Freight charges in ex-refinery supply contracts may exclude siding and shunting expenses integral to transport movement.

Siding and shunting charges incurred for movement of railway tankers under an ex-refinery supply contract were treated as part of freight, not as presale expenditure forming part of the sale price. The contract required delivery ex-refinery, the dispatch expenses were incurred for and on behalf of the purchasers, and the sale price was fixed under the Administrative Pricing Mechanism and shown separately in the invoice. In commercial parlance, freight includes expenses necessarily incurred in transporting goods, including incidental charges integral to movement. On that basis, the charges were excludable from the sale price and were wrongly included by the revisional and appellate authorities.

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Issues: Whether siding and shunting charges incurred for movement of railway tankers in execution of an ex-refinery supply contract formed part of the freight charges and were therefore excludable from the sale price, or whether they were includable in the sale price as presale expenditure.

Analysis: The contract required delivery ex-refinery and the dispatch expenses were incurred for and on behalf of the purchasers. The sale price was fixed under the Administrative Pricing Mechanism and separately shown in the invoice. The expenditure on siding and shunting was directly connected with placing empty tankers for loading and facilitating movement of goods to the destination. In commercial parlance, freight covers expenses necessarily incurred in transporting goods, including incidental charges integral to movement. On that basis, the charges were treated as part of freight and not as an element of sale price.

Conclusion: The siding and shunting charges did not form part of the sale price and were wrongly included by the revisional and appellate authorities; the issue is answered in favour of the assessee and against the revenue.

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