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TMI Blog2006 (10) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... bills separately, but was not charged from the purchasers, though the transaction was f. o. r. can be computed for the purposes of ascertaining sale price. 4. The sale is of cotton, inter-State. The freight charges were shown in the bills separately, but the transportation expenses were paid by the purchasers. These facts are not in dispute. 5. Now the question is that when the transaction was f. o. r. and the freight was paid by the purchasers though it was shown in the bills whether it may be included in the sale price. Sale price is defined in Section 2(h). For ready reference Section 2(h) of the Central Sales Tax Act, 1956 reads thus: 2(h) '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. 6. The State placed reliance on the judgment of the apex court in Hindustan Suga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment in Hindustan Sugar Mills Ltd. [1979] 43 STC 13 which has been strongly relied upon by the learned Counsel for the State, may be referred. The apex court considering the question held thus (page 35): We must, therefore, hold that, by reason of the provisions of the Control Order which governed the transactions of sale of cement entered into by the assessee with the purchasers in both the appeals before us, the amount of freight formed part of the 'sale price' within the meaning of the first part of the definition of that term and was includible in the turnover of the assessee. 11. The apex court while considering the question had an occasion to consider the law laid down by the Division Bench of the High Court in Hyderabad Asbestos Cement Products Ltd. [1969] 24 STC 487 (SC) and held thus: This would plainly and indubitably be the position where the contract of sale entered into by the dealer is f. o. r. destination railway station. But here it is necessary to bear in mind a rather important distinction. There may be a case where the contract of sale may not be f.o.r. destination railway station, but the price alone may be so. Where such is the case, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided as follows : '(4) The price of the said productions supplied to the stockists shall be the current general gross list price charged by the company, free on rail, less such discount as may be fixed by the company from time to time...(16)...the date of delivery shall mean the date of the railway receipt and in the case of consignments sold free on rail destination, the railway freight shall be nevertheless payable by the stockists at the destinations and the amount of freight shown on the railway receipt shall be deducted from the invoice of the company. It will be seen that under Clause (4) the price of the goods was stipulated to be 'the current general gross list price charged by the company free on rail', but Clause (16) made it clear that 'the date of delivery shall mean the date of the railway receipt' and though the goods may be sold free on rail destination, 'the railway freight shall nevertheless be payable by the stockists at the destinations and the amount of freight...shall be deducted from the invoice of the company. The combined reading of Clauses (4) and (16) clearly showed that it was only the price which was f. o. r. destination and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut including them in the price of the goods sold: (i) freight; (ii)... 'This court held that the deduction claimed was not permissible since the conditions for the applicability of Rule 5(1)(g) were not satisfied. It was pointed out that it was clear from the contents of the specimen invoice produced by the appellant that 'the appellant has charged a price inclusive of the railway freight and would therefore be outside the terms of Rule 5(1)(g), which requires that in order to enable a dealer to claim the deduction it should be charged for separately and not included in the price of goods sold. The conditions of the rule not having been complied with, the appellant was not entitled to the deduction in respect of freight'. Here the freight was payable by the appellant because the price was inclusive of the freight and there was no stipulation in the contract, as in Hyderabad Asbestos Cement Products Ltd.'s case [1969] 24 STC 487 (SC), that the delivery to the purchaser shall be complete when the goods are put on rail or that the payment of freight shall be the obligation of the purchaser. And it did not make any difference to this position that the freight was not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the purchaser against the railways and in case excess freight has been charged, the purchaser shall be entitled 'to lodge claim with the railways'. It would, thus, be seen that according to these provisions, the delivery of the goods to the purchaser would be complete as soon as they are put on rail at the work siding and the risk then passes to the purchaser and payment of freight would be the responsibility of the purchaser. This would be the position apart from the provisions of the Control Order and, on this position, there can be no doubt, for reasons already discussed, that the amount of freight would not form part of the 'sale price'. But we have to consider the impact of the provisions of the Control Order, for these provisions, having statutory force and authority, have overriding effect and the terms and conditions of the contract to the extent to which they conflict with these provisions must be held to be excluded. Let us, therefore, examine the impact of the relevant provisions of the Control Order on the terms and conditions of the contract. 12. The apex court has precisely held that under terms of the contract who was liable to pay the freig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the question held thus (page 9): In the result, we hold that in the facts and circumstances of the present cases, the amount of freight charged on the goods and later on deducted from the bill does not form part of the turnover and answer the first question in the affirmative and in favour of the assessee and against the Revenue. We also hold that the ratio of Hyderabad Asbestos Cement Products Ltd.'s case , is fully applicable to the facts of the present cases and the decisions of the Madhya Pradesh and Madras High Courts are not attracted. Thus, the second question is also answered in the affirmative and in favour of the assessee and against the Revenue. 15. The apex court again had an occasion to consider the sale price in Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu and held thus (page 158 of STC): 6. Interesting as these arguments are, we find that they are merely a repetition of what was urged in the case of Hindustan Sugar Mills Ltd. . In that case also the point urged was that the Cement Control Order only fixes the maximum price and that there was nothing to prevent the producer from selling the cement at a lower price and that, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the controlled price irrespective of the amount of freight which might have been incurred in respect of the transaction. Having regard to the fact that the freight on consignments to places near the factory and consignments to places far away from the factories could show a lot of variation, the Control Order created a machinery by which all freight charges were credited to a common account and any particular cement manufacturer incurring more than a specified amount was entitled to be reimbursed for the excess freight incurred by him. As the learned Judges pointed out in the earlier decision, the whole Control Order proceeds on the footing that the freight charges are to be met by the producer and that he was entitled to a consolidated price irrespective of the freight he may have incurred. In this view of the matter, the sale price, on the terms of the Central Sales Tax Act, could only be the controlled price as fixed by the Cement Control Order. 7. We find that the factual position in these cases is also not as described by the learned Counsel for the assessee. The assessee's arguments in this regard were sought to be highlighted by the production of one of the invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Control Order. 8. For the reasons mentioned above we are of the opinion that the High Court was fully justified in applying the decision in Hindustan Sugar Mills Ltd. to the present case and denying the benefit of deduction of freight charges from the controlled price to arrive at the turnover of the assessee for the purpose of the Central Sales Tax Act. 16 The apex court again reiterated the law laid down by it in Hindustan Sugar Mills Ltd. [1979] 43 STC 13. A Division Bench of this court in Straw Products Ltd. [1987] 65 STC 20 following law laid down by the apex court in Hindustan Sugar Mills Ltd. [1979] 43 STC 13 held that a contract of sale of the goods f. o. r. destination railway may be of two kinds. In the first, the freight is part of the considerations payable to the seller and forms part of the price. The delivery is complete at the destination railway station and the risk till then continues to remain with the selling dealer while in the other although the price stipulated is f. o. r. destination railway station, the delivery is complete when the goods are put on rail and the risk passes to the purchaser thereafter. The freight is payable by the purchaser, thou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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