TMI Blog1985 (4) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... motor-cars and trucks, such as Ambassador Cars, Tata Mercedes Benz trucks on agency basis in Mangalore used to get them from their manufacturers having their factories at Calcutta and Jamshedpur. Both of them are registered dealers under the Karnataka Sales Tax Act of 1957 and the Central Sales Tax Act of 1956 ("K.S.T. and C.S.T. Acts"). The new cars and trucks are first purchased by the assessees from their manufacturers outside the State, and then they are brought and sold to their customers or purchasers within the State of Karnataka. In the normal circumstances, the freight and insurance charges incurred by the assessees prior to the delivery of the vehicles at their place of business to their purchasers or customers, would form part of the sale price recovered by the assessees from their purchasers and customers. But, evidently with the sole object of avoiding payment of sales tax under the K.S.T. Act, on such freight charges collected an arrangement or an agreement is entered into between the assessees and their individual purchasers or customers providing for charging separately the freight and insurance charges incurred by the assessees on each car or truck to be borne by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erring Bench doubting the view expressed by the Division Bench in Agro (P.) Ltd. case [1974] 34 STC 1 has referred the question to a Full Bench of this Court for opinion. 6.. Sri K. Srinivasan, learned counsel for the assessees urged for answering the question in the negative while Sri S. Rajendra Babu, learned Government Advocate appearing for the Revenue, urged for answering the question in the affirmative. 7.. Before we examine the several rulings, we consider it appropriate to briefly notice the scheme and object of the Act and some of the material provisions which have a bearing on the question referred. The K.S.T. Act has been enacted to levy tax on the sale/purchase of goods in the State of Karnataka. The terms, "sale", turnover ", "total turnover" and "taxable turnover", have been defined in section 2 of the Act as hereunder. Section 2(t) of the Act defines the term "sale" thus: "'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........................................................................... (f) all amounts falling under the head 'freight', when specified and charged for by the dealer separately without including such amounts in the price of the goods sold. ". Rule 9(f) of the Kerala Sales Tax Rules, framed under the Kerala General Sales Tax Act, 1963 corresponding to rule 6(4)(f)(i) of the Rules, which reads as follows: "In determining the taxable turnover, the amount specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of the dealer..... (f) all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the 'price of goods sold';' (i) freight, (ii) charges for packing and delivery." (underlining by us*) 8.. The Central Sales Tax Act of 1956 that regulates the levy of sales tax on inter-State sale defines the term "sale" thus: "'Sale', with its grammatical variations and congate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "The freight to which clause (f) refers is the freight which has been paid by the dealer in the context of a sale which he has agreed to make to the customer. So, the freight paid by the dealer in order to bring the goods from any place to any other place after he has agreed to sell the goods to the customer so that he could deliver these goods to the customer at the point specified by him, is of course deductible under clause (f) of rule 6(4). If the dealer agrees to sell to the customer goods of a particular description and these goods have to be purchased by the dealer from the manufacturer so that there could be an implementation of that agreement to sell, and the customer who agreed to purchase these goods consents to pay the freight which the dealer has to incur for bringing the goods from the place of manufacture to the place where the purchaser wants them to be delivered, there could be very little doubt that the freight incurred by the dealer in that situation falls wholly within clause (f)(i) of rule 6(4)." 11.. This Court had occasion to consider the correctness of this decision in a later case in Agro Private Ltd., v. State of Mysore [1974] 34 STC 1. The facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o extract the facts involved and the observations made by the Supreme Court in Dyer Meakin case [1970] 26 STC 248 (SC) by Sri Shah, Acting C.J.: Dyer Meakin, a company registered under the Kerala (General) Sales Tax Act, as a dealer, transported for sale from its breweries and distillaries in U.P. and Haryana to its place of business in Ernakulam. The assessee-company made out two bills-one for the ex-factory price and the other for "freight and handling charges" separately and claimed deduction of the freight charges under rule 9(f) of the Kerala (General) Sales Tax Rules. That claim was rejected by all the authorities under the Act and the revision filed before the High Court of Kerala was also dismissed. In the further appeal filed by the assessee before the Supreme Court, the Supreme Court held in the context of the provisions of the Kerala Act and after examining rule 9(f) of the Kerala General Sales Tax Rules, 1963 at page 250 of the judgment as follows: Rule 9(f) of the Kerala General Sales Tax Rules, 1963 provides: "In determining the taxable turnover, the amount specified in the following clauses shall, subject to the conditions specified therein, be deducted from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Sons) had claimed deduction of freight and packing and delivery charges in respect of which separate bills were made out when selling the goods at Ernakulam. The Supreme Court held, that the transport charges formed a component of the price for which goods were sold and held that the tax levied was not a tax on railway freight but it is a tax on turnover, that is on the aggregate of sale price received by the dealer in respect of sale of goods. So saying, the Supreme Court dismissed the appeals. From the above discussion, it follows that it was rightly held by the Division Bench in Agro Private Ltd. [1974] 34 STC 1 that the decision rendered earlier by this Court in Webbs case [1969] 24 STC 84 was no longer good law and that it should be deemed to have been impliedly overruled by the two decisions of the Supreme Court in Dyer Meakin Breweries Ltd. [1970] 26 STC 248 (SC) and D.C. Johar Sons [1971] 27 STC 120 (SC) cases. The contention of the assessees before the Division Bench in the S.T.R.P., that if the goods are brought pursuant to an order placed by an individual customer it is liable to be deducted from the total turnover has no substance and has to be rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for the sale of any goods. Here, the concept of real price or actual price retainable by the dealer is irrelevant. The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to ask is as to what is the amount payable by the purchaser to the dealer as consideration for the sale and not as to what is the net consideration retainable by the dealer." The Supreme Court further observed with regard to "freight and handling charges" that: "What the dealer receives as the price for which the goods are sold is inclusive of freight and handling charges incurred by him in transporting the goods and that the said charges included in the price would undoubtedly be a part of the sale price." 17.. In a recent decision of this Court in Premier Breweries v. State of Karnataka [1984] 56 STC 14 the ratio of the above decision was followed, and it was held, that "freight and handling charges " if it becomes part of the price for which the goods are sold, then it is not liable to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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