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TMI Blog1990 (11) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption. The State of Tamil Nadu has questioned the validity of the said order of the Sales Tax Appellate Tribunal. 3. In the case of Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu [1982] 51 STC 171, a Bench of this Court has gone into this question in some detail. If we go to refer to the various provisions of the Act and the Rules, we shall only repeat what the Bench had done in the said case. It may, however, be not out of place to point out that in the said case, the Bench considered the question, whether freight charges incurred by the dealer in the despatch of cement to the place of the customer could be deducted from the total turnover of the dealer under the Central Sales Tax Act, 1956, the Tamil Nadu General Sales Tax Act, 1959 and the Tamil Nadu Additional Sales Tax Act, 1970, or not. It will also be not out of place to refer to some of the provisions of the Act which give us a clue to answer the problem posed before us, namely, the definition of the expression "sale" in section 2(n), "goods" in section 2(j), "taxable turnover" in section 2(p), "total turnover" in section 2(q), "turnover" in section 2(r) and the rule, that is to say, rule 6(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of such turnover is liable to tax. "Turnover" means the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (n) by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce, other than tea, grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover. Rule 6 of the Rules reads: "6. The tax or taxes under sections 3, 3A, 4 or 5 shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer: (a) all amounts for which goods specified in the Third Schedule to the Act are sold; (b) all amounts for which goods exempted by a notification under section 17 are sold or purchased, as the case may be, provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges will have to be deducted. This statement of law is available in the case of Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu [1982] 51 STC 171 (Mad.). Our attention, however, has been drawn to a judgment by a Bench of this Court in State of Tamil Nadu v. Parry and Company [1976] 38 STC 122, stated to be contra to what has been stated in the case of Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu [1982] 51 STC 171 (Mad.). In State of Tamil Nadu v. Parry and Company [1976] 38 STC 122 (Mad.), in a short judgment, without referring to the other provisions of the Act, but taking notice of the "taxable turnover" under rule 6(c) of the Rules, a statement of law has been made to the following effect: "We are unable to agree with the order of the Tribunal that merely because the freight is shown separately in the bill, the dealer is entitled to deduct that amount from the taxable turnover. In order to claim deduction, not only the freight will have to be shown and separately charged in the bill, but there should be evidence to show it was not included in the price in the bargain made between the dealer and the purchaser. If the bargain between the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to take the freight also as part of the sale price and thus include it in the turnover on which tax can be imposed. If there is nothing available to show that there was any price charged which included the freight also and the assessee is separately showing the price of sale as well as the freight charges, the Revenue will have no option but to tax on the turnover of sale and not of freight. 9.. A question somewhat close to the question before us fell for decision before a Division Bench of the Punjab and Haryana High Court in State of Haryana v. Janki Dass and Co. [1990] 79 STC 1. It was noticed and said that it is clear from the definition of "sale price" in the Central Sales Tax Act that the cost of freight or delivery is not included in the turnover, where such cost is separately charged. Similarly, according to the definition of "turnover" in the Punjab General Sales Tax Act, 1948, the cost of freight is not includible in the turnover if it is not charged by the dealer at the time of or before the delivery of the goods; it is manifest from a perusal of the terms of contract in the present case and Hyderabad Asbestos case [1969] 24 STC 487 (SC), that the dealers in both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made part of the price." The Supreme Court reiterated the above law in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 in which certain observations made in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827 (SC) were explained. The Supreme Court stated in Hindustan Sugar Mills Ltd. case [1979] 43 STC 13 thus: "We may also at this stage refer to another decision of this Court earlier in point of time. That is the decision in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827 (SC). What happened in this case was that the appellant sold and despatched hydrogenated groundnut oil to the purchasers at an agreed price which was inclusive of freight. It is not very clear from the record but it does appear that the railway receipts obtained by the appellant were on the basis of 'freight to pay' and the amount of freight was paid by the purchasers and in the invoices made out by the appellant, the agreed price inclusive of freight was shown and from this the amount of freight was deducted and on the balance the amount of sales tax was computed. The appellant claimed to deduct the amount of freight from the turnover on the str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the purchaser was wholly inconsistent with the scheme of the Control Order and must be held to be excluded by it. The Control Order was paramount; it had overriding effect and if it stipulated that the freight was payable by the producer, such stipulation must prevail, notwithstanding any term or condition of the contract to the contrary. Therefore, 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, the amount of freight formed part of the 'sale price' within the meaning of the first part of the definition of that term in section 2(p) of the Rajasthan Act and section 2(h) of the Central Act and was includible in the turnover of the assessee." 11.. Thus, it is clear that freight cannot be included in the taxable turnover unless it is found that it was paid as a part of the stipulation of the price of the goods sold. The law on the subject has thus to be understood as above. 12.. Coming to the facts of this case, we have no hesitation in holding that in the absence of any material to the contrary to suggest that there has been freight realised as a stipulation of the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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