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Ramco Cement Distribution Co. (P.) Ltd. Vs. the State of Tamil Nadu - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case (Revision) Nos. 31 to 37, 45 to 52, 54 to 61, 206 to 210, 450 to 452, 470 to 474, 581 to 58
Judge
Reported in[1982]51STC171(Mad)
ActsCentral Sales Tax Act, 1956 - Sections 2, 6, 8 and 8A; Tamil Nadu General Sales Tax Act, 1959 - Sections 2, 3, 8A, 17, 53 and 53(2)
AppellantRamco Cement Distribution Co. (P.) Ltd.
RespondentThe State of Tamil Nadu
Appellant AdvocateP.R. Ranganathan, ;S.V. Subramaniam and ;C. Natarajan, Advs.
Respondent AdvocateK.S. Bakthavatsalam, Additional Government Pleader
Cases ReferredIn Dalmia Cement (Bharat) Ltd. v. Deputy Commercial Tax Officer
Excerpt:
(i) sales tax - sale price - sections 2, 6, 8 and 8a of central sales tax act, 1956 and sections 2, 3, 8a, 17, 53 and 53 (2) of tamil nadu general sales tax act, 1959 - whether having regard to definition under section 2(h) read with section 8a of central sales tax act - assessment as made on freight charges separately disclosed in bills and given rebate to consumer liable to be assessed in hands of assessee - where a dealer transports goods from his factory to his place of business and sells them at a price arrived at taking into account the freight and handling charges the amount of freight and handling charges included in price would be part of 'sale price' - freight forms part of sale price under central sales tax and liable to be included in sale price for purpose of assessee.....padmanabhan, j.1. these tax revision cases arise under the central sales tax act, 1956, hereinafter referred to as the c.s.t. act, the tamil nadu general sales tax act, 1959, hereinafter referred to as the t.n.g.s.t. act, and the tamil nadu additional sales tax act, 1970, hereinafter referred to as the t.n.a.s.t. act. the matter relates to cement, the sale price and distribution of which are subject to the cement control order, 1967, and the regulations made thereunder. the questions that arise for determination can be briefly categorised as follows : '(i) whether the freight charges incurred by a dealer in the despatch of cement to the place of the customer could be deducted from the total turnover of the dealer under the c.s.t. act, the t.n.g.s.t. act and the t.n.a.s.t. act (ii) whether.....
Judgment:

Padmanabhan, J.

1. These tax revision cases arise under the Central Sales Tax Act, 1956, hereinafter referred to as the C.S.T. Act, the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as the T.N.G.S.T. Act, and the Tamil Nadu Additional Sales Tax Act, 1970, hereinafter referred to as the T.N.A.S.T. Act. The matter relates to cement, the sale price and distribution of which are subject to the Cement Control Order, 1967, and the regulations made thereunder. The questions that arise for determination can be briefly categorised as follows :

'(i) Whether the freight charges incurred by a dealer in the despatch of cement to the place of the customer could be deducted from the total turnover of the dealer under the C.S.T. Act, the T.N.G.S.T. Act and the T.N.A.S.T. Act

(ii) Whether the packing charges being the cost of the packing materials used by the dealer in packing cement for being delivered to his customers could be properly excluded from his total turnover for the assessment of sales tax

(iii) Whether the excise duty paid on packing materials used by a dealer for packing cement to be sold to his customers can be excluded in his total turnover ?'

2. In T.C. Nos. 31 to 37, 206 to 210, 585, 586, 588 and 825 of 1979, the assessee is Ramco Cement Distribution Co. (P.) Ltd., Rajapalayam. While T.C. Nos. 206 to 210 of 1979, 586 and 825 of 1979 arise under the C.S.T. Act, the other cases arise under the T.N.G.S.T. Act and the T.N.A.S.T. Act. These cases cover the assessment years 1967-68 to 1975-76. In T.C. Nos. 581 to 584, 587, 589, 826 and 827 of 1979, the assessee is the Madras Cements Ltd., Rajapalayam. T.C. Nos. 581 and 583 of 1979 arise under the Central Sales Tax Act (C.S.T. Act), while the other cases arise under the T.N.G.S.T. Act and the T.N.A.S.T. Act. The assessment years covered by these cases are 1975-76 to 1977-78. In T.C. Nos. 470 to 474, 45 to 52 and 54 to 61 of 1979, the assessee is Dalmia Cement (Bharat) Ltd., Dalmiapuram. While T.C. Nos. 470 to 474 of 1979 arise under the C.S.T. Act, T.C. Nos. 45 to 52 and 54 of 1979 arise under the T.N.G.S.T. Act and T.C. Nos. 56 to 61 arise under the T.N.A.S.T. Act. In this batch of cases, we are concerned only with the levy of sales tax on freight in respect of sales of cement under the Cement Control Order, 1967. In T.C. Nos. 450 to 452 of 1979, the assessee is M/s. India Cements Ltd., Madras, which arise under the C.S.T. Act, the assessment years being 1973-74 to 1975-76.

