Freight separately charged can be excluded from turnover, while scrap sales and last-purchase tax on hides remain taxable.

Freight separately charged and payable by the buyer is excludible from taxable turnover when it is not part of the sale price. Receipts from sale of scrap and discarded articles used in the business are includible in turnover because such sales are incidental to the dealer's business activity. Liability for tax on the last purchase of raw hides and skins remains attached at the statutory point of last purchase, and later tanning and sale of tanned hides and skins does not displace that levy. The matter resulted in partial relief only on the freight issue.

---

---

Issues: (i) Whether freight charged separately could be excluded from the taxable turnover. (ii) Whether receipts from sale of scrap and discarded articles formed part of the assessee's business turnover. (iii) Whether tax on the last purchase of raw hides and skins could be displaced by subsequent tanning and sale of tanned hides and skins.

Issue (i): Whether freight charged separately could be excluded from the taxable turnover.

Analysis: Rule 6(c)(i) of the Tamil Nadu General Sales Tax Rules, 1959 permitted exclusion of freight when it was specified and charged separately without being included in the price of the goods sold. On the facts, the contract terms and invoices showed that freight was payable by the buyer and was not part of the price received by the seller. The reasoning was applied by following the principle that where the buyer undertakes to bear railway freight and the seller receives only the invoice amount less freight, freight does not form part of the sale price for turnover purposes.

Conclusion: The freight amount was not includible in the taxable turnover and the issue was decided in favour of the assessee.

Issue (ii): Whether receipts from sale of scrap and discarded articles formed part of the assessee's business turnover.

Analysis: The definition of business under Section 2(d)(ii) of the Tamil Nadu General Sales Tax Act, 1959 includes transactions connected with, incidental to, or ancillary to the trade or manufacture carried on by the dealer. The goods sold as scrap and discarded articles consisted of items used in the assessee's business and which had become useless for that business. Their sale was therefore connected with the business activity and constituted a transaction forming part of the assessee's turnover.

Conclusion: The sale proceeds of scrap and discarded articles were includible in turnover and the issue was decided against the assessee.

Issue (iii): Whether tax on the last purchase of raw hides and skins could be displaced by subsequent tanning and sale of tanned hides and skins.

Analysis: Liability under item 7(a) of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959 attached at the point of last purchase of raw hides and skins. The later conversion of raw hides and skins into tanned hides and skins did not create any statutory basis for shifting or substituting that tax liability. The court distinguished the line of authority dealing with local sales of tanned hides and skins and held that the last-purchase levy remained unaffected by subsequent processing.

Conclusion: The tax on the last purchase of raw hides and skins remained payable and the issue was decided against the assessee.

Final Conclusion: The revision succeeded only on the freight question and failed on the issues relating to scrap sales and purchase tax on hides and skins, resulting in a mixed outcome with each side bearing its own costs.

Ratio Decidendi: Freight separately charged and payable by the buyer is excludible from turnover when it is not part of the price of the goods sold, but scrap arising from business operations and last-purchase liability under the sales tax schedule remain taxable according to their statutory character and point of levy.

---