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TMI Blog1976 (2) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ted turnover could not be included in the taxable turnover. The supply and distribution of cement is regulated by the Cement Control Order, 1967, promulgated by the Central Government in exercise of their powers under the Industries (Development and Regulation) Act, 1951. Under clause 7 read with the First Schedule to this Order, the Central Government had fixed an ex factory price admissible to the producer for different varieties of cement as the retention price. Clauses 8, 9, 11(1) and 11(2), which are relevant for the purpose of this case, read as follows: "8. Price at which producer may sell.-No producer shall, himself or by any person on his behalf, sell- (a) rapid hardening cement and low heat cement at a price exceeding Rs. 174.00 per metric tonne; (b) any other variety of cement at a price exceeding Rs. 151.00 per metric tonne; free on rail destination railway station plus the excise duty paid thereon: Provided that in the case of packed cement there shall be added to the price referred to in this clause such charges as may be fixed by the Central Government in respect of packings or the containers and the Central Government may fix different charges for differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice for supplies to Government or for purposes of export under the second proviso to clause 8; (iii) expenses incurred by the Controller in discharging the functions under this Order subject to such limits, if any, as may be laid down by the Central Government in this behalf." It may be mentioned that at the relevant period in 1969-70, the prices fixed for the variety of cement falling under clause 8(b) was Rs. 129.13 and the sum of Rs. 151.00 which is found in the extracted provision above was introduced only with effect from 15th September, 1973. It may be seen from these provisions that the producers are bound to sell cement at a uniform rate of Rs. 129.13 per metric tonne free on rail the destination to all the dealers, irrespective of the distance of the destination station from the place of manufacture. It is stated that this uniform rate is arrived at after a careful study of the freight variations and finding out a pooled average freight irrespective of the distance. In addition to these provisions, the sale and purchase of cement is also governed by an agreement between the manufacturer-seller and the purchaser, the terms of which are to be found in the purchase orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der railway risk and enclose R/R No. Inv. No Date Destination 755379 18 17-1-70 Arkonam Indentor's name: M.M. Mohamed Saleh Order No. Cs/ms/st/62 Wagon C/C Tare No. of Tonnes Tonnes Ry. receipt Wt. Rate per No. Bags Kg. actual charged quintal quintal quintal with freight proportions Rs. P. WRC 21.9 10.8 473 23.650 238.87 239.00 2.24 62200 MGST. No. 12331 CST. No. 3233 Quantity already Despatched Balance to despatched as per this be desadvice patched Nil 23.650 1.350 Note: Our responsibility ceases from the time delivery is made by the works to the carriers. Any claim for loss, shortage or damage must be made against carriers. The other irrelevant portions are omitted. The invoice enclosed along with the above covering letter is as follows: "Chettinad Cement Corporation Limited. 6, Armenian Street, Madras. Dated: 17-1-1970 M.M. Mohamed Saleh, 178, Gandhi Road, Arkonam (N.A. Dist.). Dr. to Chettinad Cement Corporation Ltd. Interest at the rate of 12 per cent per annum will be charged on all accounts unpaid 15 days from date of delivery. Every care is taken in packing and despatching goods but our responsibility for shortage, loss, delay or damage ceases after delivery at work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to clause 9 states that the expenditure incurred by the producer on freight shall be reimbursed to him by the Controller. These provisions, in our opinion, clearly show that the price to be charged is free on rail the destination price and the cost of transport from the place of manufacture to the destination would have to be borne by the producer-seller and not by the buyer. In fact, it is not possible to clearly predicate at to what exactly the amount of price that was included in fixing the selling price at Rs. 129.13 since even a dealer purchasing and taking delivery, ex factory, had to pay the same rate per metric tonne similar to a person who is far away from the place of manufacture. Except to say that in fixing the free on rail destination price, the freight element had also been taken into account, it cannot be said that the price represented the ex factory price plus the actual freight. The clauses in the agreement between the parties relied on by the learned counsel also do not show that there was any variance so far as the payment of price is concerned. Clauses 5 and 10 extracted above only deal with the risk in transport. By agreement of parties, they provided for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading of these provisions, therefore, we are of the view that the price at which the producer could have sold and in fact agreed to sell is Rs. 129.13 per metric tonne free on rail the destination railway station and not free on rail the despatching station. The learned counsel for the assessees strongly relied on the decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh[1969] 24 S.T.C. 487 (S.C.). In that case, the assessee who was a manufacturer of asbestos cement sheets, in order to meet the competition in the trade, voluntarily maintained a uniform catalogue rate all over the country in respect of the goods manufactured by him. The goods were despatched to outstation customers under railway receipts with freight "to pay". The invoices were made at the catalogue rate and the purchasers paid the amount of the invoices less the freight paid by them. The result of it was the net price realised by the company was the catalogue rate less the railway freight charged in respect of the goods transported to the destination. Clauses (4) and (16) of the terms of the contract on which the relationship of the parties were determined read as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Jute Mfg. Co. Ltd. v. Commissioner of Sales Tax[1972] 29 S.T.C. 639. and by the Mysore High Court in State of Mysore v. Panyam Cements and Mineral Industries Ltd.