1. This appeal, at the instance of the Cement Marketing Company of India Limited (an agent of the State Trading Corporation of India and hereinafter referred to as the 'assesses-company'), is directed against the order of the Commissioner of Commercial Taxes, Karnataka, dated 30th October, 1976, whereby he suo motu revised the order of the Deputy Commissioner of Commercial Taxes (Appeals), who had, in turn by his order dated 27th February, 1975, modified the order dated 29th June, 1972, of the Assistant Commissioner of Commercial Taxes (Assessment), Bangalore, in regard to the inclusion of freight turnover from the taxable turnover.
2. The Commissioner of Commercial Taxes by his order under appeal modified the order of the Deputy Commissioner of Commercial Taxes (Appeals) and restored that of the Assistant Commissioner of Commercial Taxes holding that the assesses-company was not entitled to the exclusion of freight turnover from the taxable turnover in regard to the year in question, i.e., assessment year 1963-64.
3. Learned counsel for the appellant sought to assail the order under appeal on the ground that the same was against the ratio of the decision of their Lordships of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh . The appellant therein, a public limited company carrying on the business of manufacturing and selling asbestos cement sheets and other products, in order to meet competition from other manufacturers, had maintained a uniform catalogue rate all over the country in respect of its manufacturers. It sent goods to outstation customers by railway under railway receipts with freight to pay. It made out an invoice at the catalogue rate, and the customer paid the amount of the invoice less the freight for releasing the railway receipt and took delivery of the goods on payment of the railway freight charged in respect of the goods transported to the destination. The question for decision was as to whether in assessing the turnover of the appellant-company for the purpose of finding out the taxable turnover for the coming years, deduction could be allowed in respect of railway freight on articles supplied to outstation customers. Clauses (4) and (16) of the terms of the contract were in the following terms :
'(4) The price of the said productions supplied to the stockists shall be the current general gross list price charged by the company, free on rail, less such discount as may be fixed by the company from time to time; but the terms and the times of delivery and the payments therefor shall be in the absolute discretion of the company who may vary the same from time to time.
(16) The conditions of any railway receipt shall be binding on the stockists and the date of delivery shall mean the date of the railway receipt and in the case of consignments sold free on rail destination, the railway freight shall be nevertheless payable by the stockists at the destinations and the amount of freight shown on the railway receipt shall be deducted from the invoice of the company.'
4. Their Lordships, disagreeing with the view of the Andhra Pradesh High Court, held as follows :
'If clause (4) stood alone the price charged by the company may be deemed to be the catalogue rate less the discount payable to the purchasers. But by clause (16) the purchasers clearly undertook to pay railway freight which was deducted from the invoice made out by the company. By clause (16) the company received the catalogue rate less the railway freight as price of the goods sold. We are unable to agree with the High Court that 'the term relating to the price in the contract between the company and the stockists envisaged by his clause [clause (16)] implies an obligation on the part of the company to pay the railway freight'. In our judgment, under the terms of the contract there is no obligation on the company to pay the freight, and under the terms of the contract the price received by the company for sale of goods is the invoice amount less the freight.'
5. As would be clear from the observations quoted above, their Lordships came to the conclusion, in the light of the terms of the contract, that there was no obligation on the company to pay the freight, which burden under the terms of the contract was placed on the buyer and, therefore, the price received by the company for the goods was the invoice amount less the freight. Hence, it has to be seen whether the assesses-company in the present case was under an obligation to pay the freight. We are of the opinion that the assesses-company was under an obligation to pay the freight as would be presently shown, and hence, to the facts of the present case, the ratio of the Hyderabad Asbestos case is not attracted.
6. In the case before us, the price of the cement was statutorily controlled. The relevant provision in this regard is clause 6(2)(a) of the Cement Control Order, 1961, which is in the following terms :
'6. (2)(a) The price at which the Corporation may sell cement other than rapid hardening cement and low heat cement to any person shall be Rs. 94.00 per metric ton free on rail destination railway station plus the excise duty paid thereon.'
7. The perusal of the aforesaid provision would show that the price fixed is inclusive of freight charges; for it clearly envisages 'price free on rail destination', that is, the buyer shall receive the delivery of the goods from the railway without paying freight charges.
8. The learned counsel for the appellant, however, sought to argue that under the Cement Control Order, 1961, only fair price was fixed leaving to the seller freedom of contract with regard to the terms thereof, so long as the fair price was not exceeded, and so the seller, that is, the assesses-company, could make the buyer pay the freight charges.
9. We do not think that any such freedom of contract is left to the seller, that is, the assesses-company, by the terms of clause 6(2)(a) of the Cement Control Order, which fixed a certain sum per metric ton as price 'free on rail destination', which means that the buyer at the destination could take the goods without payment of any freight charges. This statutory requirement that the price per metric ton would be 'free on rail destination' cannot be revised by the seller in the contract, for the seller is duty bound to adhere to the statutory requirements of clause 6(2)(a), unlike a seller who vends the goods the price whereof is not so statutorily fixed, which was the case in the matter before their Lordships of the Supreme Court in Hyderabad Asbestos case .
10. It is true that in Hyderabad Asbestos case clause (4) of the contract was somewhat in pari materia with the provisions of clause 6(2)(a) of the Cement Control Order, 1961. Since the assesses-company in that case had the freedom of contract, it added clause (16) to the contract which clearly envisaged the payment of freight charges by the buyer, and it was for that reason that their Lordships held in that case that the assesses-company was not under an obligation to pay the freight. Had the finding of their Lordships in this regard been different, the position would have been otherwise.
11. For the above view, we find support from a Division Bench decision of this Court in State of Mysore v. Panyam Cements and Mineral Industries Ltd. [ 33 S.T.C. 407], wherein the facts involved were identical with the facts of the present case. The learned Chief Justice who delivered the Bench decision distinguished the ratio of the Supreme Court decision in Hyderabad Asbestos case with the following observations :
'5. In the instant case, the facts are distinguishable. Under the Cement Control Order, the price fixed is f.o.r. and, therefore, there is an obligation on the seller to pay the freight. It is a matter of arrangement between the parties that instead of the seller in the first instance paying the freight and despatching the goods, the purchaser at the receiving end pays the freight on behalf of the vendor and takes delivery. When the price is fixed by a statutory order and that price is inclusive of freight, it cannot be predicated as to what percentage of that price constitutes the freight and, in that view, it cannot be contended that the turnover of the goods is the price fixed by the Cement Control Order less the freight ...........'
12. For the reasons stated, we find no merit in this appeal and dismiss the same with costs. Advocate's fee Rs. 100.
13. Appeal dismissed.