1981 (12) TMI 143 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Deductibility of freight charges under the C.S.T. Act, T.N.G.S.T. Act, and T.N.A.S.T. Act.
2. Exclusion of packing charges from the total turnover for sales tax assessment.
3. Exclusion of excise duty on packing materials from the total turnover.

Detailed Analysis:

1. Deductibility of Freight Charges:
Issue: Whether freight charges incurred by a dealer in the despatch of cement to the place of the customer could be deducted from the total turnover under the C.S.T. Act, T.N.G.S.T. Act, and T.N.A.S.T. Act.

Judgment:
- C.S.T. Act: The freight charges form part of the "sale price" within the meaning of section 2(h) of the C.S.T. Act due to the overriding effect of the Cement Control Order, 1967. The Supreme Court's decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC) was applied, establishing that freight charges are included in the sale price and thus subject to sales tax.
- T.N.G.S.T. Act: Under the T.N.G.S.T. Act, freight charges are deductible from the total turnover as per rule 6(c) of the T.N.G.S.T. Rules, provided they are specified and charged separately.
- T.N.A.S.T. Act: Since the freight charges are deductible under the T.N.G.S.T. Act, they are also not liable for additional sales tax under the T.N.A.S.T. Act.

2. Exclusion of Packing Charges:
Issue: Whether the packing charges being the cost of the packing materials used by the dealer in packing cement for delivery to customers could be excluded from the total turnover for the assessment of sales tax.

Judgment:
- C.S.T. Act: Packing charges are included in the sale price under section 2(h) of the C.S.T. Act, following the Supreme Court's rationale in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC). The price includes the cost of packing materials and labor charges.
- T.N.G.S.T. Act: Packing charges are deductible from the total turnover under rule 6(cc) of the T.N.G.S.T. Rules, provided they are specified and charged separately.
- T.N.A.S.T. Act: Packing charges are not liable for additional sales tax under the T.N.A.S.T. Act, following their exclusion under the T.N.G.S.T. Act.

3. Exclusion of Excise Duty on Packing Materials:
Issue: Whether the excise duty paid on packing materials used by a dealer for packing cement to be sold to customers can be excluded from the total turnover.

Judgment:
- C.S.T. Act: Excise duty on packing materials is included in the sale price under section 2(h) of the C.S.T. Act, as it forms part of the total consideration paid by the purchaser.
- T.N.G.S.T. Act: Excise duty on packing materials is deductible from the total turnover under rule 6(cc) of the T.N.G.S.T. Rules, as it forms part of the cost of packing materials.
- T.N.A.S.T. Act: Excise duty on packing materials is not liable for additional sales tax under the T.N.A.S.T. Act, following its exclusion under the T.N.G.S.T. Act.

Conclusion:
- C.S.T. Act: Freight charges, packing charges, and excise duty on packing materials must be included in the sale price for the computation of sales tax.
- T.N.G.S.T. Act and T.N.A.S.T. Act: Freight charges, packing charges, and excise duty on packing materials are not liable to be included in the sale price for the computation of sales tax. Consequently, they are also not subject to additional sales tax under the T.N.A.S.T. Act.

Orders:
- C.S.T. Act Cases: T.C. Nos. 206 to 210, 450 to 452, 470 to 474, 825, 581, 583, and 586 of 1979 are dismissed.
- T.N.G.S.T. Act and T.N.A.S.T. Act Cases: T.C. Nos. 31 to 37, 45 to 52, 54 to 61, 826, 827, 582, 584, 585, and 587 to 589 of 1979 are allowed.

Leave to Appeal:
- Both sides are granted leave to appeal to the Supreme Court due to the substantial questions of law involved.