Freight forming part of sale price is taxable turnover when delivery completes the sale and transport is contractual

Freight charges incurred by the seller to deliver goods to the buyer's premises formed part of the sale price where title passed only on delivery and transport was a contractual condition of the bargain. Rule 6(c) of the Tamil Nadu General Sales Tax Rules permits deduction of freight only when it is separately specified and excluded from the price, but it must be read consistently with the statutory definitions of "sale" and "turnover." As the freight was incurred before completion of the sale, it was includible in taxable turnover and not deductible under Rule 6(c); the earlier contrary view was not in line with binding Supreme Court authority.

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Issues: Whether freight charges incurred by the seller for delivery of goods at the buyer's premises were deductible from taxable turnover under Rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959, or formed part of the sale price and taxable turnover.

Analysis: The contract showed that title to the goods passed only on delivery at the buyer's destination and that the seller was obliged to incur freight to complete the sale. Rule 6(c) permits deduction of freight only where it is separately specified and does not form part of the price, but that rule must operate consistently with the statutory definitions of "sale" and "turnover" in Sections 2(n) and 2(r) of the Tamil Nadu General Sales Tax Act, 1959. Where the seller must transport the goods to the place of delivery as a condition of the bargain, the freight is incurred before completion of the sale and becomes part of the amount for which the goods are sold. The earlier view treating such freight as excludible was held not to correctly reflect the binding Supreme Court authorities.

Conclusion: The freight charges were rightly included in the taxable turnover and were not deductible under Rule 6(c).

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