3. We shall now take up for consideration T.C. Nos. 581 of 1979 which arises under the C.S.T. Act. The relevant assessment year is 1975-76. The assessees are M/s. Madras Cements Ltd., Rajapalayam. They sold cement to their various customers. The goods were despatched on 'freight to pay' basis. They allowed deduction in their invoices to the extent of the actual freight payable up to the railway station of the customer's place. They, therefore, claimed deduction of such amounts from the total turnover liable to Central sales tax on the ground that they were not included in the price of cement sold and that the freight charges had been shown separately in the invoices. On this basis, for the assessment year 1975-76, the assessee claimed exemption towards freight charges to the extent of Rs. 9,51,419. The assessee also claimed exemption in respect of packing charges collected to the extent of Rs. 7,61,105.55 and a further exemption of additional excise duty collected on packing materials to the extent of Rs. 16,119.15. The Joint Commercial Tax Officer, Rajapalayam, by his order dated 15th March, 1977, disallowed the exemption claimed by the assessee on account of freight charges, packing charges and additional excise duty under the C.S.T. Act, and determined the taxable turnover for 1975-76 at Rs. 61,57,697 and the tax payable at Rs. 70,867. It may be observed that in this case the Joint Commercial Tax Officer found that the freight charges were included in the price of the goods themselves.

4. Against the order of assessment passed by the Joint Commercial Tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner of Commercial Taxes, Ramanathapuram at Virudhunagar. The Appellate Assistant Commissioner of Commercial Taxes dismissed the appeal by his order dated 30th June, 1978. The assessee then took up the matter in second appeal before the Sales Tax Appellate Tribunal, Additional Bench, Madurai. The Tribunal disposed of three appeals by a common order, viz., M.T.A. Nos. 553, 556 and 589 of 1978. The appeals in M.T.A. Nos. 553 and 556 of 1978 had been filed by M/s. Madras Cements Ltd., Rajapalayam, against the order of the Appellate Assistant Commissioner, for the assessment years 1975-76 and 1976-77, while M.T.A. No. 589 of 1978 had been filed by Ramco Cement Distribution Co. (P.) Ltd., Rajapalayam. The Tribunal by its order dated 30th June, 1979, held that the freight element in free on rail sales has to be included in the sale price under the C.S.T. Act. The Tribunal also found that packing charges and excise duty also form part of the sale price and they have to be included in the turnover under the C.S.T. Act. Against this order of the Tribunal for the assessment year 1975-76, T.C. No. 581 of 1979 has been filed by Madras Cements Ltd. The facts in the other tax cases need not be set out in detail, except to set out the facts of a case arising under the T.N.G.S.T. Act.

5. T.C. No. 31 of 1979 arises under the T.N.G.S.T. Act. The relevant assessment year is 1969-70. The assessees are Ramco Cement Distribution Co. (P.) Ltd., selling agents of M/s. Madras Cements Ltd., Rajapalayam. The assessees were assessed to sales tax on a taxable turnover of Rs. 2,37,64,245 which included Rs. 29,71,527 relating to freight charges by the Joint Commercial Tax Officer, Rajapalayam. The assessees claimed exemption of freight charges on the ground that freight had been independently charged in the invoices and basing themselves on the judgment of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh . The assessing authority, relying upon the decision of the Patna High Court in Ashoka Marketing Ltd.'s case [1973] 32 STC 411 and a judgment of this Court in T.C. 200 of 1969, held that the sale bill was inclusive of the freight and the total amount represented the price. He therefore rejected the claim of the assessees for deduction of the freight charges. The assessees went up in appeal before the Appellate Assistant Commissioner (CT), Ramanathapuram at Virudhunagar, contending that the assessing officer erred in ignoring the judgment of this Court in Ramco Cement Distribution Co. (P.) Ltd. v. Deputy Commercial Tax Officer, Rajapalayam [1974] 33 STC 180 and Agricultural Farms Ltd. v. State of Tamil Nadu [1974] 34 STC 143 which, according to the assessees related to identical facts. The Appellate Assistant Commissioner found that the assessees have effected the transactions at f.o.r. price in accordance with the intention spelled out on the basis of the circulars, agreements, etc., that the expenses were incurred as an incident of sale and that there is no scope or basis to view them as 'post service charges'. He therefore had that the price inclusive of freight constituted the turnover of sale of cement and that the assessees were not entitled to deduction. The assessees took up the matter in further appeal before the Tribunal. The Tribunal by a common order disposed of the appeal. At the time of hearing of the appeal by the Tribunal, it was contended that railway freight is separately shown in the invoices. The Tribunal following their own earlier decision held that freight equivalent involved in f.o.r. destination sales is imbedded in the sale price and is therefore liable to tax and hence confirmed the assessment so far as it related to freight charges. The Tribunal went into the question of deduction claimed for excise duty, since packing charges had already been excluded by the authorities below and found that excise duty on packing materials would be eligible for deduction. Aggrieved by the above orders, the assessees preferred the tax revision case.

