TaxTMI 
TaxTMI 
1992 (10) TMI 228
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....and 4044 of 1982 and Nos. 315 to 319 of 1983 and appellants in C.A. Nos. 5306 to 5336 of 1985 and 280 and 281 of 1989. K. Ram Kumar, Advocate, for the appellants in C.A. Nos. 2684 to 2690 of 1982 and respondents in C.A. Nos. 5306 to 5336 of 1985. G.L. Sanghi and M.L. Verma, Senior Advocates (S.K. Verma, Manoj Prasad, Ms. Minoti Mukherji and A.K. Srivatsava, Advocates with him), for the appellants in C.A. Nos. 315 to 319 of 1983 and respondents in C.A. Nos. 280 and 281 of 1989. -------------------------------------------------- The judgment of the Court was delivered by S. RANGANATHAN, J.-By its judgment dated December 23, 1981, reported as Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu [1982] 51 STC 171, the Madras High Court disposed of a batch of 48-sales tax revision cases arising out of the assessments, to local sales tax (TNST) as well as Central sales tax (CST) of Ramco Cement Distribution Co. P. Ltd. (16 cases), Madras Cements Ltd. (8 cases), Dalmia Cement (Bharat) Ltd. (21 cases) and India Cements Ltd. (3 cases). The questions at issue were answered partly in favour of the Revenue and partly in favour of the assessees. C.A. No....
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....ing charges being the cost of the packing materials used by the dealer in packing cement for being delivered to his customers could be properly excluded from his total turnover for the assessment of sales tax. (iii) Whether, the excise duty paid on packing materials used by a dealer for packing cement to be sold to his customers can be excluded in his total turnover. These questions were answered by the High Court as follows: "In tax revision cases arising under the Central Sales Tax Act, we hold that the freight, packing charges and excise duty on packing materials have to be included in the sale price for the computation of sales tax. In cases arising under the Tamil Nadu General Sales Tax Act and the Tamil Nadu Additional Sales Tax Act, we hold that freight, packing charges and excise duty on packing materials are not liable to be included in the sale price for the computation of the sales tax. The assessees are not liable to pay additional sales tax on freight, packing charges and excise duty on packing materials in those cases arising under the Tamil Nadu Additional Sales Tax Act." The High Court certified the case to be one fit for appeal to the Supreme Court and hence ....
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....tos Cement Products case [1969] 24 STC 487. It was then urged that, in fact, the assessees had entered into contracts with the purchasers which clearly stipulated that the freight will be payable by the latter. The following terms and conditions of sale were cited before us as an instance of the type of contracts entered into by the assessees: "Condition 2: Once the consignment is handed over to the carriers and a receipt is obtained, the responsibility of the company ceases. The company does not accept any liability for any delay, shortage, damage or loss of goods in transit. Claims should be lodged with the carriers by buyers directly. Condition 3: The consignees shall arrange to take delivery against indemnity bond, should the railway receipt or bill of lading not reach them in time. The company is not liable in any manner whatsoever and is also not responsible for any demurrage or damages that may accrue due to non- receipt or late receipt of railway receipt or bill of lading by the consignees. Condition 4: Prices shall be charged as ruling on the date of despatch of the goods and the company shall not be responsible for any variation in prices. The price of the cement suppl....
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....roducer opted to sell his cement at price lower than the control price and allow credit to the purchaser where the purchaser agreed to pay the freight, the sale price can only be the smaller amount by deducting the freight charges from the gross amount of the bill. The second argument, based on the terms of the contract between the parties, was also addressed in the Hindustan Sugar Mills case [1979] 43 STC 13 (SC). There also clauses 5, 8 and 11 of the general terms and conditions of supply were strongly relied upon on behalf of the assessee. Under those terms and conditions, it was specifically mentioned that although the price of cement was on the basis of f.o.r. destination railway station, consignments would nevertheless be despatched "freight to pay" and credit afforded in the bill for the amount of freight payable and that the purchaser should accordingly arrange to pay railway freight or road transport charges at the destination at the time of taking delivery. This Court, after referring to the above contentions, pointed out that, if the terms and conditions of the contract had stood alone, the assessee might have been entitled to succeed in excluding the freight charges on ....
