Freight and insurance separately invoiced are excluded from sale price, even in for-destination supply arrangements.

Freight and insurance charges separately shown in the invoice are excluded from sale price under the Rajasthan Value Added Tax Act, 2003, and the same construction applies to section 2(h) of the Central Sales Tax Act, 1956. Explanation III to section 2(36) is read to exclude freight and related transportation expenses incurred for or on behalf of the buyer when separately charged. A for-destination delivery arrangement, or the seller bearing transit risk, does not alter this exclusion if the freight component is separately invoiced. The contrary view of the lower authorities was treated as inconsistent with the statutory language and legislative intent.

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Issues: Whether freight and insurance charges, when separately shown in the invoice, form part of the sale price under the Rajasthan Value Added Tax Act, 2003 and the Central Sales Tax Act, 1956, including in a for destination supply.

Analysis: Section 2(36) of the Rajasthan Value Added Tax Act, 2003, read with Section 2(h) of the Central Sales Tax Act, 1956, was construed to mean that the amount payable as consideration for sale does not include freight or delivery charges where such charges are separately shown in the invoice. The Court held that Explanation III to Section 2(36) expressly excludes freight and related transportation expenses incurred for or on behalf of the buyer when separately charged, and that the same interpretation applies to Section 2(h) of the Central Sales Tax Act, 1956. It further held that a for destination delivery arrangement or transit risk on the seller does not override the statutory exclusion when the freight component is separately invoiced. The contrary view taken by the lower authorities was found inconsistent with the plain language and legislative intent of the provisions.

Conclusion: Freight and insurance charges separately reflected in the invoice are not includible in sale price and are allowable deductions; the issue is decided in favour of the assessee and against the revenue.

Ratio Decidendi: Where the statute excludes freight from the definition of sale price and the freight is separately charged in the invoice, such freight does not form part of taxable turnover notwithstanding for destination delivery or seller-borne transit risk.

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