Case: Tvl. Ramco Cement Distribution Company Private Limited v. State of Tamil Nadu Vs. Messrs Dalmia Cement (Bharat) Limited

By its judgment dated December 23, 1981, reported as Ramco Cement Distribution Co. (P.) Ltd. State of T.N1. the Madras High Court disposed of a batch of 48 sales tax revision cases arising out of the assessments, to local Sales Tax (T. N. S. T) as well as Central Sales Tax (C.S.T.), of Ramco Cement Distribution Co. (P.) Ltd. (16 cases), Madras Cement Ltd. (8 cases), Dalmia Cement Bharat Ltd. (21 cases) and India Ltd. (3 cases). The question at issue were answered partly in favour of Revenue and partly in favour of the assesses. C.A. Nos. 5306-5336 of 1985 preferred by the State of Tamil Nadu arise oft of 31 of these cases: 9 relating Ramco Cements, 16 relating to Dalmia Cements and 6 cases relating to Madras Cements. C.A. Nos. 2684 to 2690 of 1982 are appeals by Ramco Cements and C.A. Nos. 4043-4044 of 1982 by Madras Cements from the same judgment. C.A. Nos. 315-319 of 1983 arise out of the other 5 cases relating to Dalmia cements. C.A. Nos. 280-281 of 1989 arise out of judgment of the High Court dated January 17, 1985 which dismissed two revision tax cases pertaining to Dalmia Cements. One of the questions involved in these cases was decided in favour of the assesses by following the decision in Ramco Cement Distribution Co. (P.) Ltd. v. State of T.N ( 1982 (51) STC 171 (Mad)) . As the questions involved are common, all these appeals are being disposed of by a common judgment. In doing so, we shall refer to the facts in the appeals pertaining to Ramco Cement. It is common ground that the facts in other cases are similar and that the decision reached in the case of Ramco Cement will govern the other appeals asRamco Cement Distribution Co. Pvt. Ltd., (hereinafter referred to as the assessee) are the selling agents of M/s. Madras Cements Ltd., Rajapalayam. For the assessment year 1969-70, they were assessed to sales tax on a taxable turnover of Rs. 2, 37, 66, 245 which included an amount of Rs. 29, 71, 527, representing freight charges. The assessee claimed exclusion of freight charges in computing the taxable turnover on the ground that freight had been independently charged in the invoices. It relied on the decision of the Supreme Court in the case of Hyderabad Asbestos Cement Products Ltd. v. State of A. P ( 1969 (24) STC 487 (SC). This contention was rejected by the assessing authority, the appellate authority as well as the Tribunal. Aggrieved by the above orders the assessee preferred revisions to the High Court. The questions that arose for the consideration of the High Court were enunciated as follows at the commencement of itsWhether the freight charges incurred by a dealer in the dispatch of cement to the place of the customer could be deducted from the total turnover of the dealer under the Central Sales Tax Act, Tamil Nadu General Sales Tax Act and the Tamil Nadu Additional Sales Tax Act;(ii) Whether the packing charges being the cost of the packing materials used by the dealer in packing cement for being delivered to his customers could be properly excluded from his turnover for the assessment of sales tax;(iii) Whether the excise duty paid on packing materials used by a dealer for packing cement to be sold to his customers can be excluded in his total turnover."questions were answered by the High Court astax revision cases arising under the Central Sales Tax Act, we hold that the freight, packing charges and excise duty on packing materials have to be included in the sale price for the computation of sales taxIn cases arising under Tamil Nadu General Sales Tax Act and Tamil Nadu Additional Sales Tax Act, we hold that freight, packing charges and excise duty on packing materials are not liable to be included in the sale price for the computation of the sales taxThe assessees are not liable to pay additional sales tax on freight a packing materials and excise duty on packing materials in those cases arising under the Tamil Nadu Additional Sales Tax Act."High Court certified the case to be one fit for appeals to the Supreme Court and hence these appeals

Reasoning:
