TMI Blog2010 (9) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... t the judgment and order dated November 20, 2001 passed by the High Court of Judicature at Madras in Writ Petition No. 21298 of 2001 and Tax Case No. 980 of 1993. The appellant is a company incorporated under the provisions of the Companies Act. The appellant manufactures electric meters and supplies them to Electricity Boards. The appellant is also a dealer registered under the provisions of the Tamil Nadu General Sales Tax Act, 1959 as well as the Central Sales Tax Act, 1956. The brief facts which are necessary to dispose of these appeals are recapitulated as under: The Deputy Commercial Tax Officer, Group VIII, the assessing officer, Enforcement South passed two separate orders under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as, "the TNGST Act") and Central Sales Tax Act, 1956 (hereinafter referred to as, "the CST Act") on June 30, 1989 holding that the freight and insurance charges were liable to be taxed and the same are to be included in the turnover and thus a sum of Rs. 7,97,864 was sought to be included towards the taxable turnover for the assessment year 1986-87 under the TNGST Act taxable at 10 per cent and a sum of Rs. 8,48,265 relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such ex-factory price, as also the fact that the ex-factory price mentioned was exclusive of sales tax. The clause dealing with sales tax in clause 3(b) further provided that "appropriate sales tax, if any, found leviable in accordance with the provisions of the relevant Sales Tax Act in force will be paid over and above the price of goods accepted in this order". The clause also provided that sales tax and excise duty will be payable only on ex-factory price. The appellant, initially, did not include the freight charges in its taxable turnover. The original assessment was made without taking the freight charges into account for the year 1986-87. There was an inspection on February 27, 1987 in which the inspecting officer had found that the assessee had collected freight charges and insurance charges separately under the debit notes for a total sum of Rs. 16,96,530 but the same had not been shown in the monthly returns. The assessing authority, therefore, determined 50 per cent of that amount of Rs. 16,96,530 as freight charges, after making allowance for the insurance amount and levied tax on that amount of the freight, charged by the assessee forming part of the sale pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to so deliver, the assessee necessarily had to incur freight charges. The transfer of title to the goods as provided in clause 10 read with clause 6 of the agreement was to be at the place of delivery in the premises of the buyer. Though the contract mentioned the price of the electric meters as ex-factory price, the delivery was not at the factory gate. The specification of what the price would be at the factory gate, therefore, does not in the context of the term subject to which the sale was agreed to be effected, render it the point or the location at which the sale can be said to have been completed. Had the sale been completed at the factory gate, the expenses incurred thereafter by way of freight charges would then be capable of being regarded as expenditure which was in the nature of a post-sale expenditure and, if paid by the seller, regarded as an amount paid by such seller on behalf of the buyer. Both the aforementioned cases emphasise the fact that expenses incurred by a seller on freight would be part of the sale price, as until the transfer of title to the goods takes place that being the only way made in which sale could have taken place prior to the introduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods are sold by the seller to the buyer and would fall within the scope of "turnover". The learned counsel for the State of Tamil Nadu submitted that freight and insurance charges are included in the sale price of the goods. Even if freight and insurance charges are shown separately in the bill and added to the price of the goods, the character of payment would remain the same. Since freight and insurance charges represent expenditure incurred by the dealer in making the goods available to the purchaser at the place of sale, they would constitute an addition to the cost of the goods to the dealer and would clearly be a component of the price to the purchaser. The amount of freight and insurance charges would be payable by the purchaser not under any statutory or other liability but as part of the consideration for the sale of the goods and would therefore, form part of the sale price. In order to crystallize the legal position, we would like to refer important English and Indian cases. English cases In Paprika Ltd. v. Board of Trade [1944] 1 All ER 372, the court observed as under: "Whenever a sale attracts purchase tax, that tax presumably affects the price which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adding to the ex-factory price the appropriate amount attributable to freight and other charges. In proceedings for assessment of sales tax for 1963-64 the company claimed under rule 9(f) of the Kerala General Sales Tax Rules, 1963, Rs. 59,188.99 as an admissible deduction in respect of charges for "freight and handling charges" collected from the customers, in the computation of the taxable turnover. The Sales Tax Officer rejected the claim, and the order was confirmed by the Appellate Assistant Commissioner and by the Sales Tax Tribunal. A revision application filed before the High Court of Kerala was summarily dismissed. The company has appealed to this court with special leave. 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 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." The company claims t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise duty is included in the price charged by the dealer or is shown as a separate item in the bill. In either case, it would be part of the 'sale price'. So also, the amount of sales tax payable by a dealer, whether included in the price or added to it as a separate item, as is usually the case, forms part of the 'sale price'. It is payable by the purchaser to the dealer as part of the consideration for the sale of the goods and hence falls within the first part of the definition. . ." This judgment has been followed in a large number of subsequent judgments in other cases by this court. In Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore [1980] 45 STC 197 (SC). [1980] 1 SCC 71 similar question arose for consideration. In this case, while following the case of Hindustan Sugar Mills [1979] 43 STC 13 (SC). [1978] 4 SCC 271 this court came to the clear conclusion that the amount of freight formed part of the sale price within the meaning of the first part of the definition of the term contained in section 2(p) of the Rajasthan Sales Tax Act, 1954. In Cement Marketing Co. of India Ltd. v. Commissioner of Commercial Taxes, Karnataka [1980] 46 STC 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty because it is the respondent who has, by necessary implication, taken on the liability to pay all taxes on the goods sold and has not sought to realise any sum in addition to the price obtained by it from the purchaser. The purchaser was under no obligation to pay any amount in excess of what had already been paid as the price of the scrap." In State of Andhra Pradesh v. A.P. Paper Mills Ltd. [2005] 139 STC 434 (SC). [2005] 1 SCC 719 the short question arose for consideration was whether the transportation charges and agent's commission paid by the respondent M/s. A.P. Paper Mills Ltd. to the agent together with the cost of raw material constitute "turnover" under section 2(s) and is liable to sales tax under section 6A of the Andhra Pradesh General Sales Tax Act, 1957. This court relied on Hindustan Sugar Mills [1979] 43 STC 13 (SC). [1978] 4 SCC 271 and came to the conclusion that the transportation charges and agent's commission would be inclusive in "turnover" under section 2(s) and is liable to sales tax under section 6(a) of the Andhra Pradesh General Sales Tax Act, 1957. When we apply the ratio of the judgments of the English courts and of our courts, the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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