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Issues: Whether freight charges shown separately in the invoice and paid by the buyer could be excluded from the sale price where the transaction was on f.o.r. destination terms.
Analysis: Section 2(h) of the Central Sales Tax Act, 1956 excludes freight or delivery cost only where such cost is separately charged, but the decisive factor is the terms of the contract and who, under those terms, bears the liability for freight and transit risk. If the contract is truly f.o.r. destination, with the seller liable up to delivery at the destination, freight forms part of the consideration and is includible in sale price. If, on the other hand, delivery is complete on loading and the purchaser bears transit risk and freight, the freight does not form part of sale price even if the invoice mentions an f.o.r. price and the purchaser actually pays the freight. The Tribunal's approach was incomplete because the contract terms governing liability for freight were not examined.
Conclusion: The question was answered against the assessee and in favour of the Revenue to the extent that exclusion of freight from turnover could not be sustained without first determining the contractual allocation of freight liability and transit risk.
Ratio Decidendi: For purposes of sale price under Section 2(h) of the Central Sales Tax Act, 1956, the inclusion or exclusion of freight depends on the true contract terms and on whether freight and transit risk are borne by the seller or the purchaser.
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