6. The first question that arises for consideration is whether, on the facts and in the circumstances of the case and having regard to the definition under section 2(h) read with section 8A of the C.S.T. Act, the assessment as made on freight charges separately disclosed in the bills and given rebate to the consumer, is liable to be assessed in the hands of the assessee.

7. Mr. P. R. Ranganathan, the learned counsel for the assessee, very strenuously contended that under the provisions of the C.S.T. Act, the freight charges incurred by an assessee, when goods are despatched to a customer on 'free on rail basis' and the freight is shown separately in the invoices and a rebate is given to a consumer, cannot be included in the sale price of cement. In this connection, the learned counsel referred to us to the following sections of the C.S.T. Act. Section 6 which reads as follows was first referred to :

'6. (1) Subject to the other provisions contained in the Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified.'

8. We are not concerned with the rest of the provisions of section 6. The definition of 'sale price' in section 2(h) to which our attention was then drawn reads :

''Sales price' means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged.'

9. According to Mr. P. R. Ranganathan, the above definition of 'sale price' consists of the following :

(i) It includes the amount which the seller receives from the buyer for the goods sold. It shall exclude any cash discount according to the practice normally prevailing in the trade. It shall also include any amount charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof.

(ii) It will exclude the cost of freight or delivery or the cost of installation in cases where such cost is separately charged.

10. Mr. P. R. Ranganathan, the learned counsel for the assessee, Mr. S. V. Subramaniam, the learned counsel for the assessee in another batch of cases, and Mr. C. Natarajan, the learned counsel for the assessee in yet another batch of cases, stressed the importance of the second limb of the definition of 'sale price' occurring in section 2(h) of the Act. The learned counsel urged that inasmuch as the definition of 'sale price' very clearly excludes the cost of freight from the amount received by the seller from the buyer of the goods sold, the freight charges cannot be included in the sale price and subject it to sales tax. In this context, the learned counsel dealt with determination of turnover (sic). It states :

'8A. (1) In determining the turnover of a dealer for the purposes of this Act, the following deductions shall be made the aggregate of the sale prices, namely :-

(a) the amount arrived at by applying the following formula -

rate of tax x aggregate of sale prices : ---------------------------------------- 100 + rate of tax

Provided that no deduction on the basis of the above formula shall be made if the amount by way of tax collected by a registered dealer, in accordance with the provisions of this Act, has been otherwise deducted from the aggregate of sale prices.'

11. We are not concerned with the explanation to section 8A.

12. If we are only called upon to deal with the question whether freight paid by a dealer in despatch of the goods to the customer can be included in the 'sale price' for the purpose of sales tax under the C.S.T. Act in terms of the definition of 'sale price' under section 2(h) of the C.S.T. Act, there can be absolutely no difficulty in accepting their arguments and holding that such freight will have to be excluded from the 'sale price' for the computation of sales tax under the C.S.T. Act. But, unfortunately, in these cases where cement is the subject of sale, we have to take into consideration the provisions of the Cement Control Order, 1967, and the impact of the provisions of the said Order on section 2(h) of the C.S.T. Act.

