ORDER
N.V. Balasubramanian, J.
1. These tax revision petitions are filed against the orders of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, for the assessment years 1987-88 and 1988-89, wherein the Tamil Nadu Sales Tax Appellate Tribunal allowed the appeals preferred by the assessee and dismissed the enhancement petitions filed by the State.
2. The respondents (hereinafter referred to as the assessee) had reported for the assessment year 1987-88 the total and taxable turnover of a sum of Rs.81,047/- under the provisions of the Central Sales Tax Act, 1956, and the assessing officer determined the total turnover at Rs.2,13,412, which was also the taxable turnover for that year. The assessee had reported for the assessment year 1988-89 a total and taxable turnover of Rs.1,39,589/- and Rs.60,393/- respectively, but the assessing officer has determined the total and taxable turnover at Rs.2,13,412/-.
3. The difference in the determination of total taxable turnover for the two assessment years in question arose due to the following circumstances. The assessee was the licence holder to mine the minerals at Nadanthai village in Namakkal taluk in Salem District and the assessee also had its own crushing unit in the above place. The assessee after unearthing the stones from the mines at Nadanthai transported the same from the said mines to the grinding unit, ground the stones there at its own risk and sold the calcite powder and lime stones both within and outside the State of Tamil Nadu.
4. The dispute is in relation to the inclusion of grinding charges, loading and unloading charges, transport charges and freight charges in the taxable turnover. The place of the business of the assessee was inspected by the officials of the Enforcement Wing, Salem and they found that there were serious defects in the maintenance of the accounts by the assessee. During the course of investigation, the Inspecting Officials unearthed a bill book relating to the business of the assessee for the assessment years 1987-88 and 1988-89 and there was proof to show that the assessee had actually sold the finished products to the purchasers. According to the assessee, it transported the minerals quarried from the mines to their grinding unit for grinding at the risk of the purchaser and sold the same to the purchasers after grinding them. The assessing Officer found that the assessee had issued a proforma invoice at the time of despatch of the finished products from their grinding unit to the purchasers through lorry and after the sale was concluded the said proforma invoices were handed over to the lorry driver. It was also found that the said proforma invoices were not accounted for by assessee in its accounts. The assessee had subsequently prepared sale bills for the above despatches separately showing the material costs, sales tax, Central Sales Tax, grinding charges, loading and unloading charges and transport charges paid and claimed that the turnover relating to grinding charges etc., do not form part of the turnover of the assessee. It was found that the sale bills have been issued by the assessee after the despatch of the finished products from their grinding unit together with the proforma invoices and the assessee had not accounted for the sale bill issued by them in their accounts. The assessing officer found that the proforma invoices prepared by the assessee showed that they sold the powder and not the raw material. The assessing officer came to the conclusion that the grinding charges, loading and handling charges, freight charges were pre-sale expenses incurred by the assessee and the assessee had prepared the sale bill as if he had sold the raw material and the expenses have been incurred at the risk of the buyers on payment of necessary charges. He therefore held that the turnover relating to grinding charges, loading and handling charges and freight charges are liable to be included as part of the total and taxable turnover of the assessee and included the same as part of total and taxable turnover of the assessee and completed the assessments. He issued notices for the levy of penalty. The assessee has produced certain letters from the purchasers stating that the contract was only for the purchase of quarried materials and there was no agreement for the finished products. The assessing officer rejected those letters on the ground that there were after thought and the assessee had not produced the same at any earlier stage of the proceedings and they were produced after the matter was remanded in appeal. He rejected the letters produced by the assessee and held that there was wilful default on the part of the assessee in not returning the turnover in question and levied penalty for both the assessment years.
5. The Appellate Assistant Commissioner on appeal held that there were no two separate distinct contracts one for the purchase of the raw material and the other for grinding the raw material and the assessee has not produced the same. He also found that there was no evidence to show how the assessee had transported the raw materials from the mines to the grinding unit and that how it was dealt with and for whose behalf the work was done. The Appellate Assistant Commissioner also found that the letters produced by the assessee were silent about the quantity proposed to be purchased and they have not indicated to whom the delivery of stones was to be made in the mines. The assessee has not produced the despatch slip prescribed by the Revenue Department in respect of removal of stones from the mines. He therefore upheld that the inclusion of pre-sale expenses for both the assessment years was correct and confirmed the assessments regarding the additions made.
The Appellate Assistant Commissioner, however, set aside the orders of penalty on the ground that the assessee has not acted wilfully in not disclosing the turnover relating to the grinding charges, loading and handling charges and freight charges as part of the taxable turnover.
