Freight charges are considered part of the sale consideration in sales tax assessments, and authorities must thoroughly examine accounts rather than rely on estimates.

ORDER :

(Order of the Court was made by Dr. ANITA SUMANTH, J)

Prayer in W.P.No.18848 of 2008: Petition filed under Article 226 of the Constitution of India praying to call for the records of the common order of the 3rd respondent herein in STA No.187/2004 dated 10.03.2008 and issue a writ of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India, quashing the said order of the 3rd respondent.

Prayer in W.P.No.18849 of 2008: Petition filed under Article 226 of the Constitution of India praying to call for the records of the common order of the 3rd respondent herein in STA No.189/2004 dated 10.03.2008 and issue a writ of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India, quashing the said order of the 3rd respondent.

Prayer in W.P.No.18850 of 2008: Petition filed under Article 226 of the Constitution of India praying to call for the records of the common order of the 3rd respondent herein in STA No.190/2004 dated 10.03.2008 and issue a writ of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India, quashing the said order of the 3rd respondent.

These three writ petitions relate to proceedings for the periods 1996 – 97, 1997 – 98 & 1999 – 00 (‘periods in question’) passed in terms of the provisions of the Tamil Nadu General Sales Tax Act, 1959 ('TNGST Act').

2. The petitioner is a manufacture and dealer in Cement. In respect of the periods in question, assessments had been framed overriding the submissions of the petitioner that the sale price of the Cement as per its accounts was proper and had been arrived at in a scientific manner. The methodology for determination of turnover is set out under Rule 6 of the Tamil Nadu General Sales Tax Rules, 1959 (TNGST Rules), which sets out that, in determining taxable turnover, various deductions shall be made. One of the deductions, in clause (c) of Rule 6 relates to the component of freight.

3. In the present case, the difficulty arises on account of the fact that the petitioner had changed its method of invoicing on and from 05.10.1996. Prior to 05.10.1996, the sale invoice had contained the break-up between the cost of the cement and transport charges. It was on the total consolidated sale price (cement price plus transport charges), that the petitioner had been remitting taxes.

4. According to petitioner, this position continued even post 05.10.1996. The only difference was that on and from that date, the sale invoices reflected a consolidated sale price as, in the interest of administrative convenience, the petitioner has decided not to show bifurcation of the cement price and the transport charges under that invoice.

5. However, the State would not dispute the position that the petitioner had maintained accounts in respect of the transport/freight charges, that had been duly produced before the assessing authority.

6. This is the second round of litigation. Even in the order of assessment passed originally, the assessing authority had adopted the stand that the turnover had not reflected the appropriate sale consideration insofar as the freight charges, according to him, had not been included in the sale price. Hence an addition of freight charges over and above the sale consideration referred to in the invoices/accounts, had been made.

7. The matter had travelled in appeal to the Appellate Assistant Commissioner (AAC), who had remanded the matter by order dated 31.08.2000 for re-examination of the issue. The conclusion of the AAC at paragraph 12 is as follows:-

“12. In the circumstances stated above, I’m of the opinion that these material facts were not at all deeply scrutinised and gone in depth. The Assessing Authority in a hasty approach had simply arrived an approximate freight charges on best of judgment and subjected it to tax without paying attention to any of the details furnished by the appellant, nor established his stand