1. The question that arises for consideration in this tax case is :
'Whether the assessee M/s. K. K. Mohammed Ebraheem Saheb and Sons are liable to pay sales tax on the freight charges incurred by the assessee in transporting goods from Erode to Madras ?'
2. The assessee is a dealer in hides and skins. For the year 1970-71, they sold fleshings to M/s. Shaw Wallace and Company Limited, Madras. During that year, he claimed a deduction, among other things, a sum of Rs. 98,816.18 being the expenses incurred by them towards freight and loading charges for transporting the goods from Erode to Madras. The Commercial Tax Officer took the view that the freight and loading charges incurred by the assessee were only pre-sale expenses and therefore could not be deducted from the total taxable turnover. On appeal by the assessee, the Appellate Assistant Commissioner, Pollachi, allowed the appeal and held that it was a permissible deduction. Thereafter, the matter was taken before the Board of Revenue. The Board of Revenue by its order dated 6th June, 1977, set aside the order of the Appellate Assistant Commissioner and held that the deletion of Rs. 98,816.18 relating to freight charges was not correct. Hence this tax case.
3. Mr. K. J. Chandran, the learned counsel for the assessee, argued that on the facts of this case, admittedly the freight charges had been shown separately by the assessee and that consequently by the application of rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959, the assessee would be entitled to a deduction of the said amount. In this connection, the learned counsel relied on a decision of this Court in Balakrishna Brick Works v. State of Tamil Nadu  49 STC 251 (Tax Case No. 778 of 1977 decided on 22nd October, 1981).
4. Mr. K. S. Bakthavatsalam, the learned Additional Government Pleader, very vehemently contended that on the facts of the case rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959, is not attracted. He relied upon the decisions of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer : 2SCR14 , Dyer Meakin Breweries Ltd. v. State of Kerala : (1970)3SCC253 and Gordon Woodroffe & Co. (Madras) Private Ltd. v. State of Tamil Nadu  44 STC 485.
5. Before we deal with the legal contentions raised by the learned Additional Government Pleader, it is necessary to set out a few facts which are not disputed. On 2nd December, 1966, a contract has been entered into between the assessee and M/s. Shaw Wallace & Company Limited. The said contract mentions the price as follows :
'Rs. 43 per baram of 500 lbs. (1 ton-157 cft.) ex-tannery, Rs. 1.13 per cft. will be extra towards lorry freight. This is inclusive of sales tax. Loading charges of Rs. 20 per lorry will also be extra to your account.'
6. Packing is to be in lorries to be arranged by the assessee. M/s. Shaw Wallace & Company Limited have confirmed the above contract on the terms set out above. On 11th February, 1967, a contract has been entered into where the price has been mentioned as under :
'Rs. 47 per baram of 500 lbs. (1 ton-157 cft.) ex-tannery, Rs. 1.13 per cft. will be extra towards lorry freight. This is inclusive of sales tax. Loading charges of Rs. 20 per lorry load will also be extra to your account.'
7. Packing in lorries is to be arranged by the assessee. It is not disputed that for subsequent years also, the contracts between the parties were on the above lines. From this it is clear that the assessee stipulated the price to be Rs. 43 or Rs. 47 per baram, as the case may be, ex-tannery. Freight and loading charges were separately charged for. It may also be mentioned that on 29th February, 1972, M/s. Shaw Wallace & Company Limited wrote a letter to the Deputy Commercial Tax Officer, Erode (Rural), stating that they had purchased the fleshings from the assessee, that the agreement was that the purchase would be completed at Erode and the goods would be transported at the risk of the purchaser, viz., Shaw Wallace & Co., from Erode and they would be transported in the carrier engaged by the assessee. M/s. Shaw Wallace & Co. Ltd. has further made it clear that the purchase was completed at Erode and the pattern of the invoice raised by the seller on them were under advice from them. It is therefore factually clear that in the bargain between the parties, the price of fleshings per baram was specified separately. The freight charges for transporting the fleshings from Erode to Madras in lorries engaged by the assessee were stipulated at a rate per cft. On the facts of the case we are not satisfied that the way in which the invoices have been prepared, has been done only as a matter of routine, to warrant the application of the principle laid down by a Bench of this Court in State of Tamil Nadu v. Parry and Company  38 STC 122 that the mere bill-making routine bifurcating the price and the transport charges into two sub-heads would not divide the sale consideration, if really there was only one single consideration. There cannot be any room for doubt so far as the facts of this case are concerned that for all practical purposes, the parties agreed that the price should be fixed at a particular rate per baram, ex-tannery and that the freight charges and loading charges should be charged for separately. It is not a case of there being a single consideration for the sale of one baram of fleshings. On the facts of the case, we have no hesitation in holding that rule 6(c) of the Tamil Nadu General Sales Tax Rules is attracted. Further, the case is governed by the ratio laid down by us in Balakrishna Brick Works v. State of Tamil Nadu  49 STC 251 (T.C. No. 778 of 1977, dated 22nd October, 1981).
