1978 (8) TMI 186 - SC - VAT and Sales Tax

Whether or not the railway freight on the cement sold by the petitioner under the Cement Control Order 1967 should be deducted from its taxable turnover for purposes of the Rajasthan Sales Tax Act 1954 or it should be treated as the part of the sale price and liable to be taxed under the Act? Held that - Appeal dismissed. 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 State to invoke the inclusive clause and in fact the State has not done so. The exclusion clause is therefore irrelevant and cannot be called in aid by the assessee.

Summary

Issues Involved:
1. Taxability of railway freight under the Rajasthan Sales Tax Act, 1954.
2. Maintainability of the writ petition.
3. Definition and inclusion of "sale price" under the Rajasthan Sales Tax Act, 1954, and the Central Sales Tax Act, 1956.
4. Impact of the Cement Control Order, 1967, on the inclusion of railway freight in the sale price.

Issue-wise Detailed Analysis:

1. Taxability of Railway Freight:
The primary issue was whether the railway freight on cement sold under the Cement Control Order, 1967, should be deducted from the taxable turnover or treated as part of the sale price and taxed under the Rajasthan Sales Tax Act, 1954. The petitioner argued that the railway freight should be deducted from the taxable turnover as it was separately charged to the purchaser. However, the assessing authority and the High Court held that the railway freight formed part of the sale price because the price fixed under the Cement Control Order was "f.o.r. destination," meaning inclusive of freight. The Supreme Court upheld this view, stating that the amount of freight forms part of the sale price within the meaning of the first part of the definition of "sale price" under the Act.

2. Maintainability of the Writ Petition:
The Commissioner of Commercial Taxes raised a preliminary objection to the maintainability of the writ petition, arguing that the petitioner should have exhausted the alternative remedies provided under the Rajasthan Sales Tax Act before approaching the High Court. The High Court agreed, stating that it is not the function of the High Court under Article 226 of the Constitution to determine the question of taxability, which depends on a precise definition of facts. The Supreme Court also emphasized that the petitioner should have availed the statutory remedies of appeal and revision provided under the Act.

3. Definition and Inclusion of "Sale Price":
The definition of "sale price" under Section 2(p) of the Rajasthan Sales Tax Act, 1954, and Section 2(h) of the Central Sales Tax Act, 1956, was crucial in determining whether the railway freight should be included in the taxable turnover. The definition includes any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof, other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged. The Supreme Court held that the railway freight, being part of the "f.o.r. destination" price, forms part of the sale price and is not separately charged, thus it should be included in the taxable turnover.

4. Impact of the Cement Control Order, 1967:
The Cement Control Order, 1967, which controls the price of cement, was central to the issue. According to Clause 8 of the Order, the price of cement was fixed "f.o.r. destination," meaning inclusive of freight. The Supreme Court noted that the Control Order is designed to ensure the availability of cement at a uniform price throughout India, irrespective of the distance from the place of manufacture. The Court held that the provisions of the Control Order override any contractual terms to the contrary, and the freight forms part of the sale price as per the statutory scheme of the Control Order.

Conclusion:
The Supreme Court confirmed the judgment of the Rajasthan High Court and the order of the sales tax authority, dismissing the appeals. The Court held that the amount of freight forms part of the sale price within the meaning of the first part of the definition under the Rajasthan Sales Tax Act, 1954, and the Central Sales Tax Act, 1956. The Court also emphasized the importance of exhausting statutory remedies before approaching the High Court under Article 226 of the Constitution.