Freight embedded in invoicing treated as part of sale price and excluded from discount-based turnover deduction.

Freight shown as a nominal deduction in the invoice was held to form part of the sale price where the catalogue price was followed by a freight discount and sales tax was charged on the reduced figure. Although the contract described despatch on a freight-to-pay basis and freight was payable at destination by the purchaser, the invoicing structure showed that the freight component was embedded in the pricing of the goods. It was therefore not an "other discount" deductible from turnover under the Karnataka Sales Tax Act, and the freight amount remained includible in taxable turnover. The assessment including the freight component was sustained.

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Issues: Whether the discount equivalent to freight charges could be treated as an "other discount" deductible from turnover under explanation (iii) to section 2(1)(v) of the Karnataka Sales Tax Act, 1957.

Analysis: The invoice and sale documentation showed that the catalogue price was stated first, thereafter a freight discount was shown, and sales tax was charged on the reduced figure. Although the contract referred to despatch on a "freight to pay" basis and freight was payable at destination by the purchaser, the deduction in the invoice demonstrated that the freight component was built into the sale pricing structure. The freight payment was therefore treated as part of the consideration for the sale rather than as a deductible discount falling outside turnover.

Conclusion: The freight amount formed part of the sale price and was not excludible from taxable turnover. The question was answered against the assessee and in favour of the Revenue.

Final Conclusion: The assessment of turnover including the freight component was sustained, and the petition was dismissed.

Ratio Decidendi: Where the invoicing and sale arrangement show that freight is embedded in the pricing of goods and only reflected as a nominal deduction, the freight component is part of the sale price and cannot be excluded from taxable turnover as a discount.

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