8. The decision of the Supreme Court in Dyer Meakin Breweries Ltd. v. State of Kerala : (1970)3SCC253 cited by the learned Additional Government Pleader is not applicable to the facts of the case. The assessee before the Supreme Court was a dealer in Indian-made foreign liquor. The case arose under the Kerala General Sales Tax Rules, 1963. The assessee had a place of business at Ernakulam in Kerala. The company transported liquor for sale from its factory to its warehouse at Ernakulam. The transport from its factories to its warehouse at Ernakulam was not for the purpose of sale of liquor to any individual customer. But while selling liquor to its customers from the warehouse, the company made out separate bills for the ex-factory price and for freight and handling charges. In that context, the question arose whether the expenditure incurred by the company towards freight and handling charges in bringing liquor from its factories to the warehouse prior to the sale should be deducted from the total taxable turnover. The Supreme Court answered the question in the negative. The Supreme Court in interpreting rule 9(f) of the Kerala General Sales Tax Rules, 1963, which is identical to rule 6(c) of the Tamil Nadu General Sales Tax Rules, 1959, took the view that the said rule sought to exclude only those charges which were incurred by the dealer either expressly or by necessary implication for and on behalf of the purchaser after the sale when the dealer undertook to transport the goods and to deliver the same or where the expenditure was incurred as an incident of sale, and that it was not intended to exclude from the taxable turnover any component of the price, expenditure incurred by the dealer which he had to incur before sale and to make the goods available to the intending customer at the place of sale. This interpretation of the Supreme Court, if we may say so with respect, is consistent with the factual situation in that case. As already stated, liquor was being transported from the assessee's various factories to its warehouse at Ernakulam. At the time of transport, there was no intention on the part of the assessee to sell the liquor that has been transported to any particular customer. The sale took place only after the liquor was brought to the warehouse at Ernakulam and consequently all the expenses that the assessee had incurred prior to the sale must naturally come within the connotation of the words 'pre-sale expenses' and had become a component of the price. The Kerala case is entirely distinguishable from the facts of the present case.
9. The learned Additional Government Pleader again heavily relied upon the decision of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer : 2SCR14 . The case turned upon the interpretation of rule 5(1)(g) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. In that case, the appellant who was an assessee has claimed exemption in a sum of Rs. 3,88,377-13-3 on the ground that it represented the freight in respect of the goods sold by the appellant, asserting that they had been charged for separately. The High Court factually found that the charges had not been charged for or specified by the dealer separately, but had been included in the price of the goods sold. The Supreme Court agreed with the finding of the High Court. It is seen from the facts stated at page 836, that the assessee had given the total amount of the price at Rs. 23,388-12-0 and from the aggregate amount had deducted the railway freight of Rs. 1,439-12-0 and had shown the balance as taxable turnover. From this the Supreme Court came to the conclusion that the assessee had charged a price inclusive of the railway freight and would therefore be outside the terms of rule 5(1)(g) which required 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. This case is also distinguishable on its facts in view of the fact that the assessee therein had shown the aggregate price for the entire quantity of goods sold and deducted therefrom the actual railway freight incurred by them. But, in this case, as we have already stated, the contract itself stipulated that the freight should be calculated at Rs. 1.13 per cft. [(T.C. Nos. 31 to 37 of 1979, etc., High Court, Madras, dated 23rd December, 1981). Ramco Cement Distribution Co. (P.) Ltd., Rajapalayam v. State of Tamil Nadu  51 STC 171.
10. The learned counsel for the assessee cited the decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh . In that case which arose under the Andhra Pradesh General Sales Tax Act, the terms of contract between the parties stipulated that even 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. The Supreme Court came to the conclusion on a reading of the relevant clause in the agreement that under the terms of the contract, there was no obligation on the part of the dealer to pay the freight, and on the terms of the contract, the price received by the dealer for the sale of goods was less the railway freight. This decision of the Supreme Court has been followed by a Bench of this Court in Gordon Woodroffe & Co. (M.) P. Ltd. v. State of Tamil Nadu  44 STC 485. The learned Chief Justice has distinguished the case reported in Tungabhadra Industries Ltd. v. Commercial Tax Officer : 2SCR14 on the ground that there the dealer has specified in the bill of sale the total amount of the price of the goods sold and then deducted from this amount the railway freight and showed the balance as the sum on which sales tax was computed. Following the decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of A.P. , the Bench held that the amount of freight was not includible in the total turnover of the assessee as the freight did not form part of the price payable for the sale. The facts in this case are similar to the facts in Hyderabad Asbestos Cement Products Ltd. v. State of A.P. . We therefore hold that the order of the Board of Revenue holding that the sum of Rs. 98,816.18 incurred by the assessee towards freight and loading charges was not permissible deduction, has to be set aside. The assessee will be entitled to deduct the said amount from the total taxable turnover. We accordingly set aside the order of the Board of Revenue and restore that of the Appellate Assistant Commissioner. The result is, the tax case is allowed. The assessee would be entitled to their costs. Advocate's fee Rs. 250.