Point of Law : Freight separately invoiced will not form part of the ‘sale price’ as defined in Section 2(h) of the CST Act and Section 2(36) of the RVAT Act.

JUDGMENT :

1. With consent of learned counsel for the parties, the instant Sales Tax Revision Petitions (for short “STRs”) were taken up for final disposal.

2. These STRs were admitted vide order dated 30/01/2023 on the following questions of law:-

“(i) Whether under the facts and circumstances of the present case, the Rajasthan Tax Board was justified in ignoring the definition of ‘sale price’ as defined under Section 2(h) of the Central Sales Tax Act, 1956 wherein the Parliament has expressly excluded the cost of freight or the cost of installation in cases where such cost is separately charged from ‘sale price’?

(ii) Whether under the facts and circumstances of the present case, the Rajasthan Tax Board was justified in ignoring the submission that if at all the levy of tax on element of freight was to be upheld, then the rate thereon had to be the same as levied on goods against Form “C” in view of the provisions of Section 8(1) of the Central Sales Tax Act, 1956?”

3. It is submitted on behalf of the petitioner-assessee that the petitioner-assessee is carrying on business of manufacturing and sale of PVC Cables, ACSR Conductors and other kinds of cables; and majority of their sales are to the State Electricity Boards across India who purchased the material for generation, transmission and distribution of electric power. It is further submitted that regular assessment was duly carried out under Sections 23/24 of the Rajasthan Value Added Tax Act, 2003 (for short, “RVAT Act”) read with Section 9 of the Central Sales Tax Act, 1956 (for short, “CST Act”) for the year under consideration. While making regular assessments, the element of freight which was collected separately and not included in the assessor’s value for consideration of the purchase order was duly approved. The cause of action arose when a survey was conducted by the Anti Evasion Team on 22/05/2012 and there was a change in opinion of the said authorities, and it was determined that even though the freight and insurance charges are collected separately, but as the same are included in the price charged from the buyer and the delivery is F.O.R. destination, the same is required to be taxed. In the light of said observation, assessment order dated 01/03/2013 was passed and due amount of tax, interest and penalty was imposed under Section 25, 55, 61 of the RVAT Act read with Section 9 of the CST Act.

4. Upon appeal, the penalty was set side but levy of interest was confirmed by the Appellate Authority vide order dated 01/04/2015.

5. The learned Tax Board, against the appellate order dated 01/04/2015, confirmed the levy of VAT on freight and interest on the following analogy:-

^^o"kZ 2007&08 ls 2011&12 dh vof/k ds izdj.kksa ds rF;ksa ls ;g fufoZokfnr :i ls Li"V gS fd vihykFkhZ dks Øsrk fo|qr dEifu;ksa@Øsrk O;ogkfj;ksa dks F.O.R. Destination ij eky dh fMyhojh nh xbZ gS ,oa eky dh fMyhojh rd VªkaftV fjLd foØsrk dh gh gSaA vr% mi;qZDr foospukuqlkj izdj.k ds rF;ksa dks n`f"Vxr j[krs gq, ,oa lafonk dh 'krksZ rFkk Åij of.kZr ekuuh; mPpre U;k;ky; ds fu.kZ;ksa esa izfrikfnr fl)kUrksa ds vkyksd esa eky dh F.O.R. Destination Delivery ik;s tkus rFkk eky dh ekxZLFk tksf[ke vihykFkhZ dh gksus ds dkj.k Freight and Insurance jkf'k dks foØ; ewY; dk Hkkx ekuk tkuk iw.kZr% U;k;ksfpr ,oa fof/klEer gS] vr% bl laca/k esa vihyh; vkns'k iqf"V fd;s tkus ;ksX; gSA**

6. Being aggrieved, the present STRs have been filed by the petitioner-assessee.

7. Learned counsel for the petitioner-assessee submitted that as per provisions of Section 2(36) of the RVAT ACT and pari meteria provisions of Section 2(h) of the CST Act, which defines sale price, the cost of freight and other such expenses is specifically excluded from the definition of ‘sale price’, if the same are separately charged. Learned counsel for the petitioner-assessee submitted that it is an admitted position that in the invoice, the freight an insurance was separately reflected and therefore the respondents had no authority in law to levy tax on