COMMISSIONER SALES TAX U P Vs. INDIAN TRADERS

JUDGEMENT

(1.) THIS reference relates to the assessment year 1965-66 under the Central Sales Tax Act. The assessee disclosed a turnover in sun hemp, rope cutting, etc., of Rs. 8,27,127.01. It was indicated that on these transactions freight amounting to Rs. 18,552 was paid by the purchasers and, therefore, it was not included in the turnover. The assessing authority held that the freight was charged as a part of the sale price and it was liable to tax under the Central Sales Tax Act. On appeal it was held that the amount of freight could not be included in the sale price. The imposition of tax at ten per cent. on this amount was set aside. This view was upheld in revision. At the instance of the Commissioner, the revising authority has referred the following questions of law for the opinion of this court :

(2.) BEFORE the Judge (Revisions) it was conceded that the sales were made by the assessee on f.o.r. basis. The freight was paid by the purchasers. The bills were prepared by the assessee in the following way :

(3.) FOR the department, the learned standing counsel placed reliance upon the decision of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer ([1960] 11 S.T.C. 827 (S.C.).). This case was considered and followed by a Division Bench of this Court in United Timber Corporation v. Commissioner of Sales Tax, U.P. ([1972] 29 S.T.C. 646; 1972 U.P.T.C. 211.) In both these cases the bills were framed in the same manner as in the present case, namely, the cost of product included the freight but thereafter the actual amount of freight was deducted from the price. It was held that since the costs of freight was not separately charted, the same was liable to be included in the sale price as defined by section 2(h) of the Central Sales Tax Act. In these cases there was no plea or finding that the purchasers had in fact paid the freight to that under the terms of the agreements they were liable to pay it. A Bench of this Court distinguished the decision in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh ([1969] 24 S.T.C. 487 (S.C.).) on the view that in that case it appeared that the contract required the purchaser to pay the freight and although the price shown as the sale consideration included the charge on account of freight, the subsequent reduction on that account from the price was in conformity with the contractual condition that the purchaser should pay the freight. It could not be said, therefore, that having regard to the terms of the contract the price could include the charge on account of freight. In accordance with the terms of the contract, the price shown in the bill should not have been calculated by including the charge on account of freight.