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Judgment
Padmanabhan, J.—These two tax cases are being disposed of by this common judgment. The only effective question in these tax cases that
falls for our decision in these two cases is as follows :
Whether the freight charges incurred by dealer in the despatch of cement to the place of the customer could be deducted from the total turnover
of the dealer under the Tamil Nadu General Sales Tax Act ?
The dealer is ""Dalmia Cement (Bharat) Ltd."". The periods with which we are concerned are 1st April, 1966, to 31st December, 1967, and 1st
January, 1968, to 31st March, 1968. For the assessment year 1966-67, the total freight charges case to Rs. 35,23,765.20 and for the year 1967-
68, it came to Rs. 43,53,992.98. The dealer claimed, among others, that the freight charges should be excluded from the total turnover. The claim
was negatived by the Deputy Commercial Tax Officer, Lalgudi. The dealer preferred appeals before the Appellate Assistant Commissioner,
Commercial Taxes, Tiruchirapalli. He rejected the appeals of the dealer in so far as they relate to the claim for exclusion of the freight charges from
the total turnover. Thereupon, the dealer carried the matter before the Sales Tax Appellate Tribunal, Madras, in Tribunal Appeals Nos. 261 and
262 of 1978. The Tribunal also overruled the claim of the dealer for the exclusion of the freight charges from the total turnover. In this connection,
the Tribunal relied upon the decision of the Supreme Court in Hindusthan Sugar Mills Vs. State of Rajasthan and Others, . The dealer has, in these
circumstances, filed these tax revision cases against the order of the Sales Tax Appellate Tribunal.
At the outset, we may observe that during the period 1st April, 1966, to 31st December, 1967, no Cement Control Order was in force. But the
sale of cement was, from time to time, controlled by the Cement Control Orders issued by the Government. The first Cement Control Order was
promulgated in 1956 and that was in force till 30th June, 1958. Thereafter, the Cement Control Order, 1958, was in force up to 31st October,
1961. The Cement Control Order, 1961, was in force till 31st March, 1966. The Cement Control Order, 1967 came into force only on 1st
January, 1968, with the result that during the period between 1st April, 1966 and 31st December, 1967, no Cement Control Order was in force.
However, the sale of cement was being carried on through an Organisation called ""Cement Allocation and Co-ordinating Organisation (CACO)"".
The said Organisation regulated the distribution of cement throughout India, even thought there was no statutory control of cement during the
period 1st April, 1966, to 31st December, 1967. In other words, it is claimed that the Cement Allocation and Co-ordinating Organisation
continued to maintain the same method in the matter of sale and distribution of cement, which prevailed during the time the Cement Control Order
was in force prior to 1st April, 1966. The fact that the Cement Allocation and Co-ordinating Organisation was in-charge of the sales and
distribution of cement during the relevant period, does not in any manner affect the question that arises for decision in these two cases.
The factual basis on which the question that arises for our decision in these two cases can be stated thus, in the words of the Tribunal :
Though there was statutory decontrol of cement during the period from 1st January, 1966, to 31st December, 1967, the Cement Manufacturers
Association agreed to continue the same arrangements as existed during the period when the Cement Control Order was in force. The Cement
manufacturers'' Sales Co-ordinating Organisation regulated the distribution of cement throughout India. Thus, cement was sold on f.o.r. destination
basis with the provision of equalisation of freight. The f.o.r. destination price was fixed on all India basis, i.e., the price will be the same irrespective
of the destination of the customer. The assessee despatched the goods on ''freight to pay'' basis and allowed reduction in the invoices to the extent
of actual freight payable to the nearest railway station of the customer''s place. The assessee claimed deduction of such amounts on the ground that
freight charges are not liable to tax and that deduction is admissible under rule 6(c) of the Tamil Nadu General Sales Tax Rules.
It is therefore factually clear that cement was sold by the dealer on ""freight to pay"" basis. It is admitted by the learned Government Pleader that
the dealer had separately charged the freight for transporting cement to the place of destination of the purchaser and that he had given the break up
figures to the purchasers in the invoices themselves. The finding of the Tribunal/that the dealer had despatched the goods on freight to pay basis
and allowed reduction in the invoice to the extent of actual freight paid has not been assailed before us. It is clear from the invoices from the
invoices produced before us that the separation of the freight charges in the invoices was only matter of bill making routine and there was really no
separate levy of freight charges in any of the sales effected, by the dealer. In this factual situation, rule 6(c) of the Tamil Nadu General Sales Tax
Rules, 1959, is clearly attracted. Rules 6(c) reads as follows :
The tax or taxes u/s 3, 4 or 5 shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the
following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer -
........................................
(c) all amounts falling under the following three heads when specified and charged for by the dealer separately, without including them in the price
of the goods, sold -
(i) freight;
(ii) (omitted);
(iii) charges for delivery.
