TMI Blog2005 (1) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale from Kanpur Dump and Sitapur Dump, freight charges were charged separately from the customers alleged to be relating to the transportation of goods from the Dump to the customers destination to provide extra facility. During the year under consideration, in the case of sale from Kanpur Dump, a sum of ₹ 12,73,238/- and in respect of sales from Sitapur Dump, a sum of ₹ 43,60,304/- were charged towards freight charges. It appears that in original proceedings freight charged from the customers in respect of sale made from Kanpur Dump and Sitapur Dump have not been considered, therefore, a proceeding under Section 21 was initiated. Assessing Authority held that the aforesaid amount of freight at ₹ 56,33,542/- would be part of the turnover in view of Cement Control Order, inasmuch as, supply was FOR customer destination and levied tax on the said amount. First appeal filed by the dealer was rejected. Dealer filed second appeal before the Tribunal which was allowed vide impugned order. 3. Heard Counsel for the parties. 4. First Appellate Authority observed that the Cement Control Order was applicable to the levy and non-levy of Cement up to February, 1982 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er held that under the Cement Regulation Account, freight charges were reimbursed was apart from the place of manufacturing to a particular destination, freight relating to the movement of goods from Dump to the customers destination was also to be born by the present dealer and even that freight would be charged at its own desire, but the rate fixed by the State Government vide letter No. 2303/29-8-68/Cement/70 dated 27.3.1980 which is reproduced in the order by which, rate per Km. was fixed. It is further observed that by Clause-10 of the Cement Control Order, whole sale and retail rate was to be fixed by the Government, keeping in view cost of cement, handling charges and Godown charges, Stockiest profit, local tax approved road transportation charges, rate of which, was fixed time to time and since there is a provision of reimbursement of freight from Cement Regulation Account, hence, freight charged for movement of goods from Dump to the purchaser account, would be a part of the turnover. Tribunal held that the sale from Kanpur Dump and Sitapur Dump was the sale by Stockiest and not by the manufacturer. Tribunal further observed that up to movement of cement from Factory to Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reight was born by the dealer and there is no dispute in this regard. According to him, under the Control Order, dealer was entitled for reimbursement of freight amount only from factory to Depot. He submitted that the sale was made at the Depot itself and for further movement of cement from Depot to the customer place extra services for transportation of the good were provided and freight charges were charged from customers towards transportation charges separately in the bill and therefore, the said amount is out of purview of the Cement Control Order and in view of the explanation to Section 2 (i), since freight being charged separately, would not be a part of the turnover and the Tribunal has rightly held that the freight charged from the customers separately for transportation of cement from Kanpur and Sitapur Dumps, could not be part of the turnover. 8. Having heard learned Counsel for the parties. I have perused the order of Tribunal and the authorities below 9. Before dealing with the facts of the present case, it would be necessary to examine the decision of Apex Court in the case of Hindustan Sugar Mills v. State of Rajasthan (supra), in which, Cement Control Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price (including the cost of transport by the cheapest mode except where any other mode of transport has been specified by the Central Government under Clause (4) at the destination point. Clause (9) and (11) provided for the creation of a Cement Regulation Account in the following terms. (9) Payment to Cement Regulation Account; Every producer shall, in respect of such transaction by way of sale of cement effected by him, pay within one month of the close of the month in which sales take place, to the Controller, an amount equivalence to the amount, if any, by which the free on rail destination price of such cement realised by him exceeds the aggregate of the following amounts namely:- (i) the ex-factory price of such cement calculated in accordance with the rates specified in the Schedule; (ii) a selling agency commission calculated at the rate of ₹ 3.00 per tone; (iii) the excise duty paid thereon; and (iv) in the case of packed cement, the charges fixed by the Central Government in respect of the packing or the containers under the first proviso to Clause 8: Provided that the expenditure incurred by the producer on freight by the cheapest mode of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation from the manufacturing site. Clause 9 and 11 of the Control Order provided a machinery by which the producer could be ensured the retention price specified in the Schedule alongwith selling agency commission at the rate of ₹ 3.00 per metric tone, packing charges and excise duty. This respite was achieved by providing that the producer should hand over to the Controller the excess of the free on rail destination railway station , price including packing charges and excise duty realised by him over the retention price, selling agency commission, packing charges and excise duty and he should then be reimbursed the amount of expenditure actually incurred by him on freight by the cheapest mode of transport. This would leave with the producer the retention price together with the selling agency commission, packing charges and excise duty and also reimburse him the actual freight paid by him. 10. Apex Court further held as follows:- 12- Now in the light of this discussion, let us turn to examine the facts of the present appeals. The Control Order here becomes very material. It is a statutory order having binding force and effect and it must govern the transactions or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the responsibility of the purchaser. This could be the position apart from the provisions of the Control Order and on this position, there can be doubt, for reasons already discussed, that the amount of freight would not form part of the 'sale price.' But we have to consider the impact of the provisions of the Control Order, for these provisions having statutory force and authority have overriding effect and the terms and conditions of the contract to the extent to which they conflict with these provisions must be held to be excluded. Let us, therefore, examine the impact of the relevant provisions of the Control Order on the terms and conditions of the contract. 