Freight deductible from sale price only when separately charged; inclusive f.o.r. destination pricing keeps freight within taxable turnover.

Freight is excluded from sale price under section 2(h) of the Central Sales Tax Act, 1956 only where the contract separately charges freight and creates a corresponding obligation on the buyer to pay it. Where the bargain is for a lump sum f.o.r. destination price inclusive of freight, later invoice splitting or credit adjustments do not change the contractual character of the price or make freight separately deductible. On the facts discussed, the buyer's payment of freight before delivery was only an adjustment on behalf of the seller, not a separate freight charge.

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Issues: Whether freight charges paid by the buyer could be excluded from the sale price and deducted for the purpose of levy of sales tax under the Central Sales Tax Act, 1956.

Analysis: Under section 2(h) of the Central Sales Tax Act, 1956, freight is excluded from sale price only when it is separately charged; where the contract shows a lump sum f.o.r. destination price inclusive of freight, subsequent splitting up of the invoice amount does not alter the character of the bargain. The decisive test is whether the contract creates a right in the seller to separately charge freight and a corresponding obligation in the buyer to pay it. On the order form and invoices relied upon, the price was inclusive of freight and the buyer merely paid freight on behalf of the seller before taking delivery, with credit given in the invoice. Such adjustment did not amount to a separate contractual charge for freight.

Conclusion: Freight charges could not be deducted from the sale price; the reference was answered in the affirmative, in favour of the department and against the assessee.

Ratio Decidendi: Freight is excluded from sale price under section 2(h) of the Central Sales Tax Act, 1956 only when the contract separately charges freight and creates a corresponding liability in the buyer; where freight forms part of an inclusive contract price, later invoice adjustments do not make it separately chargeable.

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