13. The sale of cement was from time to time controlled by the Cement Control Orders issued by the Central Government. Though in this batch of cases, we are concerned with the Cement Control Order, 1967, it may be observed, as a historical fact, that the first Cement Control Order was promulgated in 1956. This Order was in force between 1st April, 1956, and 30th June, 1958. On 1st July, 1958, the Cement Control Order, 1958, came to be passed and that was in July, 1958, the Cement Control Order, 1958, came to be passed and that was in force up to 31st October, 1961. Between 1st November, 1961, and 31st March, 1966, the Cement Control Order, 1961, was in force. There was an interregnum between 1st April, 1966, and 31st December, 1967, during which there was no statutory control with regard to the sale of cement. The Cement Control Order, 1967, came into force afterwards. The Control Order was issued by the Central Government in exercise of its powers conferred by section 18G and section 25 of the Industries (Development and Regulation) Act, 1951. Clause 7 of the Control Order provided that the ex-factory prices admissible to the producer for the different varieties of cement shall be as specified in the schedule. The schedule stipulated a retention price of Rs. 185.00 per metric tonne for cement produced by all producers. Clause 8 stated that no producer shall himself or by any person on his behalf sell waterproof cement at a price exceeding Rs. 350.94 per metric tonne, low heat cement at a price exceeding Rs. 341.94 per metric tonne and any other variety of cement for a price exceeding Rs. 318,94 per metric tonne, free on rail destination railway station plus the exercise duty paid thereon. The first proviso shall be referred to later. For a consideration of the question whether the freight can be included in the sale price, it is not necessary to refer to the second proviso to clause 8. The explanation to clause 8 states that :

'For the purposes of this Order, the expression 'free on rail destination railway station' means the price including the cost of transport by the cheapest mode except where any other mode of transport has been specified by the Central Government under clause 4 at the destination point.'

14. The explanation makes it clear that for the purpose of the Control Order, the expression 'free on rail destination railway station' shall mean the price including the cost of transport by the cheapest mode, except in cases where the Central Government has specified any other mode of transport under clause 4 at the destination point. Clause 9 provides that every producer shall, in respect of each transaction by way of sale of cement effected by him, pay within one month of the close of the month in which such sales take place to the Controller and amount equivalent to the amount, if any, by which the free on rail destination price of such cement exceeds the aggregate of the following amounts, namely :

(i) The ex-factory price of such cement calculated in accordance with the rates specified in the schedule;

(ii) selling expenses calculated at the rate of Rs. 3.71 per tonne;

(iii) the excise duty paid thereon; and

(iv) in the case of packed cement, the charges fixed by the Central Government in respect of the packing under the first proviso to clause 8.

15. The first proviso to clause 8 stipulates that in the case of packed cement, there shall be added to the price referred to in clause 8 such charges as may be fixed by the Central Government in respect of packing in jute bags or in any other containers, and that different charges may be fixed for the use of new and serviceable second-hand jute bags and for the use of such other containers. Clause 11 enjoins on the Controller to maintain an account styled as 'Cement Regulation Account', to which shall be credited the amounts paid by the producer under clause 9 and such other sums of money as the Central Government may, after due appropriation made by Parliament by law in this behalf, grant from time to time. Clause 11 further enjoins that the amount credited under sub-clause (1) shall be spent only for the purposes of (i) paying or equalising the expenditure incurred by the producer on freight in accordance with the provisions of the Order; (ii) equalising concessions, if any, granted in the matter of price, freight, supplies to Government or public or for purposes of export under the second proviso to clause 8 or for import; (iii) expenses incurred by the Controller in discharging the functions under the Order subject to such limits, if any, as may be laid down by the Central Government in this behalf; and (iv) such reimbursement of expenses by the Controller as may be incurred by the producers of cement for the purposes of increasing the production for securing the equitable distribution and availability at fair prices of cement. Clause 14 deals with the procedure which will have to be followed by a producer for making the necessary claims for reimbursement towards equalising freight or equalising concession in the matter of export price of the Controller. Thus it can be seen that the sum total of the Cement Control Order, 1967, is that no producer sells cement at a price exceeding Rs. 220 per metric tonne plus packing charges and excise duty.