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....were despatched by Dalmia Cements to Karaikal. It is interesting to see that this invoice mentions f.o.r. cement price as the controlled price stipulated in the Cement Control Order, and this is also what is contemplated by condition 4 set out earlier. To this is added a Central excise duty. Thereafter, the assessee purports to give credit for railway freight and a net price, which is described as net price "f.o.r." works siding is worked out, to which are added Central sales tax, packing charges, sales tax on packing charges (if any) and a deposit to cover any levy of sales tax on freight. In our opinion, if, as stated by the assessee, all that it did was to sell the cement at net price f.o.r. with a liability on the purchasers to bear the railway freight, the invoice need not have contained all the details which it purports to contain including all the above calculations starting with the f.o.r. price at the controlled rate. In such an event all that the assessee need have done was to invoice the purchasers at the net price f.o.r. works siding and despatch the goods under "freight to pay ". It is also interesting to see that the invoice specifically includes a deposit to "cover ....
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....aler shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed." The Tamil Nadu General Sales Tax Rules, 1959, have prescribed rules for the determination of the taxable turnover. Rule 6 reads thus: "Rule 6-The tax or taxes under section 3, 4 or 5 shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer- (a) all amounts for which goods specified in the Third Schedule to the Act are sold; (b) all amounts for which goods exempted by a notification under section 17 are sold or purchased, as the case may be, provided that the terms and conditions, if any, for the exemption in the notification are complied with; (c) all amounts falling under the following three heads when specified and charged for by the dealer separately, without including them in the price of the goods sold- (i) freight; (ii) (omitted); (iii) charges for delivery; (cc) all amounts falling under the head charges for packing, that is to say, cost of packing ....
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....ailway freight from the amount of price of the goods sold as stated in the bill on the strength of rule 5(1)(g) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, which is in precisely the same terms as rule 6, which is now being, considered by us. The claim was negatived by this Court. It observed: "The appellant claimed exemption on a sum of Rs. 3,88,377-13-3 on the ground that it represented the freight in respect of the goods sold by the appellant, asserting that they had been charged for separately. The assessing officer rejected the claim and this rejection was upheld by the departmental authorities and by the High Court in revision. It would be seen that in order to claim the benefit of this exemption the freight should (i) have been specified and charged for by the dealer separately, and (ii) the same should not have been included in the price of the goods sold. The learned Judges of the High Court held that neither of these conditions was satisfied by the bills produced by the appellant. We consider, the decision of the High Court on this point was correct. In the specimen bill which the learned counsel for the appellants has placed before us, after....
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....ately and expenditure incurred for freight and packing and delivery charges prior to the sale and for transporting the goods from the factories to the warehouse of the company is not admissible under rule 9(f). Rule 9(f) seeks to exclude only those charges which are incurred by the dealer either expressly or by necessary implication for and on behalf of the purchaser after the sale when the dealer undertakes to transport the goods and to deliver the same or where the expenditure is incurred as an incident of sale. It is not intended to exclude from the taxable turnover any component of the price, expenditure incurred by the dealer which he had to incur before sale and to make the goods available to the intending customer at the place of sale." In Johar & Sons (P) Ltd. v. Sales Tax Officer [1971] 27 STC 120 (SC) the same question arose, again in the context of the Kerala General Sales Tax Rules, 1963. The court followed the decision in Dyer Meakin Breweries Ltd. case [1970] 26 STC 248 (SC). It was pointed out that the decision in Tungabhadra Industries Ltd. [1960] 11 STC 827 (SC) had rested on the facts of the case without going into the interpretation of the relevant rule of the ....