[1974] 33 S.T.C. 407. The learned counsel also relied on the decision of the Andhra Pradesh High Court in K.C.P. Limited v. Government of Andhra Pradesh[1972] 29 S.T.C. 507. It is true in this decision, though it related to a case coming under the Cement Control Order, a Division Bench of the Andhra Pradesh High Court applied the decision in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh[1969] 24 S.T.C. 487 (S.C.). and held that the transport charges are not includible in the taxable turnover. We may point out that there is not much of discussion and even if it were to be taken as an authority, with great respect to the learned Judges, we differ from the same. The decision of a learned single Judge of this court in Ramco Cement Distribution Co. P. Ltd. v. Deputy Commercial Tax Officer, Rajapalayam[1974] 33 S.T.C. 180., also proceeded on the assumption that the decision in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh[1969] 24 S.T.C. 487 (S.C.). was applicable and that, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement of freight, no collection of freight is made with reference to the actual charge in respect of the transaction. Even a person who takes delivery of the same ex factory had to pay the same price thereby showing that the purchaser is not asked to pay any freight separately as if dissecting the total price fixed for free on rail destination into retention price, excise duty and packing charges into one compound and the freight differently, one payable to the seller and the other payable to the Cement Controller. Further, under the provisions in clause 9 the liability to pay the freight is on the seller and not on the purchaser. Therefore, no question of the seller collecting the amount on behalf of the Cement Controller would arise at all. The decision in Joint Commercial Tax Officer v. Spencer Co.[1975] 36 S.T.C. 188 (S.C.).related to a case of tax collected under section 21-A of the Prohibition Act. That section provided a 50 per cent tax on sale of foreign liquor and the tax is payable by the purchaser. The section also provided that the seller had to collect the amount and remit the identical amount collected to the Government. The Supreme Court in these circumstances sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it; it merely finds profits made from what appears to be a trade, and the revenue laws happened to say that the profits made from trades have to be taxed, and they say: 'Give us the tax.' It is not to the purpose in my judgment to say: 'But the same State that you represent has said they are unlawful;' that is immaterial altogether and I do not see that there is any contact between the two propositions. It was said in the Irish case[1929] I.R. 406. that allegans suam turpitudinem non est audiendus. I cannot see that the State are alleging their own turpitude; it is the appellant who is alleging his own turpitude. The State says: 'It is a business;' the appellant says: 'It is an unlawful one;' he is alleging his own turpitude. It is said again: 'Is the State coming forward to take a share of unlawful gains?' It is mere rhetoric. The State is doing nothing of the kind; they are taxing the individual with reference to certain facts. They are not partners; they are not principals in the illegality, or sharers in the illegality; they are merely taxing a man in respect of those resources. I think it is only rhetoric to say that they are sharing in his profits, and a piece of rheto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a post sale liability of the purchaser and not included in the price. In this connection, he relied on explanation (3) to section 2(n) and clauses 5 and 10 of the agreement between the parties. Section 2(n) defines a sale and the explanation (3) to that definition reads as follows: "The sale or purchase of goods shall be deemed, for the purposes of this Act, to have taken place in the State, wherever the contract of sale or purchase might have been made, if the goods are within the State- (i) in the case of specific or ascert ained goods, at the time the contract of sale or purchase is made." According to the learned counsel, the element of time of sale is also contemplated under this provision and read in conjunction with clauses 5 and 10 of the agreement, which are extracted above, show that the sale was completed when the goods were put on rail in the despatching station. This contention of the learned counsel is also untenable. The purpose of explanation (3) to section 2(n) is to fix the situs of sale for the purpose of taxation and the question as to when the sale is completed was outside the scope of explanation (3). Clauses 5 and 10 of the agreement also could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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