Case: INDIA METERS LIMITED Vs. STATE OF TAMIL NADU

the excise duty to the purchaser. Ordinarily it is not shown as a separate item in the bill, but it is included in the price charged by him. The sale price in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even so, it would be part of the sale price because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability, statutory or otherwise, under which the purchases would be liable to pay the amount of excise duty to the dealer. And, on this reasoning, it would make no difference whether the amount of excise 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. 33. This judgment has been followed in a large number of subsequent judgments in other cases by this Court. 34. In Cement Marketing Co. of India Ltd. Vs. Assistant Commissioner of Sales Tax, Indore and Others, similar question arose for consideration. In this case, while following the case of Hindustan Sugar Mills (supra) 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. 35. In Cement Marketing Co. of India Ltd. v. Commissioner of Commercial Taxes, Karnataka 1980 (Supp) SCC 373 this Court observed as under: This question is no longer res integra and it stands concluded by a recent decision given by this Court in Hindusthan Sugar Mills Vs. State of Rajasthan and Others, . It has been held by this Court in that case that by reason of the provisions of the Cement Control Order which governed the transactions of sale of cement entered into by the assessee with the purchasers, the amount of freight formed part of the sale price within the meaning of the first part of the definition of that term in Section 2(h) of the Central Sales Tax Act, 1956 and was includible in the turnover of the assessee. This decision completely covers the present case and hence we must hold that the High Court was right in taking the view that the amount of freight formed part of the sale price and was rightly included in the taxable turnover of the appellant. 36. In TVL. Ramco Cement Distribution Co. Pvt. Ltd., Tamil Nadu Vs. State of Tamil Nadu, this Court while following the ratio in the case of Hindustan Sugar Mills (supra) observed as under: (i) that the freight charges should be included in arriving at the taxable turnover for purposes of Central Sales Tax and Tamil Nadu Sales Tax; and (ii) that packing charges and excise duty thereon should also be included in arriving at the taxable turnover for purposes of both Central Sales Tax and Tamil Nadu Sales Tax. 37. In Bihar State Electricity Board and another Vs. M/s. Usha Martin Industries and another, this Court relied on the judgment of this Court in the case of Hindustan Sugar Mills (supra) and reiterated legal position that sale price would be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of goods. 38. In the case of M/s. Black Diamond Beverages and another Vs. Commercial Tax Officer, Central Section Assessment Wing, Calcutta and others, this Court observed that freight and handling charges would be included in the sale price. 39. In Commissioner of Central Excise, Delhi Vs. Maruti Udyog Ltd., this Court observed as under: ...The sale price realized by the respondent has to be regarded as the entire price inclusive of excise 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 realize 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. 40. In State of Andhra Pradesh Vs. A.P. Paper Mills Ltd., the short question arose for consideration was whether the transportation charges and agents commission paid by the respondent - M/s. A.P. Paper Mills Ltd. to the agent together with the cost of raw material constitute turnover u/s 2(s) and is liable to sales tax u/s 6A of the Andhra Pradesh General Sales Tax Act, 1957. This Court relied on Hindustan Sugar Mills (supra) and came to the conclusion that the transportation charges and agents commission would be inclusive in turnover u/s 2(s) and is liable to Sales Tax u/s 6(a) of the Andhra Pradesh General Sales Tax Act, 1957. 41. When we apply the ratio of the judgments of the English Courts and of our Courts, the conclusion becomes obvious that the amount of freight and insurance charges incurred by the dealer forms part of the sale price.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. In the instant case, the obligation to pay the freight was clearly on the appellant as there was no sale at all, unless the goods were delivered at the premises of the buyer and in order to so deliver, the assessee necessarily had to incur freight charges.15. 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.16. 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 introduction of Clause 29A of Article 366 of the Constitution.18. It is no doubt true that Rule 6(c) of the Rules permits deduction of the cost on freight while determining the taxable turnover. However, that provision must be read in the context of definition of turnover as also the definition of sale in Sections 2(r) and 2(n) respectively of the Act. Turnover is defined in the Act, inter alia, to mean the aggregate amount for which goods are bought or sold or delivered or supplied or otherwise disposed of in any of the ways referred to in Clause (n).20. When the transfer of the property or the goods is to be at the place of the buyer to which the seller is under an obligation to transport the goods, the expenditure incurred by the seller on freight in order to carry the goods from his place of manufacture to the place at which he is required under the contract to deliver, would thus become part of the amount for which the goods are sold by the seller to the buyer and would fall within the scope of turnover.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.26. According to the facts of this case, Dyer Meakin Breweries Ltd. is registered as a dealer in Indian made foreign liquor under the Kerala General Sales Tax Act, 1963. The company has a place of business at Ernakulam, Kerala. The liquor sold by the company is manufactured or produced in distilleries or breweries at different places in the State of U.P. and Haryana. Liquor is transported for sale by the company from its breweries and distilleries to its place of business at Ernakulam. It is the practice of the company to maintain a uniform ex-factory price in respect of each brand of liquor sold at different centers after adding to the ex-factory price the appropriate amount attributable to freight and other charges.31. This Court had an occasion to deal with identical issues in the case of Hindustan Sugar Mills (supra). P.N. Bhagwati, J. (as His Lordship then was), clearly held that by reason of the provisions of the Control Order which governed the transactions of sale of cement entered into by the assessee with the purchasers in both the appeals before us, the amount of freight formed part of the sale price.32. In this judgment, the court comprehensively explained the entire principle of law by giving an example in para 8 of the judgment which reads as under:8. Take for example, excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him, he always passes on the excise duty to the purchaser. Ordinarily it is not shown as a separate item in the bill, but it is included in the price charged by him. The sale price in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even so, it would be part of the sale price because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability, statutory or otherwise, under which the purchases would be liable to pay the amount of excise duty to the dealer. And, on this reasoning, it would make no difference whether the amount of excise 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.33. This judgment has been followed in a large number of subsequent judgments in other cases by this Court.37. In Bihar State Electricity Board and another Vs. M/s. Usha Martin Industries and another, this Court relied on the judgment of this Court in the case of Hindustan Sugar Mills (supra) and reiterated legal position that sale price would be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of goods.40. In State of Andhra Pradesh Vs. A.P. Paper Mills Ltd., the short question arose for consideration was whether the transportation charges and agents commission paid by the respondent - M/s. A.P. Paper Mills Ltd. to the agent together with the cost of raw material constitute turnover u/s 2(s) and is liable to sales tax u/s 6A of the Andhra Pradesh General Sales Tax Act, 1957. This Court relied on Hindustan Sugar Mills (supra) and came to the conclusion that the transportation charges and agents commission would be inclusive in turnover u/s 2(s) and is liable to Sales Tax u/s 6(a) of the Andhra Pradesh General Sales Tax Act, 1957.41. When we apply the ratio of the judgments of the English Courts and of our Courts, the conclusion becomes obvious that the amount of freight and insurance charges incurred by the dealer forms part of the sale price.