1955 (10) TMI 28 - HC - VAT and Sales Tax

Issues Involved:
1. Whether freight charges are liable to be assessed and included in the total turnover for the assessment years 1966-67 and 1967-68.

Issue-wise Detailed Analysis:

1. Inclusion of Freight Charges in Total Turnover:
- The primary issue is whether freight charges should be included in the total turnover for the assessment years 1966-67 and 1967-68. The assessing officer included freight charges of Rs. 79,43,992 for 1966-67 and Rs. 47,53,709 for 1967-68 in the total turnover. The Appellate Assistant Commissioner confirmed this inclusion. However, the Appellate Tribunal allowed the assessee's appeal, holding that since the Cement Control Order was not in force during these periods, freight charges should not be included in the turnover as they do not form part of the sale price.

2. Arguments by the Department:
- The department contended that even though the Cement Control Order was not in force, the parties are bound by their agreement, which included freight charges as part of the sale price. Citing section 2(h) of the Central Sales Tax Act, the department argued that freight charges, being a component of the sale price collected by the assessee, should be included in the sales turnover. They relied on the decision in Shaw Wallace and Company v. State of Tamil Nadu to support their stance.

3. Arguments by the Assessee:
- The assessee argued that during the relevant assessment years, the Cement Control Order was not in force, and as per the contract, freight charges were payable separately and not included in the sale price. They highlighted that the freight charges were shown separately in the bills, thus should not be included in the total turnover for tax purposes.

4. Legal Precedents and Interpretations:
- The court referred to several precedents:
- In Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool, it was held that for freight to be deductible, it must be specified and charged separately and not included in the price of goods.
- In Shaw Wallace and Company's case, it was held that if the sale price includes freight, then freight forms part of the sale price and is taxable.
- In Hindustan Sugar Mills Ltd. v. State of Rajasthan, the Supreme Court held that if freight is part of the price, it falls within the definition of 'sale price' under section 2(h) of the Central Sales Tax Act.
- In Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu, the Supreme Court held that freight charges cannot be deducted from the controlled price for turnover calculation when the Cement Control Order is in force.

5. Court's Findings:
- The court found that during the assessment years 1966-67 and 1967-68, the Cement Control Order was not in force, and the parties were bound by their contract. The court noted that the freight charges were collected as part of the sale price, and thus, should be included in the total turnover for tax purposes.
- For the assessment year 1966-67, the court concluded that the Tribunal was incorrect in excluding the freight charges from the turnover. The freight charges of Rs. 79,43,992 were part of the sale price and thus taxable.
- For the assessment year 1967-68, the court determined that the Cement Control Order was in force from January 1, 1968, to December 31, 1968. Therefore, the freight charges for the entire year, amounting to Rs. 56,35,314, should be included in the turnover and are taxable.

Conclusion:
- The court set aside the Tribunal's orders for both assessment years and restored the orders of the Appellate Assistant Commissioner. The revisions filed by the department were allowed, and the freight charges were included in the total turnover for tax purposes. The petitions were allowed with no costs.

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