AGRICULTURAL FARMS LIMITED Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE petitioners who were limestone suppliers to the India cements Ltd. , were assessed under the Madras General Sales Tax Act, 1959, for five assessment years 1962-63 to 1966-67 in respect of their supplies of limestone. In the course of the assessment, the assessees claimed deduction of freight and transport charges from the total turnover returned by them. Though the freight and transport charges have been separately charged for in the sale invoices, without including them in the sale price of the goods, the assessing authority chose to reject the claim. THE appeals against such rejection also failed. THEre were further appeals before the Tribunal. THE Tribunal also has upheld the rejection of the claim for deduction on the ground that though the freight and transport charges have been separately charged for in the sale invoices, the assessees are not entitled to the benefit of deduction, as they have charged in the earlier years an all inclusive price for the limestone sold, and that freight and transport charges have been separately claimed in the assessment years only for reducing the tax liability. THE question is whether the disallowance of the claim for deduction of freight and transport charges could be sustained.

(2.) IT is true that as per clause 6 (c) of the original agreement dated 25th February, 1958 , an all inclusive price of Rs. 6. 87 per tonne of 90 per cent purity limestone had been fixed as payable by the India Cements Ltd. to the assessees. But the said clause has later been amended fixing separately the price per tonne of limestone and the freight and transport charges per tonne. In pursuance of the amended clause 6 (c) of the agreement, the invoices have been prepared showing the sale price of the limestone and the freight and transport charges separetely. To take one instance, under the original agreement dated 25th February, 1958 , an all inclusive price of 6. 87 per tonne has been fixed as the price of the limestone to be delivered at the buyer's factory at Thalaiyuthu. But, under the amended clause 6 (c), which is applicable to the assessment years in question, the amounts payable by the india Cements towards the price proper and towards freight and charges for effecting delivery at the buyer's factory, have been shown separately. The all inclusive price of Rs. 6. 87 per tonne shown in the original agreement has been amended by showing Rs. 4. 62 as the price proper and Rs. 2. 25 as the freight and delivery charges incurred by the assessees for bringing the goods to the buyer's factory. In view of this specific agreement between the assessees and the India Cements Limited for payment separately the price proper for the limestone supplied and the freight and transport charges, the preparation of the invoices by the assessees showing the two items separately has to be taken note of, and the applicability of rule 6 (f) (i) of the Madras General Sales Tax rules has to be considered in the face of the revised agreement and the relevant invoices. IT cannot be disputed that the said rule stands attracted to the sale of goods in respect of which the assessees have charged freight and delivery charges separately, apart from the price of the goods. We do not see any reason as to why the assessees should be denied the benefit of this deduction merely because similar invoices were not prepared in the earlier years. The fact that the assessees bargained for an all inclusive price and did not bargain for freight and delivery charges separately under the original agreement will not preclude them from revising the agreement and claiming separately for the price of the goods sold and for the freight and delivery charges incurred by them. The only reason given by the Tribunal for rejecting the claim of the assessees is that they have chosen to charge an all inclusive price for the limestone supplied in the earlier years and that they have purposely split up the same price paid for the limestone into two components, (i) the price proper and (ii) the freight and delivery charges, with a view to avoid their tax liability on that portion of the turnover which represents the freight and delivery charges does not appear to be sound or tenable. The learned assistant Government Pleader for the revenue, however, contends that the terms of the contract between the assessees and the India Cements Ltd. indicate that the sale has to be completed by delivery of the limestone at the buyer's factory at Thalaiyuthu, that the obligation of transporting the goods to the place of delivery is that of the assessees, that the sum incurred by the assessees as freight and delivery charges had to be on their account and that therefore the total amount received by them from the India Cements Ltd. , should be taken as the price of the limestone at the delivery spot. But we found that the parties have specifically provided under the agreement as revised, that the price of limestone fixed under it is to be the price of the limestone at the point of extraction. Therefore, it has to be taken that the buyer has fixed the sale price of the goods at the point of extraction and agreed to pay separately the freight and transport charges from the place of extraction to the buyer's factory. IT is not the case of the revenue that the assessees have any place of business at Thalaiyuthu where they stock the limestone for the purpose of sale to the India Cements Ltd. , and others at a price to be fixed without reference to the transport of the goods. The parties are aware that the goods are to be brought from the place of extraction to the factory and that the cost of transport of the limestone has to be borne by the buyer.