16. The impact of the above clauses of the Cement Control Order on the provisions of the C.S.T. Act came up for consideration before the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan : [1979]1SCR276 . The assessee, Hindustan Sugar Mills Ltd., manufactured cement and sold it to the purchasers who were inside and outside the State of Rajasthan. The assessee had entered into contracts with the purchasers. Some of the conditions in the clauses of contract were as follows : Although the price of cement is on the basis of f.o.r. destination railway station, consignments would nevertheless be despatched 'freight to pay' and credit afforded in their bill for the amount of freight payable. The purchaser should accordingly arrange to pay railway freight or road transport charges at the destination at the time of taking delivery. Secondly, once the consignment was handed over to the carrier and a receipt was obtained, the responsibility of the assessee ceased and the assessee was no longer liable for any liability for any delay, shortage, damage or loss of goods in transit. The responsibility was on the buyers to claim damages from the carries. In the event of there being any overcharge of freight, it was the duty of the purchaser to lodge necessary claims with the concerned railway authorities. In terms of the above contract, the assessee despatched cement to the customers. The invoices showed that the goods were despatched 'free on rail destination railway station'. The invoices referred to the amount representing excise duty and packing charges. They also deducted from that amount the railway freight to be paid by the purchasers. The assessee did not charge in the invoice sales tax on the amount of railway freight. However, in order to provide for a possible future claim on the part of the authorities, the assessee obtained by way of deposit an amount towards contingent liability to sales tax on railway freight to be paid. When the assessment of the assessee, in that case, to sales tax under the Rajasthan Sales Tax Act, 1954, and the C.S.T. Act, 1956, was taken up for consideration, the sales tax authorities took the view that the amount of freight formed part of the 'sales price' and was therefore liable to be included in the turnover of the assessee for the purpose of assessment of sales tax. The assessee challenged the correctness of this view by filing a writ petition in the High Court of Rajasthan. The High Court of Rajasthan agreed with the view of the sales tax authorities. Consequently, the assessee took up the matter in appeal to the Supreme Court. It was contended on behalf of the assessee before the Supreme Court that as per the definition of 'sale price' both under the Rajasthan Sales Tax Act and the C.S.T. Act, the sale price did not include handling charges, and as such, the assessee should be entitled to claim exemption in respect of the turnover the amount shown as freight and handling charges provided that were separately charged. In this regard, reliance was placed on the second limb of the definition of 'sale price' as found in the C.S.T. Act. We may observe that the definition of 'sale price' in the Rajasthan Sales Tax Act, 1954, and the C.S.T. Act, 1956, are in pari materia. The Supreme Court first considered the scope and ambit of the definition of 'sale price'. After referring to the definition of the words 'sale price' as found in section 2(p) of the Rajasthan Sales Tax Act, 1954, which, as we have already said, as identical with the definition of 'sale price' as found in section 2(h) of the C.S.T. Act, Bhagwati, J., speaking for the Supreme Court, observed thus :

'This definition is in two parts. The first part says that 'sale price' means the amount payable to a dealer as consideration for the sale of any goods. Here, the concept of real price or actual price retainable by the dealer is irrelevant. The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to ask as to what is the amount payable by the purchaser to the dealer as consideration for the sale and not as to what is the net consideration retainable by the dealer.'

17. The learned Judge further observed as follows :

'We may then take a case where a dealer transports goods from his factory to his place of business and sells them at a price which is arrived at after taking into account 'freight and handling charges' incurred by him in transporting the goods. The amount of 'freight and handling charges' included in the price would obviously be part of the 'sale price', because it would be payable by the purchaser to the dealer as part of the consideration for the sale of the goods. The same would be the legal position even if the 'freight and handling charges' are shown separately in the bill and added to the price of the goods, for the character of the payment would remain the same. Since 'freight and handling charges' represent expenditure incurred by the dealer in making the goods available to the purchaser at the price of sale, they would constitute an addition to the cost of the goods to the dealer and would clearly be a component of the price charged to the purchaser. The amount of 'freight and handling charges' would be payable by the purchaser not under any statutory or other liability but as part of the consideration for the sale of the goods and it would, therefore, form part of 'sale price' within the meaning of the first part of the definition.'

18. It is clear from the above that in a case where a dealer transports goods from his factory to his place of business and sells them at a price arrived at taking into account the freight and handling charges, the amount of freight and handling charges included in the price would, obviously, be part of the 'sale price', because it would be payable by the purchasers to the dealer as part of the consideration for the sale of goods. Similarly, the learned Judge went on to consider a case where the dealer, instead of transporting the goods from his factory or his place of business and selling them there, entered into a contract of sale f.o.r. destination railway station and the seller undertook an obligation to put the goods on rail and arrange to have them carried to the destination railway station at his expense. The learned Judge held that in that case the amount of freight paid by the purchaser and shown in the bill as deducted from the agreed price would clearly form part of 'sale price' and fall within the first part of the definition.