13- It is clear from the scheme of the Control Order that the price chargeable by a producer is contemplated to be ₹ 214.65 per metric tone F. O. R. destination railway station. This of course is the maximum price at which a producer may sell cement and theoretically, of course, there is nothing to prevent him from selling it at a lower price, but it is assumed by the Central Government that in a seller's market where there is scarcity of supply, the producer will sell at the maximum price permitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause, as between him and the purchaser, he is liable to pay the freight and he then recovers it as part of the price of the obligation on behalf of the purchaser and then recovers it by way of reimbursement. 14- We are of the views that the former, and not the latter, represents the correct legal position. If the obligation to pay the freight were on the purchaser and in fact the purchaser paid the freight, as happened in both the cases before us, in respect of every transaction of sale of cement, the amount of freight would obviously be deducted from the F. O. R. destination railway station price in the invoice and only the balance e would be realised by the assessee. There would be no question of the assessee realising the amount of freight from the purchaser because the purchaser would have paid the freight in discharge of his own liability and the assessee would have no claim to recover it from the purchaser. Then how would the terms of Clause (9), proviso to that clause and Clause (11) of the Control Order he satisfied ? How would if be possible effect to Clause (g) if what is realised by the assessee is not the F. O.R. destination railway station price but that price les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, other than the cost of freight or delivery of the cost of installation in case where such cost is separately charged . This exclusion clause does not operate as an exception to the first part of the definition. It merely enacts an exclusion out of the inclusive clause and takes out something which would otherwise be within the inclusive clause. Obviously, therefore, this exclusion clause can be availed of by the assessee only if the Slate seeks to rely on the inclusive clause for the purpose of bringing a particular amount within the definition of 'sale price'. But if the State is able to show that the particular amount falls within the first of the definition and, is therefore, part of the 'sale price' the exclusion clause cannot avail the assessee to take the amount in question out of the definition of 'sale price'. Here on the view taken by us, the amount of freight forms part of the 'sale price' within the meaning of the first part of the definition and it is not necessary for the Stale to invoke the inclusive clause and in fact the State has not done so. The exclusion is, therefore, irrelevant and cannot be called in aid by the assessee. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freight to the railway authorities. The proviso to Clause (9) makes this doubly clear by providing that the expenditure incurred by the producer on freight...shall be reimbursed to the producer and again Clause (11) uses the expression paying or equalizing the expenditure incurred by the producer, on freight. It is, therefore, clear that under the scheme of the Control Order the freight is paid by the producer and he then recovers it from the purchaser. But that does not conclude the controversy. The question still remains: when the producer pays the freight, does he do so because, as between him and the purchaser, he is liable to pay the freight and he then recovers it as part of the price of the obligation on behalf of the purchaser and then recovers it by way of reimbursement. 12. If the obligation to pay the freight were on the purchaser and in fact the purchaser paid the freight, as happened in both the cases before us, in respect of every transaction of sale of cement, the amount of freight would obviously be deducted from the F. O. R. destination railway station price in the invoice and only the balance would be realised by the assessee. There would be no question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of the turnover in view of Explanation of Section 2 (i) 15. Prime facie there appears to be some substance in the argument of learned Counsel for the dealer, but before coming to the conclusion that F. O. R. railway destination does not mean customer destination under the Cement Control Order. It would be relevant to have a fact that while claiming reimbursement of freight amount from the Cement Regulations Fund, figure of average freight amount whether includes freight up to the Dump or up to the customer destination, if average freight submitted to the Cement Controller for reimbursement of freight from regulations account includes freight up to the customer destination then in my opinion, alleged amount charged for transportation of the goods from Kanpur and Sitapur Dumps to the customer destination would also be a part of the turnover, but if the reimbursement was made from the Cement Regulations Fund, only of freight from Factory to Dump and not for the subsequent transportation of the goods to the customer then freight charged for further transportation of the goods from Kanpur Dump to customer destination, would not be a part of the turnover. First Appellate Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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