Separated freight charges are deductible from turnover, while royalty cannot be treated as excise duty for tax deduction purposes.

Transport charges separately specified in invoices and kept outside the sale price are deductible from gross turnover in computing net turnover under the sales tax rules. Where the buyer bears freight and the invoice separately shows price and transport charges, the freight component is treated as deductible delivery-related expenditure. Royalty paid to the State Government is not deductible as excise duty unless it legally qualifies as excise duty and is paid to the prescribed recipient; a payment to the State does not satisfy that condition. The result is that freight deduction is available, while the royalty claim fails and assessment must be recomputed on that basis.

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Issues: (i) Whether transport charges separately specified and charged in the invoices were deductible from the gross turnover in computing net turnover under the sales tax rules; (ii) whether royalty paid to the State Government was deductible as excise duty under the relevant rule.

Issue (i): Whether transport charges separately specified and charged in the invoices were deductible from the gross turnover in computing net turnover under the sales tax rules.

Analysis: The rule governing net turnover permitted deduction of freight and similar charges where they were specified and charged separately and were not included in the price of the goods sold. The sale price of the iron ore was separately fixed, the purchaser bore the transport charges, and the invoices separately showed the price and the freight. On those facts, the transport charges were not part of the sale price and fell within the deductible category.

Conclusion: The deduction for transport charges was allowable and this issue was decided in favour of the assessee.

Issue (ii): Whether royalty paid to the State Government was deductible as excise duty under the relevant rule.

Analysis: The deduction provision covered excise duty paid to the Central Government. Royalty is not excise duty in law, and in any event the amount had not been paid to the Central Government. The claim therefore did not satisfy the statutory condition for deduction.

Conclusion: The royalty amount was not deductible and this issue was decided against the assessee.

Final Conclusion: The petition succeeded only to the extent of allowing deduction of freight charges, while the claim for deduction of royalty was rejected, and the matter was sent back for recomputation of tax on that basis.

Ratio Decidendi: Where freight or delivery charges are separately specified and charged without being included in the sale price, they are deductible in computing net turnover; royalty cannot be deducted as excise duty unless it answers that legal character and is paid to the prescribed recipient.

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