19. The learned Judge thereafter went on to consider the effect of the Cement Control Order. The learned Judge took note of the fact that the Cement Control Order was designed to ensure availability of cement at a uniform price throughout India. The learned Judge was of the view that the Control Order was a statutory order having binding force and effect and that it should govern the transactions of sale of cement entered into by the assessee with the purchasers. He referred to clause 8 which provided a maximum price of Rs. 214.65 per metric tonne f.o.r. destination railway station at which a producer may sell cement manufactured by him. The learned Judge further observed that the price was clearly inclusive of freight. After referring to clause 8 of the Control Order, the learned Judge observed thus :

'But the question is : who, under the terms of the contract, was liable to pay the freight, the assessee or the purchaser Was the contract one for delivery at destination railway station or was it a contract in which delivery to the purchaser would be complete as soon as the goods are put on rail at the place of despatch The answer to this question would clearly be in favour of the assessee if we have regard only to the terms and conditions of the contract without taking into account the provisions of the Control Order.'

20. After referring to clauses 8 and 11 of the general terms and conditions of supply incorporated in the contract and the specimen invoice produced by the assessee, the learned Judge observed that the delivery of the goods to the purchaser would be complete as soon as they are put on rail at the work siding and the risk then passes to the purchaser and payment of freight would be the responsibility of the purchaser. However, the learned Judge proceeded to examine the impact of the relevant provisions of the Control Order on the terms and conditions of the contract. In this connection, the learned Judge referred to the fact that the Control Order was a statutory order, having overriding effect and the terms and conditions of the contract to the extent to which they conflict with the provisions must be held to be excluded.

21. He referred to clause 8 which provided a maximum price of Rs. 214.65 per metric tonne f.o.r. destination railway station. The learned Judge then referred to clause 9 which contemplated that the f.o.r. destination railway station price would be realised by the producer for the excess of such price over the retention price and the selling agency commission is required to be paid over by the producer to the Controller in the Cement Regulation Account. Further the amount of freight has, therefore, to be realised by the producer from the purchaser and that postulated that it was the producer who paid the freight to the railway authorities. It was further stated that the proviso to clause 9 made this double clear by providing that 'the expenditure incurred by the producer on freight ..... shall be reimbursed to the producer'. Equally, emphasis was made on the following expression occurring in clause 11 : '..... paying or equalising the expenditure incurred by the producer on freight'. The learned Judge then came to the conclusion that under the scheme of the Control Order the freight is paid by the producer and then he recovers it from the purchaser. Realising that this did not conclude the controversy, the learned Judge poses the question thus : When the producer pays the freight, does he do so because, as between him and the purchaser, he is liable to pay the freight and he then recovers it as part of the price or the obligation to pay the freight is on the purchaser and the producer pays it on behalf of the purchaser and then recovers it by way of reimbursement The learned Judge himself answers the question in the following terms :

'We are of the view that the former, and not the latter, represents the correct legal position. If the obligation to pay the freight were on the purchaser and in fact the purchaser paid the freight, as happened in both the cases before us in respect of every transaction of sale of cement, the amount of freight would obviously be deducted from the f.o.r. destination railway station price in the invoice and only the balance would be realised by the assessee. There would be no question of the assessee realising the amount of freight from the purchaser because the purchaser would have paid the freight in discharge of his own liability and the assessee would have no claim to recover it from the purchaser. Then how would the terms of clause 9, proviso to that clause and clause 11 of the Control Order be satisfied How would it be possible to give effect to clause 9 if what is realised by the assessee is not the f.o.r. destination railway station price but that price less the amount of freight How would the assessee claim to be entitled to be reimbursed under the proviso to clause 9 if he has not incurred any expenditure on the freight The entire statutory scheme would become unworkable. The scheme of the Control Order clearly proceeds on the basis that the freight is payable by the producer and he recovers it from the purchaser as part of the f.o.r. destination railway station price. The provision in the contract that the delivery to the purchaser shall be complete as soon as the goods are put on rail and payment of the freight shall be the responsibility of the purchaser is wholly inconsistent with the scheme of the Control Order and must be held to be excluded by it. The Control Order is paramount : it has overriding effect and if it stipulates that the freight shall be payable by the producer, such stipulation must prevail, notwithstanding any term or condition of the contract to the contrary. The conclusion is, therefore, inevitable that the amount of freight forms part of the 'sale price' within the meaning of the first part of the definition.'

