Charges incurred before sale and to make the goods available to the customer at the place of sale are not deductible under Rule 6 (4) (f) and (ff) of the Karnataka Sales Tax Act.

JAGANNATHA SHETTY, J.

( 1 ) THIS petition is directed against the order of the Appellate Tribunal dated 15th February, 1980, made in S. T. A. 606 of 1979.

( 2 ) THE petitioner, who is a registered dealer under the Karnataka Sales Tax Act, 1957, is carrying on brewery business. For the assessment period from 1st January, 1977, the petitioner filed a return claiming exemption of a sum of Rs. 48,839 under rule 6 (4) (f) and (ff) of the Karnataka sales tax Rules, 1957, being the packing and forwarding charges at the rate of Rs. 4 per crate. This claim was rejected by the assessing authority on the ground that the said charges were incurred prior to the sales effected. The Deputy Commissioner of Commercial Taxes (Appeals), bangalore City, also did not give any relief to the petitioner. While dismissing the appeal of the petitioner, he observed that there was no packing involved at the time of sales of liquor bottles. With regard to the claim for deduction of forwarding charges, this is what the Deputy commissioner observed :

"as per trade practice in vogue the companies are giving delivery to the bars, restaurants and wine stores of goods dealt by them. Hence there is no question of charging freight charges to the local customers. It is a case of f. o. r. delivery. "

The Tribunal, on further appeal, agreed with the view taken by the assessing authority, but added some more reasons. The Tribunal has stated :

"we can infer that the appellant delivers the liquor in crates at the door of the purchaser and the uniform rate charges did not relate to actual freight but inclusively many other charges. These charges were incurred as a matter of necessity to get the bottles sealed and signed as per the requirements of the Karnataka Excise Rules. Unless such sealing and signing was completed the appellant was not at all at liberty to sell them to their customers. Since the packing and forwarding charges collected at a uniform rate of Rs. 4 per crate was intended to cover the expenses involved in the above activities and since these activities were pre-sale activities the charges recovered should be taken as a component of the price for which the liquor was sold. " the Tribunal then went on to state : "in the instant case, the bargain between the appellant and his customers was for payment of a particular price subject to delivery at the buyers premises. In these circumstances, we find nothing exceptionable in the action of the authorities below in disallowing the exemption on the packing and forwarding charges claimed by the appellant. Since these charges are not attributable to any packing material exclusively and in fact the cost of packing material is not ascertainable and also in view of the fact that the charges are mostly incurred towards the various activities like unloading, unpacking, getting the bottles sealed, repacking and so on, we have to conclude that these charges go to increase the cost of liquor sold. "

Being aggrieved by these orders, the petitioner has approached this Court with the revision petition under section 23 (1) of the Karnataka Sales Tax Act.

( 3 ) BEFORE we examine the contentions urged, it will be useful to refer to the nature of the activities of the petitioner so far as they are found on record. The petitioner-company is not having any manufacturing unit at Bangalore or, as a matter of fact, not even in the State to karnataka. It manufactures liquor at Palghat, in Kerala State. It had, during the relevant period, sales depot at No. 29, B. K. H. Road, Bangalore. The petitioner got the stock from Palghat and sold at the sales depot. From the letter dated 12th June, 1978, written by the petitioner to the commercial Tax Officer, it will be noticed that the stocks in bottles were received either in crates, in cartons or in gunny bags and after receipt of the stock, it would be unloaded at the sales depot and packed again either in cartons or in crates. For out station delivery they were packed necessarily in carto

Click Here to Read the rest of this document