Separate freight charges deductible from taxable turnover even when charged on an ad hoc basis

Freight charges separately billed to buyers were deductible from taxable turnover under the relevant turnover rule because the transactions were at ex mine price, delivery was made to the buyers' sites, and the freight element was charged separately from the price of the goods. The deduction was not defeated by the fact that the freight was fixed on an ad hoc basis or did not match the actual freight in each transaction, since the rule turns on separate charging and exclusion from sale price, not exact correspondence with actual cost. The revision order was therefore unsustainable, and the freight deduction was allowed in both matters.

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Issues: (i) whether freight charges separately billed to buyers could be deducted from taxable turnover under rule 6(c)(i); (ii) whether an ad hoc freight charge, not equalling the actual freight in each transaction, affected the entitlement to deduction.

Issue (i): Whether freight charges separately billed to buyers could be deducted from taxable turnover under rule 6(c)(i).

Analysis: The rule permits deduction where freight is charged separately and is not included in the price of the goods sold. The findings recorded showed that the transactions were at ex mine price, that delivery was made to the buyers' sites, and that the freight element was billed and charged separately from the price of the minerals. On those findings, the freight amount did not form part of the sale price for the purpose of taxable turnover.

Conclusion: The assessees were entitled to deduction of the separately charged freight under rule 6(c)(i).

Issue (ii): Whether an ad hoc freight charge, not equalling the actual freight in each transaction, affected the entitlement to deduction.

Analysis: The entitlement under the rule depends on separate charging of freight and its exclusion from the price, not on whether the amount exactly matches the actual freight in every case. Undercharging or overcharging of freight in particular transactions does not alter the character of the amount as a separate freight charge for purposes of deduction.

Conclusion: The use of an ad hoc freight rate did not defeat the deduction.

Final Conclusion: The revision order was unsustainable and the assessees were entitled to the freight deduction in both matters.

Ratio Decidendi: Where freight is separately charged and is not included in the price of goods sold, it is deductible from taxable turnover under the relevant turnover rule, and the deduction is not affected merely because the freight charged is an ad hoc amount or differs from the actual freight.

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