6. The assessee carried the matter in appeal before the Sales Tax Appellate Tribunal against the order of the Appellate Assistant Commissioner upholding the additions and the department has filed enhancement petition as regards the cancellation of levy of penalties for both the assessment years. The Appellate Tribunal following the decisions of this Court in (1) (56 S.T.C. 65) (2) STATE OF TAMIL NADU Vs. FEDDERS LLOYD CORPN. (P) LTD. (56 S.T.C 191) held that the charges for grinding, loading and handling and freight were shown separately in the bills and the price mentioned in the sale bill was the real price and the levy of sales tax on loading and handling charges and freight charges was not warranted. The Appellate Tribunal, held that the grinding charges, loading and handling charges and freight charges were only post-sale expenditure and held that they were not part of the taxable turnover under the Act and allowed the appeals preferred by the assessee. Consequently, the Appellate Tribunal confirmed the order of the Appellate Assistant Commissioner in cancelling the levy of penalty. It is against the orders passed by the Appellate Tribunal the present revision petitions are filed.
7. We heard the submissions made by the learned Government Advocate appearing for the Additional Government Pleader (Taxes) and Mr.A. Suresh, counsel appearing for the assessee.
8. The short question that arises for consideration is whether the grinding charges, loading charges and handling charges, transport charges would form part of the sale price and they are liable to be assessed under the Act. The expression “sale price” is defined in Section 2(h) of the Central Sales Tax Act and it reads as under:
“sale price” means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged.”
The Supreme Court in HINDUSTAN SUGAR MILLS LTD. Vs. STATE OF RAJASTHAN (43 S.T.C. 13) considered the scope of the definition of “sale price” as defined under Section 2(h) of the Central Sales Act. The Supreme Court was dealing with the case of levy of sales tax on the sale of cement under the Cement Control order and the question that arose before the Court was whether the railway freight would form part of the sale price when the price of the cement was mentioned as “Free on Rail Destination Railway Station”. The Supreme Court while construing Section 2(p) of the Rajasthan Sales Tax Act which defined the expression “sale price” which is in pari materia with the definition of the phrase, ‘sale price’ in Section 2(h) of Central Sales Tax Act, held that the freight amount paid would form part of the sale price. The Supreme Court held as under:
“This definition is in two parts. The first part says that “sale price” means the amount payable to a dealer as consideration for the sale of any goods. Here, the concept of real price or actual price retainable by the dealer is irrelevant. The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to ask is as to what is the amount payable by the purchaser to the dealer as consideration for the sale and not as to what is the net consideration retainable by the dealer. We may then take a case where a dealer transports goods from his factory to his place of business and sells them at a price which is arrived at after taking into account “freight and handling charges” incurred by him in transporting the goods. The amount of “freight and handling charges” included in the price would obviously be part of the “sale price”, because it would be payable by the purchaser to the dealer as part of the consideration for the sale of the goods. The same would be the legal position even if the “freight and handling charges” are shown separately in the bill and added to the price of the goods, for the character of the payment would remain the same. Since “freight and handling charges” represent expenditure incurred by the dealer in making the goods available to the purchaser at the place of sale, they would constitute an addition to the cost of the goods to the dealer and would clearly be a component of the price charged to the purchaser. The amount of “freight and handling charges” would be payable by the purchaser not under any statutory or other liability but as part of the consideration for the sale of the goods and it would, therefore, form part of “sale price” within the meaning of the first part of the definition. This position is also well-settled having regard to the decisions of this Court in DYER MEAKIN BREWERIES LTD. Vs. STATE OF KERALA and D.C.JOHAR & SONS (P) Ltd. Vs. SALES TAX OFFICER, ERNAKULAM (1971) 27 S.T.C. 120 (S.C.).”