22. The ratio of the Supreme Court is conclusive on the question which arises for determination in this case. However, Mr. P. R. Ranganathan, the learned counsel for some of the assessees, vehemently contended that the Supreme Court has omitted to take note of the second limb of the definition of 'sale price' in section 2(h) of the C.S.T. Act and such an omission would render the decision per incuriam and not a valid precedent, and therefore, the said decision is not binding on this Court. We are unable to subscribe to the argument of the learned counsel. Bhagwati, J., has clearly and categorically applied his mind to the second part of the definition of 'sale price' in section 2(p) of the Rajasthan Sales Tax Act which is identical with section 2(h) of the C.S.T. Act. The learned Judge has observed as follows :

'The second part enacts an inclusive clause. It says that 'sale price' includes 'any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in case where such cost is separately charged'. Therefore, 'any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof' is to be regarded as part of 'sale price', even if it does not fall within the first part of the definition. But there is an exception carved out of this inclusion. Not all sums charged for something done by the dealer in respect of the goods at the time of or before the delivery thereof are covered by the inclusive clause. The cost of freight or delivery or the cost of installation certainly represents an amount charged for transportation or installation of the goods at the time of or before the delivery thereof and would, therefore, fall within the inclusive clause on its plain terms but it is taken out by the exclusion clause, 'other than the cost of freight or delivery or the cost of installation in case where such cost is separately charged'. This exclusion clause does not operate as an exception to the first part of the definition. It merely enacts an exclusion out of the inclusive clause and takes out something which would otherwise be within the inclusive clause. Obviously, therefore, this exclusion clause can be availed of by the assessee only if the State seeks to rely on the inclusive clause for the purpose of bringing a particular amount within the definition of 'sale price'. But if the State is able to show that the particular amount falls within the first part of the definition and is, therefore, part of the 'sale price', the exclusion clause cannot avail the assessee to take the amount in question out of the definition of 'sale price'. Here, on the view taken by us, the amount of freight forms part of the 'sale price' within the meaning of the first part of the definition and it is not necessary for the State to invoke the inclusive clause and in fact the State has not done so. The exclusion clause is, therefore, irrelevant and cannot be called in aid by the assessee. We may point out that even if the exclusion clause were read as an exception to the first part of the definition which, as we have pointed out, cannot be done, it cannot avail the assessee. It is only where the cost of freight is separately charged that it would fall within the exclusion clause and in the context of the definition as a whole, it is obvious that the expression '...... cost of freight ....... is separately charged' is used in contradistinction to a case where the cost of freight is not separately charged but is included in the price. It is not intended to apply to a case where the cost of freight is part of the price but the dealer chooses to split up the price and claim the amount of freight as a separate item in the invoice. Where the cost of freight is part of the price, it would fall within the first part of the definition and to such a case, the exclusion clause in the second part has no application.

We must, therefore, hold that, by reason of the provisions of the Control Order, which governed the transactions of sale of cement entered into by the assessee with the purchasers in both the appeals before us, the amount of freight formed part of the 'sale price' within the meaning of the first part of the definition of that term and was includible in the turnover of the assessee.'

23. We are of the view that the above decision concludes the matter. We reject the contention of Mr. Ranganathan that the second limb of the definition of 'sale price' has not been considered by the Supreme Court. It is also significant that the Supreme Court has considered not only the definition of 'sale price' as found in section 2(p) of the Rajasthan Sales Tax Act, but also the definition of 'sale price' as found in section 2(h) of the C.S.T. Act both of which are identical.

24. It is, therefore, now settled that the provisions of the Cement Control Order, 1967, have an overriding effect not only on the terms of contract between the parties as regards as the sale of cement, but also on the definition of 'sale price' in section 2(h) of the C.S.T. Act. In other words, under the provisions of the Cement Control Order, it is the producer who is liable to pay the freight though he may be able to recover it from the purchaser as part of the price. This will be so, notwithstanding the second part of the definition of 'sale price' in the C.S.T. Act. By virtue of the provisions of the Cement Control Order, the freight forms part of the 'sale price' within the meaning of the first part of the definition. Hence, it is unnecessary to invoke the second part of the definition at all. We, therefore, hold that the freight forms part of the sale price under the C.S.T. Act and is also liable to be included in the sale price for the purposes of the assessees' liability to sales tax.

