Sale price includes pre-delivery charges, while a separate voluntary dharmada recovery is excluded from taxable turnover.
Sales made after commencement of the Act against pre-commencement orders were held outside the proviso to section 4 because the proviso covered only contracts of the kind contemplated by the Act, not ordinary agreements to sell. Sales of goods accepted against stock in the State and despatched from the State fell within section 2(g) read with Explanation II, and the constitutional challenge failed. Packing expenses, hamali and cartage were treated as part of sale price and taxable turnover because they were charges for work done before delivery, but dharmada was excluded as a separately recovered voluntary charge not shown to be consideration for the sale. The challenges under Article 286, to the proviso to section 22(1), and to the single-member reference procedure failed.
Issues: (i) whether sales of goods despatched after the Act came into force, in fulfilment of orders received before its commencement, were sales in the course of execution of a contract so as to attract the proviso to section 4; (ii) whether sales of goods despatched outside the State fell within section 2(g) read with Explanation II, and whether the provision was ultra vires; (iii) whether packing expenses, hamali and cartage, and dharmada formed part of sale price and taxable turnover; (iv) whether assessment of sales tax violated Article 286 of the Constitution of India, whether the proviso to section 22(1) was ultra vires, and whether a single Member could hear the reference under section 23(1).
Issue (i): whether sales of goods despatched after the Act came into force, in fulfilment of orders received before its commencement, were sales in the course of execution of a contract so as to attract the proviso to section 4.
Analysis: The proviso protected sales made in the course of execution of a contract entered into before commencement. The expression "contract" was held to bear the meaning assigned in the Act, and not to extend to every agreement to sell. The sales in question were not made pursuant to a contract of the kind contemplated by the proviso, and the hardship rationale underlying the proviso was confined to labour-cum-material contracts rather than ordinary sales of merchandise.
Conclusion: The proviso to section 4 was inapplicable, and the assessee failed on this issue.
Issue (ii): whether sales of goods despatched outside the State fell within section 2(g) read with Explanation II, and whether the provision was ultra vires.
Analysis: Explanation II as originally enacted applied to goods actually within the territory when the contract of sale was made, and such sales were deemed to have taken place within the State notwithstanding the place where the contract was concluded. On the facts found, the assessee accepted orders against stock in the State and despatched goods from the State in fulfilment of those orders. The earlier view upholding the original Explanation was followed. The constitutional challenge did not avail the assessee because the liability related to a period before the Constitution came into force, and the provision was valid under the law then in force.
Conclusion: The sales were within section 2(g) read with Explanation II, and the challenge to the provision failed.
Issue (iii): whether packing expenses, hamali and cartage, and dharmada formed part of sale price and taxable turnover.
Analysis: Packing material, labour, hamali and cartage incurred for delivery up to the point of handing over to the carrier were amounts charged for things done by the dealer in respect of the goods before delivery, and therefore formed part of sale price. Dharmada stood on a different footing, because it was separately recovered as an additional voluntary charge and was not shown to be part of the consideration for the transfer of property in the goods. It was not a charge for anything done by the dealer in respect of the goods before delivery.
Conclusion: Packing expenses, hamali and cartage were includible in sale price, but dharmada was not includible.
Issue (iv): whether assessment of sales tax violated Article 286 of the Constitution of India, whether the proviso to section 22(1) was ultra vires, and whether a single Member could hear the reference under section 23(1).
Analysis: Article 286 did not assist the assessee because the relevant tax liability had accrued and been recovered before the Constitution came into force, and the constitutional provision was not retrospective. The proviso to section 22(1) was upheld because the right of appeal is creature of statute and may be conditioned by the Legislature. As to the reference, the Court held that proceedings under section 23(1) could directly affect the State's revenue, but the challenge failed on the facts because there was no material to show appearance by the Advocate-General or Government Advocate as required for the rule relied upon.
Conclusion: The constitutional and procedural challenges failed.
Final Conclusion: The reference was answered substantially against the assessee, with only dharmada excluded from sale price; the remaining questions were answered in favour of the revenue and the assessee was directed to pay costs.
Ratio Decidendi: A charge is includible in sale price only if it is consideration for the sale or for something done by the dealer in respect of the goods before delivery, whereas a separately recovered voluntary charge not shown to be part of that consideration is not so includible.