We have quoted the decision of the Supreme Court in extenso as it applies to facts of the case. It is accepted that the assessee had initially issued the proforma invoices at the time of despatch of the finished products by the lorry to the purchasers. At the time of despatch of goods the sale has already taken place and the proforma invoices showed a lump sum amount for the price of finished products which included the amounts towards sales tax, freight and handling charges. The assessee subsequent to the sale prepared the relevant sales bills and they indicated that the grinding charges, loading and handling charges and transport charges were paid separately but the assessee has not produced any proof to show that there was an agreement to sell only the stones and not the calcite powder nor lime stone powder. This Court in the STATE OF TAMIL NADU Vs. CAUVERY COTTON TRADING COMPANY (101 S.T.C. 19) held that the onus of proof is on the assessee to show the terms of the agreement. The assessee has not proved the grinding was done subsequent to the sale of the mineral and the loading and handling of the goods were done subsequent to the sale of mineral and freight charges was paid subsequent to the sale of the raw material. Though the assessee has produced two letters, the authorities have rightly rejected the same as not genuine as they were of recent origin and they did not even mention the quantity to be purchased and were produced at a very late stage of the proceedings. The assessee, apart from the two letters which were rejected as not genuine, did not produce any evidence to show that there was an agreement of sale for the purchase of the raw material and there was a separate agreement for grinding the raw material and the assessee has also not produced the records to show the way in which the raw materials quarried were transported from its quarrying place of operation to its grinding unit and it was also not established that the transport was done at the behest of the purchaser. The fact that a consolidated amount which included the grinding charges, loading charges, handing charges and transport charges was shown in the proforma invoices shows that they were payable by the purchasers to the assessee as part of the sale consideration for the sale of the goods. The Appellate Tribunal has over looked that the assessee prepared the sale bills subsequent to the sale of the goods and had accounted for the sale bills after the despatch of the products. We also hold that the Appellate Tribunal was not correct in placing reliance on the decisions of this Court in COMMR. OF SALES TAX Vs. B.A.KULKARNI(56 S.T.C. 65) and STATE OF TAMIL NADU Vs. FEDDERS LLOYD CORPN. (P) LTD. (56 S.T.C. 191). As far as the decision reported in STATE OF TAMIL NADU Vs. FEDDERS LLOYD CORPN. (P) LTD. (56 S.T.C. 191) is concerned that case arose under the provisions of the Tamil Nadu General Sales Tax and in view of the specific rule framed under the said Act, this Court held that the handling charges mentioned separately did not form part of the sale price and the decision rendered under the Tamil Nadu General Sales Tax Act does not automatically apply in construing the expression “sale price” under the Central Sales Tax Act. We also find that there is no case reported in 56 S.T.C. 65) on this point. The Appellate Tribunal also referred to the decision of the Orissa High Court in the case of SREE RANI SATI MINING TRADERS Vs. SALES TAX OFFICER (53 S.T.C. 322) and the definition of “sale price” in Orissa Sales Tax Act is different from the definition of ‘sale price’ under the Central Sales Tax Act and hence the said decision has no application to the facts of the case.
9. Learned Counsel appearing for the assessee referred the decisions of this Court in STATE OF TAMIL NADU Vs. LLOYD SALES CORPORATION (101 S.T.C. 280) and STATE OF TAMIL NADU Vs. SREE KAMARAJ WASTE PAPER STORE (118 S.T.C. 132) and in both cases it was found that the intention of the dealer was to exclude the freight and delivery charges and hence this Court found no difficulty in holding that freight and delivery charges did not form part of “sale price” as the cost was separately charged.
10. We find that the assessee has not discharged the burden cast on it that there was an agreement to sell the raw material and subsequent activities were done with reference to the articles purchased by the purchaser subsequent to the sale. Hence, we hold that the order of the Appellate Tribunal directing the exclusion of the grinding charges, loading charges, handling charges and transport charges from the taxable turnover for the two assessment years in question is not sustainable in law.
11. In so far as the order of the Appellate Tribunal upholding the cancellation of levy of penalty is concerned, we are of the view that the Appellate Tribunal has come to the correct conclusion that the levy of penalty is not warranted on the facts of the case. The finding of the Appellate Tribunal is that there was no wilful non-disclosure in the return and it is a pure finding of fact. The assessee had disclosed the turnover in its accounts and it cannot be stated that the assessee has deliberately omitted to disclose the same in the return filed and there is no legal infirmity in the finding of the Appellate Tribunal that there was no wilful non-disclosure by the assessee in the return. We find that the penalty is not sustainable as it is a case of bona fide mistake on the part of the assessee in not including that part of turnover in the return filed and in the absence of deliberateness, wilfulness on the part of the assessee, we hold that the levy of penalty is not warranted on the facts of the case. More over, it cannot be held that the assessee has not acted bona fide as there is a bona fide doubt as to whether the amounts in question are includible as part of the sale price as two views are possible on the question of inclusion of the disputed amounts in question. The Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal have concurrently found that there is no case for levy of penalty. We are not inclined to take a different view and the order of the Tribunal upholding the order of cancellation of penalty is upheld.
12. In the result, the tax case revisions filed against the orders of assessments are allowed and the tax case revision filed by the Revenue against the orders of cancellation of penalty are dismissed. No costs.