The Kerala High Court has upheld the addition of freight charges separately specified as deduction in invoices to taxable turnover.
The bench of Justice A.K.Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the normal presumption would be that the ‘freight charges’ were collected from the dealer because the ‘freight charges’, over and above the price of the cement, was to be borne by the said dealer. If this presumption had to be rebutted then it was for the petitioner to show by reference to books of accounts and other documents that the sale of the cement was completed ex-warehouse and not at the business premises of the purchasing dealer. Since no such document or books of accounts were produced by the petitioner, the initial presumption against it did not stand dislodged.
The revision petitioner is a manufacturer of cement and a dealer registered under the Kerala Value Added Tax Act. For the assessment year 2013-14, pursuant to an audit visit conducted in the business place of the petitioner the assessing authority completed the assessment by adding ‘freight charges’ shown in the invoices issued by the petitioner to its dealers, to the price of the cement that was mentioned in the said invoice, for the purposes of levying tax.
Although, the petitioner contended that the ‘freight charge’ was separately collected from the dealer and as per the terms of the contract between the petitioner and the dealer, the ‘freight charge’ had to be borne by the dealer, no documents or books of accounts were produced before the assessing authority to substantiate the said contention. The assessing authority therefore proceeded to complete the assessment as proposed.
The appeals preferred by the petitioner before the First Appellate Authority and the Tribunal did not meet with any degree of success and the appeals were also dismissed by the authorities. Before the Appellate Tribunal, although an opportunity was granted to the petitioner to produce documents to substantiate their contentions that the ‘freight charges’ were separately collected, and were not collected as part of the price of the cement sold to the dealer, no documents were produced by the petitioner.
The assessee contended that as per Rule 10 (e) of the KVAT Rules wherever the ‘freight charges’ are shown separately in the invoice, the same is permissible as a deduction from the sale price for the purposes of taxation.
The assessee relied on the judgement of the Supreme Court in IFB Industries Ltd. v. State of Kerala to suggest that there is no presumption that if the ‘freight charges’ are shown along with the price of the cement in the same invoice, the same forms part of the price of the cement.
The department contended that the assessing authority, the First Appellate Authority and the Appellant Tribunal, had concurrently found as a finding of fact that the petitioner had not produced any document to fortify his contention that the ‘freight charges’ were separately collected and did not form part of the price of the cement that was sold to the dealer. It is her submission that in the absence of any proof to substantiate the contention of the petitioner, the orders of the authorities below did not require any intervention at the hands of this Court.
The court while dismissing the revision held that in the absence of any document or books of accounts produced by the petitioner before the statutory authorities including the Appellate Tribunal, the petitioner could not be seen as having rebutted the presumption that flowed from the mention of ‘freight charges’ in the invoice that was issued by him to the dealer.
Case Title: M/S J.K. Cement Ltd. Versus State Of Kerala
Case No.: OT. Rev No.38 Of 2018
Date: 02/09/2024
Counsel For Petitioner: K.Srikumar (Sr.), P.R.Ajith Kumar, K.Manoj Chandran
Counsel For Respondent: Resmitha Ramachandran
