Freight and insurance held part of sale price, taxable turnover when seller must deliver goods to buyer's destination

SC held that freight and insurance charges incurred by the selling dealer were includible in the "sale price" and therefore formed part of the "turnover" for sales tax purposes. On the contractual terms, property in the goods passed only upon delivery at the buyer's destination, and the seller was under an obligation to transport the goods to that place. Consequently, freight and insurance were expenditure incurred in making the goods available at the place of sale and constituted part of the consideration payable by the purchaser. SC upheld the HC and Tribunal, affirming the taxability of such freight and insurance components.

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Issues: Whether freight and insurance charges incurred by the dealer are includable in the taxable turnover / form part of the sale price for the purposes of sales tax under the Tamil Nadu General Sales Tax Act, 1959 and the Central Sales Tax Act, 1956.

Analysis: The question turns on the definitions of "turnover" and "sale" and the contractual terms governing transfer of property. "Turnover" contemplates the aggregate amount for which goods are sold; "sale" contemplates transfer of property in goods. Where the contract provides that title transfers at the buyer's premises and the seller is obliged to transport the goods there, expenditure incurred by the seller for freight and insurance to effect delivery becomes part of the amount for which the goods are sold. Rule 6(c) (and analogous provisions) permitting deduction for separately charged freight must be read in context of the statutory definitions and established precedents. English and Indian authorities (including Hindustan Sugar Mills Ltd., Dyer Meakin, and subsequent decisions) treat freight and similar charges as components of the sale price when incurred by the seller to make the goods available at the place of sale; specification of an ex-factory price in the contract does not change the point of sale if the contract requires delivery at the buyer's premises.

Conclusion: Freight and insurance charges incurred by the dealer in delivering goods to the place where property transfers are includable in the taxable turnover and form part of the sale price; conclusion is in favour of the Revenue.

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