1997 (9) TMI 501 - SC - VAT / Sales Tax

Freight and handling charges form part of sale price under Section 2(d) West Bengal Sales Tax Act

SC held that freight and handling charges collected by the assessee from buyers formed part of 'sale price' under section 2(d) of the West Bengal Sales ... Definition of 'sale price' - Whether the freight and handling charges, hereinafter described as 'freight charges' or 'delivery charges', are to be treated as included within the words 'money consideration' in section 2(d) of the West Bengal Sales Tax Act, 1954 which defines 'sale price'? Held that:- It is clear that the definition of 'sale price' in section 2(d) uses the words 'means' and 'includes'. The first part of the definition defines the meaning of the word 'sale price' and must, in our view, be given its ordinary, popular or natural meaning. The interpretation thereof is in no way controlled or affected by the second part which 'includes' certain other things in the definition. This is a well-settled principle of construction. Having referred to the true meaning of the first limb of section 2(d) of the 1954 Act, we shall now refer to the Tribunal’s findings. The majority of the Tribunal found that the venue of the sale was the place of the buyer and the time of the sale was the point of delivery. The purchase orders were placed mostly there, the goods were received by the buyer there. Payment and receipt of the goods was simultaneous. The Tribunal held that collection of delivery charges separately was only notional in nature rather than real. It was stated that the appellant also admitted that defective goods returned by the buyer were taken back and thus defects during transportation were not at buyer's risk. The appellant's case that the sale took place ex-factory but delivery was at the buyer's place was not established. The Tribunal pointed out that in fact a single excise gate pass was issued by the appellant to one of its own employees who put the goods in the truck. The goods were despatched in a lot and there was no appropriation of any particular item to any particular buyer. The fact that the appellant changed over from a private permit for the truck to a 'public carrier' permit did not, according to the Tribunal, mean that the carriage of goods was in respect of goods not belonging to the permit holder or in connection with his trade or business. Appellant relied upon Southern Motors v. State of Karnataka[1996 (2) TMI 420 - SUPREME COURT]. That decision too does not help the appellant. In that case this Court held that the High Court erred in interfering with the orders of the Sales Tax Appellate Tribunal when the Tribunal had merely followed the decision of the High Court in the case of the same assessee in previous years, wherein it was found on identical facts that the 'freight charges' were not part of the sale price. Appeals dismissed. Issues Involved:1. Whether freight and handling charges are included in the term 'money consideration' under section 2(d) of the West Bengal Sales Tax Act, 1954, defining 'sale price.'Issue-wise Detailed Analysis:1. Definition of 'Sale Price' and Inclusion of Freight Charges:The primary issue revolves around whether 'freight and handling charges' (referred to as 'freight charges' or 'delivery charges') should be included in the 'money consideration' as defined by section 2(d) of the West Bengal Sales Tax Act, 1954 (the 1954 Act). The appellants argued that freight charges should not be included in the 'sale price' as per section 2(d) since the legislature did not explicitly include these charges within the definition. They supported their argument by pointing to the separate collection of delivery charges as evidenced by the Cash Memo No. 97751 and the specific inclusion of container charges within the definition of 'sale price,' implying that the absence of a similar inclusion for freight charges meant they were excluded.2. Comparison with Bengal Finance (Sales Tax) Act, 1941:The appellants also referred to section 2(h) of the Bengal Finance (Sales Tax) Act, 1941, which explicitly excludes 'delivery charges' if separately charged. They argued that the 1954 Act should have similarly included a specific clause for freight charges if the legislature intended them to be part of the sale price. They cited the case of Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 STC 487 to bolster their argument.3. Respondents' Argument and Tribunal's Findings:The respondents contended that the majority of the Tax Tribunal had correctly held that the obligation of paying freight charges was on the appellant-sellers, thereby making these charges part of the 'sale price' under section 2(d). They relied on the Supreme Court's decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13, which interpreted a similar definition of 'sale price' in the Rajasthan Sales Tax Act, 1954. The Court in that case held that the amount payable by the purchaser to the dealer as consideration for the sale of goods included freight charges, regardless of how the consideration was composed.4. Interpretation of 'Sale Price':The Court noted that the first part of the definition of 'sale price' in section 2(d) should be given its ordinary, popular, or natural meaning, unaffected by the second part of the definition which includes specific charges. This principle of construction means that the inclusive part of the definition cannot prevent the main provision from receiving its natural meaning. Therefore, the first part of section 2(d) should be interpreted to include freight charges within its natural meaning, as established in Hindustan Sugar Mills Ltd. v. State of Rajasthan.5. Relevance of Previous Cases:The Court distinguished the case of Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 STC 487, explaining that in that case, the terms of the contract explicitly stated that the freight charges were the obligation of the customers, which was not the situation in the present case. The Court also referred to Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu [1993] 88 STC 151, where similar arguments were made and dismissed.6. Tribunal's Findings on Factual Matrix:The Tribunal found that the venue of the sale was the buyer's place, and the time of the sale was the point of delivery. The collection of delivery charges separately was deemed notional rather than real, and the appellant's claim that the sale took place ex-factory was not established. The Tribunal concluded that the appellants were obligated to incur delivery charges to make the goods available for sale to the customers at their places, thus making these charges part of the sale price.7. Dismissal of Appeals:The Court concluded that the appellants' arguments were untenable and that the Tribunal's findings were supported by ample material and circumstances. The appeals were dismissed with costs.Conclusion:The Supreme Court upheld the Tribunal's decision that freight and handling charges are included in the 'money consideration' under section 2(d) of the West Bengal Sales Tax Act, 1954, defining 'sale price.' The appeals were dismissed with costs.