8. For the reasons mention above, we are of the opinion that the High Court was fully justified in applying the decision in Hindustan Sugar Mills Ltd.( 1978 (4) SCC 271 : 1978 SCC(Tax) 225 : 1979 (43) STC 13 ) to the present case and denying the benefit of deduction of freight charges from the controlled price to arrive at the turnover of the assessee for the purposes of the Central Sales TaxWe agree with the learned counsel for the State of Tamil Nadu that, in coming to the above conclusion, the High Court has overlooked the significance of the inclusion of the words "without including them in the price of the goods sold" in clause (c). These words make it clear that the freight charges are not to be deducted in the computation of the taxable turnover merely because they are specified and charged for separately by the dealer. A further pre-requisite for their deduction is that these charges should not have been included in the price of goods sold. This takes us back to the consideration as to whether the price charged for by the assessee includes freight or not, which we have discussed elaborately in respect of the levy of Central Sales Tax. Once we come to the conclusion-as we have-that the freight has been included as part of the price sold and that the liability to pay the freight remains with the dealer, thought permitted to be set off against the sale price by the purchaser or consumer, if follows that the deduction of the freight as a separate item in the computation of taxable turnover is not permissible. Rule 6(c) will apply only in cases where the sale price charged does not include the freight charges and the dealer separately collects freight from the consumer without including the same in the sale price. In fact, this aspect has been made clear in three decisions of this Court dealing with similar rules. In Tungabhadra Industries Ltd. v. CTO4( 1960 (11) STC 827 : 1961 AIR(SC) 412) the dealer claimed deduction of railway freight from the amount of price of the goods sold as state in the bill on the strength of Rule 5(1)(g) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, which is in precisely the same terms, as Rule 6, which is now being considered by us. The claim was negatived by this Court. Itappellant claimed exemption on a sum of Rs. 3, 88, 377-13-3-on the ground that is represented the freight in respect of the goods sold by the appellant, asserting that they had been charged for separately. The assessing officer rejected the claim and this rejection was upheld by the departmental authorities and by the High Court in revision. It would be seen that in order to claim the benefit of this exemption the freight should (i) have been specified and charged for by the dealer separately, and (ii) the same should not have been included in the price of the goods sold. The learned Judges of the High Court held that neither of these conditions was satisfied by the bills produced by the appellant. We consider, the decision of the High Court on this point was correct. In the specimen bill which the learned counsel for the appellants has placed before us, after setting out the quantity sold by weight (23, 760 lb.) the price is specified as 15 annas 9 pies per lb. and the total amount of the price is determined at Rs. 23, 388-12-0. From this the railway freight of Rs. 1, 439-12-0 is deducted and the balance is shown as the sum on which sales tax has been computed. From the contents of this invoice it would be seen that the appellant has charged a price inclusive of the railway freight and would therefore be outside the terms of Rule 5(1)(g) which requires that in order to enable a dealer to claim the deduction it should be charged for separately and not included in the price of goods sold. The conditions of the rule not having been complied with, the appellant was not entitled to the deduction in respect of freight."The same conclusion was reached by this Court in Dyer Meakin Breweries Ltd. v. State of Kerala( 1970 (3) SCC 253 : 1970 (26) STC 248 ) . Here, the appellant-company, which manufactured liquor at various place in U.P. and Harayana, transported the goods from its breweries and distilleries to its place of business in Ernakulam and sold them there. When selling liquor to the appellant made out separate bills for ex-factory price and for "freight and handling charges". The appellant claimed that the amount charged for "freight and handling charges" incurred by it in transporting the goods from the breweries and distilleries to the warehouse in Kerala were eligible for deduction under Rule 9(f) of the Kerala General Sales Tax Rules, 1963, a rule which is in the same terms as Rule 6, with which we are now concerned in the present case.We have heard learned counsel on both sides. In our opinion, so far as C.S.T. is concerned, the issue in the present case is fully and directly covered by the decision of this Court in Hindustan Sugar Mills Limited v. State of Rajasthan ( 1978 (4) SCC 271 : 1978 SCC(Tax) 225: 1979 (43) STC 13 ). As stated earlier, in assessee relied strongly on the decision of this Court in Hyderabad Asbestos Cement Products Ltd. v. State of A.P.