1972 (2) TMI 70 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Inclusion of railway freight in taxable turnover under the Central Sales Tax Act, 1956.
2. Interpretation of "sale price" and "turnover" under the Central Sales Tax Act.
3. Applicability of previous case law to the present case.
4. Compliance with the Cement Control Order, 1961.

Issue-wise Detailed Analysis:

1. Inclusion of Railway Freight in Taxable Turnover:

The petitioner, M/s. Birla Jute Manufacturing Co. Ltd., challenged the inclusion of railway freight in their taxable turnover for the assessment year 1965-66. The Assistant Commissioner of Sales Tax included the amounts of railway freight in the taxable turnover, which the petitioner contended was illegal. The court examined whether the freight incurred in inter-State sales should be excluded from the taxable turnover. The petitioner argued that the freight was payable by the buyers and not by them, thus it should not be part of the sale price or taxable turnover.

2. Interpretation of "Sale Price" and "Turnover":

The court referred to the definitions in the Central Sales Tax Act, 1956:
- Section 2(h) defines "sale price" as the amount payable to a dealer for the sale of goods, inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery, excluding the cost of freight if separately charged.
- Section 2(j) defines "turnover" as the aggregate of sale prices received and receivable by a dealer.

The court concluded that railway freight forms part of the sale price in a contract where the price is F.O.R. destination, thus it must be included in the taxable turnover.

3. Applicability of Previous Case Law:

The court reviewed several precedents:
- In *Commissioner of Sales Tax, M.P. v. Anwarkhan Mahboob Co.*, the court held that the sale price included railway freight if the contract was F.O.R. destination.
- In *Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool*, the Supreme Court ruled that freight must be separately charged to be excluded from the sale price.
- In *Dyer Meakin Breweries Ltd. v. State of Kerala* and *D.C. Johar & Sons (Private) Ltd. v. Sales Tax Officer, Ernakulam*, the Supreme Court held that freight incurred before the sale forms part of the sale price.

The court distinguished the present case from *Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh*, noting that the latter involved free trade commodities, whereas the present case involved a controlled commodity under the Cement Control Order, 1961.

4. Compliance with the Cement Control Order, 1961:

The court noted that the sales were governed by the Cement Control Order, 1961, which mandated that the price of cement sold by the petitioner, as an agent of the State Trading Corporation, was F.O.R. destination, inclusive of railway freight. This regulatory framework aimed to ensure equitable distribution and fair pricing of cement across the country. Consequently, the railway freight formed part of the sale price under section 2(h) of the Central Sales Tax Act.

Conclusion:

The court held that the petitioner's claim for deduction of the cost of freight must fail because the railway freight could not be considered as "separately charged" under section 2(h) of the Central Sales Tax Act. The petition was dismissed with costs, affirming that the railway freight forms part of the sale price and must be included in the taxable turnover.