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TMI Blog2010 (9) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... The Deputy Commercial Tax Officer, Group VIII, the assessing officer, Enforcement South passed two separate orders under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as, "the TNGST Act") and Central Sales Tax Act, 1956 (hereinafter referred to as, "the CST Act") on June 30, 1989 holding that the freight and insurance charges were liable to be taxed and the same are to be included in the turnover and thus a sum of Rs. 7,97,864 was sought to be included towards the taxable turnover for the assessment year 1986-87 under the TNGST Act taxable at 10 per cent and a sum of Rs. 8,48,265 relating to the same period under the CST Act. The appellant preferred appeals under the TNGST Act as well as the CST Act before the Appellate Assistant Commissioner (CT), Kancheepuram, Tamil Nadu. The Appellate Assistant Commissioner remanded the matters to the Appellate Assistant Commissioner for passing fresh orders of assessment. The appellant had filed two appeals before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madras and the appeals were registered as T.A. Nos. 766 of 1991 and 767 of 1991. Both the appeals were allowed by the said Tribunal. The responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made without taking the freight charges into account for the year 1986-87. There was an inspection on February 27, 1987 in which the inspecting officer had found that the assessee had collected freight charges and insurance charges separately under the debit notes for a total sum of Rs. 16,96,530 but the same had not been shown in the monthly returns. The assessing authority, therefore, determined 50 per cent of that amount of Rs. 16,96,530 as freight charges, after making allowance for the insurance amount and levied tax on that amount of the freight, charged by the assessee forming part of the sale price. The assessee's appeal against that order having succeeded, a further appeal was preferred by the Revenue, which came to be allowed by the Tamil Nadu Taxation Special Tribunal. The assessee is now before us questioning the correctness of that order of the Tribunal. The appellant claims that since the contract separates the ex-factory price and the insurance and freight charges, and, under rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959 the freight when specified and charges for by the dealer separately, without including the same in the price of the dealer, the freight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have been completed. Had the sale been completed at the factory gate, the expenses incurred thereafter by way of freight charges would then be capable of being regarded as expenditure which was in the nature of a post-sale expenditure and, if paid by the seller, regarded as an amount paid by such seller on behalf of the buyer. Both the aforementioned cases emphasise the fact that expenses incurred by a seller on freight would be part of the sale price, as until the transfer of title to the goods takes place that being the only way made in which sale could have taken place prior to the introduction of clause (29A) of article 366 of the Constitution. The learned counsel also drew our attention to the decision of this court in the case of E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes [2000] 117 STC 457 (SC). [2000] 2 SCC 321. The question considered therein was the includability of transport subsidy given by the sugar manufacturer to the cane growers, who, under the terms of the contract were required to supply the sugarcane at the factory. The subsidy so given was held by the court to be part of the price as that amount had been given by the manufacturer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dealer and would clearly be a component of the price to the purchaser. The amount of freight and insurance charges would be payable by the purchaser not under any statutory or other liability but as part of the consideration for the sale of the goods and would therefore, form part of the sale price. In order to crystallize the legal position, we would like to refer important English and Indian cases. English cases In Paprika Ltd. v. Board of Trade [1944] 1 All ER 372, the court observed as under: "Whenever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands but it does not cease to be the price which the buyer has to pay even the price is expressed as 'x' plus purchase tax." In this case, the learned judge also quoted with approval what Goddard, L.J., said in Love v. Norman Wright (Builders) Ltd. [1944] 1 All ER 618: "Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summarily dismissed. The company has appealed to this court with special leave. Rule 9(f) of the Kerala General Sales Tax Rules, 1963, provides: "In determining the taxable turnover the amount specified in the following clauses shall subject to the conditions specified therein, be deducted from the total turnover of the dealer,- . . . (f) all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the price of goods sold; (i) freight, (ii) charges for packing and delivery." The company claims that the amount spent by it for freight and for "handling charges" of goods from the factories to the warehouse at Ernakulam is liable to be excluded from the taxable turnover and the taxing authorities and the High Court were in error in refusing to allow the deduction. This court while interpreting rule 9(f) of the Kerala General Sales Tax Rules, 1963 observed that it is not intended to exclude from the taxable turnover any component of the price, expenditure, incurred by the dealer which he had to incur before sale and to make the goods available to the intending customer at the place of sale. This cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore [1980] 45 STC 197 (SC). [1980] 1 SCC 71 similar question arose for consideration. In this case, while following the case of Hindustan Sugar Mills [1979] 43 STC 13 (SC). [1978] 4 SCC 271 this court came to the clear conclusion that the amount of freight formed part of the sale price within the meaning of the first part of the definition of the term contained in section 2(p) of the Rajasthan Sales Tax Act, 1954. In Cement Marketing Co. of India Ltd. v. Commissioner of Commercial Taxes, Karnataka [1980] 46 STC 215 (SC)., [1980] Supp SCC 373 this court observed as under See at page 216 of 46 STC.: "This question is no longer res integra and it stands concluded by a recent decision given by this court in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC). [1978] 4 SCC 271. It has been held by this court in that case that by reason of the provisions of the Cement 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 secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogether with the cost of raw material constitute "turnover" under section 2(s) and is liable to sales tax under section 6A of the Andhra Pradesh General Sales Tax Act, 1957. This court relied on Hindustan Sugar Mills [1979] 43 STC 13 (SC). [1978] 4 SCC 271 and came to the conclusion that the transportation charges and agent's commission would be inclusive in "turnover" under section 2(s) and is liable to sales tax under section 6(a) of the Andhra Pradesh General Sales Tax Act, 1957. When we apply the ratio of the judgments of the English courts and of our courts, the conclusion becomes obvious that the amount of freight and insurance charges incurred by the dealer forms part of the sale price. We may reiterate that in this case, there was specific contract entered into by and between the parties and according to the relevant clause of the contract, the ownership of the goods will remain with the supplier till they are delivered at the destination station. In view of the clear clause of the contract, no other view is possible. In our considered view, the High Court was totally justified in affirming the judgment of the Tribunal. No interference is called for. These appeals being d ..... 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