We have already factually found that in this case the dealer has specified and charged the freight separately. In the circumstances, we have no
difficulty in coming to the conclusion that the freight charges incurred by the dealer in despatching the cement to the place of destination of the
purchaser has to be excluded from the total turnover of the dealer for the period 1st April, 1966, to 31st December, 1967, when the Cement
Control Order was not in force.
In this context, we may also refer to our decision in R. Balakrishna Brick Works, Madras v. State of Tamil Nadu by Joint Commercial Tax
Officer, Madras-57 (T.C. No. 778 of 1977 decided on 22nd October, 1981) [1982] 49 STC 251. There, the assessee carried on the business of
manufacture and supply of bricks from his kiln. For the assessment year 1974-75 the assessing authority included transport charges also in the total
turnover even thought the transport charges had been separately specified and charged for by the assessee as against his customers. The assessee
claimed deduction of transport charges in accordance with rule 6(c) of the Tamil Nadu General Sales Tax Rules and that was no accepted by the
assessing authorities as well as by the Tribunal. On revision to this Court by the assessee it has been held as follows :
The clear intent of rule 6(c) is that wherever transport charges are part of the overall consideration, but are separately charged for by the dealer,
without including them in the price of the goods sold, the dealer would be entitled to a deduction in respect of such charges in the computation of
his taxable turnover.
The next question for consideration is whether the fact that the Cement Control Order came into force on 1st January, 1968, would disentitle
the dealer from claiming deduction of the amount of freight charges from the total turnover. We are of the view that even in respect of the period
subsequent to 1st January, 1968, the dealer will be entitled to deduction of the freight charges from the total taxable turnover under rule 6(c) of the
Tamil Nadu General Sales Tax Rules notwithstanding the provisions of the Cement Control Order. We have had occasion to consider an identical
question in relation to the provisions of the Central Sales Tax Act, 1956, the Tamil Nadu General Sales Tax Act, 1959, and the Tamil Nadu
Additional Sales Tax Act, 1970, in Ramco Cement Distribution Co, (P.) Ltd., Rajapalayam v. State of Tamil Nadu by Deputy Commissioner of
Commercial Taxes, Madurai [T.C. Nos. 31 to 37, 206 to 210, 450 to 452, 470 to 474, 45 to 52, 54 to 61, 825 to 827 and 581 to 589 of 1979
(judgment dated 23rd December, 1981)] [1982] 51 STC 171. Those tax revision chases related to the periods, when the Cement Control Order
was in force. In arriving at a conclusion in those cases, we relied upon the decision of the Supreme Court in Hindusthan Sugar Mills Vs. State of
Rajasthan and Others, and we held that freight has to be included in the sale price for the computation of sales tax, on the assessee''s liability to
sales tax under the Central Sales Tax Act. However, on the question whether freight can be included in the sale price for determining the total
turnover of a dealer under the Tamil Nadu General Sales Tax Act, we held that by the operation of rule 6(c) of the Rules framed under the Tamil
Nadu General Sales Tax Act, a dealer would be entitled to exclude the freight from the sale price for the purpose of assessment to sales tax. Apart
from relying on rule 6(c) we also relied upon the definitions of ""dealer"", ""turnover"" and ""taxable turnover"" occurring in the Tamil Nadu General
Sales Tax Act. We also took note of the fact that the sale price is not defined in the Tamil Nadu General Sales tax Act, as in the case of the
Central Sales Tax Act or the Rajasthan Sales Tax Act, which came up for interpretation before the Supreme Court in Hindusthan Sugar Mills Vs.
State of Rajasthan and Others, . In those circumstances, we did not apply the ratio of the Supreme Court in Hindusthan Sugar Mills Vs. State of
Rajasthan and Others, in deciding the question with reference to the provisions of the T.N.G.S.T. Act in Ramco Cement Distribution Co. (P.) Ltd.
v. State of Tamil Nadu [T.C. No. 31 of 1979 (batch) (decided on 23rd December, 1981, and referred to above)] [1982] 51 STC 171. The ratio
contained in Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu [T.C. No. 31 of 1979 (batch)] [1982] 51 STC 171 clearly applies
to the facts of this case as well. As already stated, no contention was urged before us that the bargain between the dealer and its purchasers has
been for the sale of cement at a particular rate and that the said rate included the freight also notwithstanding rule 6(c) of the Rules framed under
the Act. It is equally not disputed by the learned Government Pleader that freight has been separately shown in the invoices. It was not disputed
that even after 1st January, 1968, the factual position, viz., that freight has been specified and charged for separately by the dealer, continued to be
the same. In the circumstances, following our earlier decision in Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu [T.C. No. 31 of
1979 (batch) (decided on 23rd December, 1981)] [1982] 51 STC 171, we hold that the freight incurred by the dealer in the despatch of goods to
the place of destination of the purchasers has to be deducted from the total turnover under rule 6(c) of the rules framed under the Act for the
period 1st January, 1968, to 31st March, 1968, as well.
The tax revision cases are therefore allowed to the extent of deleting the freight charges in both the tax cases with costs. Counsel''s fee Rs. 250,
one set.
Petitions allowed.