charges separately realized by the assessee, in addition to sale price, form part of the assessable value of Ready Mix Concrete sold by the assessee. Earlier, the assessing authority, the first appellate authority and the Tribunal held that transportation and mobilization form part of the taxable turnover.
The Revision Petitioner claimed that Rule 9(f) of the KGST Rules, 1963, which deals with the manner of determination of taxable turnover, specifically excludes the freight and charges for delivery. The dispute is with respect to the amounts realised by the assessee from its customers towards transportation charges and mobilisation charges. It is stated that transportation charges and mobilization charges are not part of the sale price, but are charges realized for delivering the Ready Mix Concrete at the purchasers’ site utilizing petitioners specially designed vehicles equipped with mixing unit and their workmen. This, according to the Petitioners, cannot form part of the taxable turnover and therefore the conclusion arrived at by the statutory authorities is erroneous.
While deciding the case, the Court given due consideration to the findings of the Tribunal that the processes such as transportation of goods through transit mixer, mobilization and pumping are directly linked with the supply of RMC. In other words the expenses like transportation charges of the transit mixer, mobilization charges and pumping charges are incidental or ancillary to the main expenses for supply of RMC. Further, these expenses are incurred and paid by the buyer along with the bill value of the RMC.
On the basis of the above, the Division Bench of the Court pointed out that “On a reading of the above finding of the Tribunal, it is obvious that the product in question cannot be transported by a customer, except by entering into the second contract with the assessee and availing of the specially designed vehicles maintained by the assessee. This therefore, shows that the transaction of sale, though bifurcated into different agreements, is completed only when the product is delivered at the site of the customer. In such a sale, transportation charges and the mobilization charges realised by the assessee are nothing but a part of the taxable turnover of the assessee.”
Read the full tet of the Judgment below.