Separate freight and insurance charges do not form sale price where title passes before physical delivery and transport is post-sale.

Freight and insurance charged separately under a supply contract did not form part of the sale price where the agreement, invoices and delivery records treated them as distinct from the ex-works price. The tribunal noted that unascertained goods were appropriated to the contract only after inspection, testing, acceptance of the test report, packing and sealing, and despatch clearance, so property passed at that stage under the Sale of Goods Act. Transportation was therefore a post-sale delivery obligation, not part of the sale consideration, and sales tax could not be levied on the separately shown freight and insurance charges.

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Issues: (i) Whether freight and insurance charges formed part of the sale price under section 2(31) of the West Bengal Sales Tax Act, 1994; (ii) when property in the goods passed under section 23 of the Sale of Goods Act, 1930; and (iii) whether the transportation charges were payable as part of the sale consideration or merely for post-sale physical delivery.

Issue (i): Whether freight and insurance charges formed part of the sale price under section 2(31) of the West Bengal Sales Tax Act, 1994.

Analysis: The agreement, tender documents, price schedules, invoices and delivery records showed that ex-works price and freight and insurance were treated as separate heads from the outset. The freight amount was quoted separately, shown separately in the supply order and bills, and the stores receipts reflected only the ex-works price as the price of the goods. The statutory definition of sale price excluded separately charged freight or delivery cost, and the overall contractual scheme did not indicate that freight was embedded in the consideration for sale.

Conclusion: Freight and insurance charges were not part of the sale price and were not taxable as such.

Issue (ii): When property in the goods passed under section 23 of the Sale of Goods Act, 1930.

Analysis: The goods were unascertained at the time of contract, and the contractual procedure required inspection, testing, acceptance of test reports, packing and sealing by the buyer's officers, followed by despatch clearance. These steps amounted to ascertained and unconditional appropriation to the contract with the buyer's assent. The clause allowing post-delivery reinspection was treated as an extra precaution and not as a condition postponing transfer of title. The contractual stipulation distinguishing delivery from physical delivery also supported the conclusion that title passed before actual transport to destination stores.

Conclusion: Property in the goods passed when the test report was accepted, the goods were packed and sealed, and despatch clearance was issued.

Issue (iii): Whether the transportation charges were payable as part of the sale consideration or merely for post-sale physical delivery.

Analysis: The contract contemplated physical despatch after the sale had already been completed, and freight was payable at an agreed rate for that separate delivery obligation. The seller undertook transit insurance and freight-paid despatch because the goods had already been appropriated to the contract and title had passed to the buyer. The transportation element was therefore a separate contractual obligation for moving the sold goods to destination stores, not a component of the price of sale.

Conclusion: Transportation charges were payable for post-sale physical delivery and not as part of the sale consideration.

Final Conclusion: The assessment, appellate and revisional orders could not be sustained to the extent they levied sales tax on freight and insurance charges, because those charges were separately stipulated and did not form part of the taxable sale price.

Ratio Decidendi: Where the contract and surrounding documents show that title passes before physical delivery and freight or insurance is separately charged for post-sale transport, such freight or insurance does not form part of the sale price for sales tax purposes.

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