1980 (4) TMI 293 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether railway freight deducted by the assessee in the bill and paid by the purchaser at the destination is part of the sale price exigible to sales tax under the Central Sales Tax Act, 1956, and the M.P. General Sales Tax Act, 1958?

Analysis:
The case involved a paper mill engaged in manufacturing and selling paper, where the assessee claimed that the freight paid by purchasers should not be included in the sale price for sales tax calculation. The Tribunal, relying on precedent, rejected the assessee's contention. The key issue was whether the freight formed part of the sale price as per the relevant tax acts.

The definition of "sale price" under both Acts is similar, encompassing the consideration for goods sold. The Supreme Court clarified in Hindustan Sugar Mills v. State of Rajasthan that in f.o.r. destination contracts, freight is part of the price. However, the court determined that in this case, despite the price being f.o.r. destination, the contract was not for the destination railway station. Risks and demurrage responsibilities indicated delivery completion at the loading station, making the buyer liable for freight as the carrier's principal.

The judgment distinguished the case from Birla Jute Manufacturing Co. Ltd. v. Commissioner of Sales Tax, M.P., which involved a Control Order governing freight inclusion in sale price. As the current case was not under any Control Order, the Birla Jute case was deemed distinguishable. Ultimately, the court held that the freight deducted and paid by the purchaser did not constitute part of the sale price, aligning with prior decisions and the specific contract terms indicating buyer liability for freight.

In conclusion, the court answered the reference question in the negative, stating that the freight deducted by the assessee and paid by the purchaser did not form part of the sale price for sales tax purposes. No costs were awarded in the judgment.