( 1969 (24) STC 487 :(SC)) but this decision has been considered and explained in the Hindustan Sugar Mills case ( 1978 (4) SCC 271 : 1978 SCC(Tax) 225: 1979 (43) STC 13 ). We do not wish to state the facts or discuss the issues at great length since, in our opinion, they are all facts and issues that were under consideration by this Court in Hindustan Sugar Mills Ltd.Interesting as these arguments are, we find that they are merely a repetition of what was urged in the case of Hindustan Sugar Mills Ltd ( 1978 (4) SCC 271 : 1978 SCC(Tax) 225: 1979 (43) STCis, therefore, no difference either on facts or in principle between this case and the Hindustan Sugar Mills Ltd. case ( 1978 (4) SCC 271 : 1978 SCC(Tax) 225: 1979 (43) STChave heard learned counsel on both sides and we do not find any reason to doubt or dissent from the decision in the Hindustan Sugar Mills Ltd. case ( 1978 (4) SCC 271 : 1978 SCC(Tax) 225: 1979 (43) STC 13 ). On the other had, as pointed out by the learned Judges in that case, the whole purpose of the Cement Control Order was that cement should be available for sale at all places in the country at a controlled price. No doubt, the price was described as a maximum beyond which the sale price could not go but the intention, which was also carried out by all the suppliers, was that cement was to be sold at what may be described as controlled price on terms free on rail destination. In other words, the producer was entitled to the controlled price irrespective of the amount of freight which might have been incurred in respect of the transaction. Having regard to the fact that the freight on consignments to places near the factory and consignments to places far away from the factories could show a lot of variation, the control order created an machinery by which all freight charges were credited to a common account and any particular cement manufacturer incurring more than a specified amount was entitled to be reimbursed for the excess freight incurred by him. As the learned Judges pointed out in the earlier decision, the whole Control Order proceeds on the footing that the freight charges are to be met by the producer and that he was entitled to a consolidated price irrespective of the freight he may have incurred. In his view of the matter, the sale price, on the terms of the Central Sales Tax Act, could only be the controlled price as fixed by the Cement ControlIn D.C. Johar & Sons (P.) Ltd. v. STO( 1971 (27) STC 120 (SC) : 1969 KLT 640 ) the same question arose, again in the context of the Kerala General Sales Tax Rules, 1963. The Court followed the decision in Dyer Meakin Breweries Ltd., case( 1970 (3) SCC 253 : 1970 (26) STC 248 ). It was pointed out that the decision in Tungabhadra Industries Ltd.( 1960 (11) STC 827 : 1961 AIR(SC) 412) had rested on the facts of the case without going into the interpretation of the relevant rule of the Madras General Sales Tax (Turnover and Assessment) Rule, 1939. It was however, held that the Dyer Meakin decision( 1970 (3) SCC 253 : 1970 (26) STC 248 ) would apply to the case before the Court. A number of subsequent decisions has also held to like effect CCT v. Ashoka Marketing Ltd( 1973 (32) STC 411 (Pat)); State of Mysore v. Panyam Cements and Mineral Industries Ltd.( 1974 (33) STC 407 (Mys)); State of T. N. v. Parry & Co.( 1976 (38) STC 122 (Mad)) ; State of T.N. v. Chettinad Cement Corporation Ltd.( 1976 (38) STC 519 (Mad)) , and Premier breweries Ltd. v. State of Karnataka( 1984 (56) STC 14 (Karn)). We are, therefore, of the opinion that the High Court was in error in trying to distinguish the decision in the Hindustan Sugar Mills case and in excluding freight charges from the taxable turnover for the purposes of the Tamil NaduThe position in regard to packing charges as well as the excise duty on packing charges is also no different. As pointed out by this Court in the Hindustan Sugar Mills case( 1978 (4) SCC 271 : 1978 SCC(Tax) 225 : 1979 (43) STC 13 ) and in CST v. Rai Bharat Das & Bros.( 1989 (1) SCC 143 : 1988 (71) STC 277 ), packing charges from part of "sale price" because the expression "any sum charged for anything done by the dealer in respect of the goods" used in the definition in Section 2(h) of the Central Sales Tax Act, 1956, squarely covers such charges, as pacing is an integral element of the transaction of sale and packing charges are an integral part of the sale price. Once this is so, it follows that these charges and the excise duty thereon cannot be excluded from the turnover for purposes of the Central Sales Tax Act. Nor will, for the reasons earlier discussed in relation to freight charges, the assessee be in a position to claim a deduction in respect of these charges by virtue of Rule 6(cc) of the Sales Tax Rules. In our view, this position has been correctly set out, applying the decision in the case of Rai Bharat Das and Bros.( 1989 (1) SCC 1453 : 1988 (71) STC 277 ), in the State of T.N. v. Vanniaperumal & Co.( 1990 (76) STC 203 (Made)), Dalmia Cement (Bharat) Ltd. v. State of T.N.( 1991 (81) STC 327 (Mad)) and Dalmia Cement (Bharat) Ltd. v. State of T.N.( 1991 (83) STC 442 (Mad)) We are, therefore, of the opinion that the packing charges and excise duty thereon cannot also be deducted in computing the taxable turnover for the purposes of the Tamil Nadu Acts