25. Mr. S. V. Subramaniam, the learned counsel for some of the assessees, heavily relied upon the decision of a Full Bench of seven Judges of the Supreme Court reported in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer : [1978]2SCR433 . The learned counsel contended that the said decision must have an overriding effect over the decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan : [1979]1SCR276 which is only a judgment by a Bench of two Judges of the Supreme Court. The question that arose for consideration before the Supreme Court. The question that arose for consideration before the Supreme Court in Vishnu Agencies' case : [1978]2SCR433 referred to above was whether sale of cement, cotton, coal or iron and steel which are in short supply and which are governed by various types of Control Orders issued under the Essential Commodities Act, 1955, with a view to making the goods available to the consumer at a fair price, will amount to sale in the language of the law. Vishnu Agencies (P.) Ltd., appellants before the Supreme Court, were stockists of cement. They supplied cement to persons in whose favour allotment orders were issued at the price stipulated and in accordance with the conditions of the permits issued by the authorities. The permits were issued by the authorities designated under the Cement Control Order. They were assessed to sales tax in respect of the sales effected by them as per the allotment orders. The tax was duly paid. Later on, they found that the transactions were not exigible to sales tax in view of the ratio laid down by the Supreme Court in New India Sugar Mills Ltd. v. Commissioner of Sales Tax : AIR1963SC1207 and consequently contended that the sales were not effected by them on their own volition and that the transactions, inasmuch as they were effected by virtue of the permits issued by the authorities under the cement Control Order, did not constitute sale within the meaning of the Sales Tax Act. There were connected appeals filed by persons who were dealing in rice. Chandrachud, J., as he then was, after a very lucid and elaborate discussion on the entire question in relation to the relevant authorities came to the conclusion that the majority decision in New India Sugar Mills Ltd.'s case : AIR1963SC1207 is not good law and that the transactions between the appellants - Vishnu Agencies (P.) Ltd. - and the allottees were sales within the meaning of section 2(g) of the Bengal Finance (Sales Tax) Act, 1941 : Similarly, the learned Judge also held that the transactions between the growers and procuring agents as also between the rice millers on the one hand the wholesalers or retailers on the other are sales within the meaning of section of 2(1)(n) of the Andhra Pradesh General Sales Tax Act, 1957. Beg, C.J., by a separate judgment concurred with the opinion of Chandrachud, J., as he then was, though the learned Chief Justice held that the New India Sugar Mills Ltd.'s case : AIR1963SC1207 was distinguishable. The above case does not in any manner affect the facts of this case.

26. Mr. Ranganathan raised an alternative argument that even assuming that freight is liable to be included in the sale price for the purpose of sales tax under the C.S.T. Act, a lower rate should be applied in the case of freight. In other words, Mr. Ranganathan argued that freight constituted 'goods' other than cement. The learned counsel was not able to convince us as to how freight can fall under the category of any 'goods' at all. No further discussion is called for to reject this argument as without substance.

27. We now take up for consideration the question whether cost of packing materials and excise duty on packing materials could be included in the sale price within the meaning of the sale price under section 2(h) of the C.S.T. Act. In our opinion the decision of the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan : [1979]1SCR276 equally applies to packing charges and excise duty on packing materials also. In Hindustan Sugar Mills Ltd.'s case : [1979]1SCR276 Bhagwati, J., has stated thus with reference to the definition of 'sale price' in section 2(p) of the Rajasthan Sales Tax Act which, as already stated, is in pari materia with section 2(h) of the C.S.T. Act :

'This definition is in two parts. The first part says that 'sale price' means the amount payable to a dealer as consideration for the sale of any goods. Here, the concept of real price or actual price retainable by the dealer is irrelevant. The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to ask is as to what is the amount payable by the purchaser to the dealer as consideration for the sale and not as to what is the net consideration retainable by the dealer.'

28. Thus, according to the decision of the Supreme Court as we have already noticed, sale price means the entire price inclusive of the freight, packing charges and excise duty. It is on this principle and on the overriding effect of the provisions of the Control Order that the Supreme Court came to the conclusion that freight forms part of the sale price within the meaning of the first part of the definition of 'sale price' found in section 2(h) of the C.S.T. Act.

29. Mr. C. Natarajan, the learned counsel, emphasised upon clause 8 of the Cement Control Order which is as follows :

'Every producer shall, himself or by any person on his behalf, sell

(a) waterproof (hydrophobic) cement at Rs. 350.94 per metric tonne

(b) rapid hardening cement, low heat cement and high-strength ordinary portland cement at Rs. 341.94 per metric tonne

(c) ordinary portland cement, portland pozzolana cement, blast furnace slag cement and masonry cement at Rs. 318.94 per metric tonne.'

30. The learned counsel therefore argued on the basis of clause 8 that packing charges were excluded from the price of cement. However, the learned counsel has overlooked the proviso to clause 8. The said proviso reads as follows :

'Provided that in the case of packed cement, there shall be added to the price referred to in this clause such charges as may be fixed by the Central Government in respect of packing in jute bags or in any other containers, and different charges may be fixed for the use of new and serviceable second hand jute bags and for the use of such other containers.'

31. The proviso therefore clearly provides that the packing charges or the charges for the containers where packed cement is sold should be added to the price. We therefore hold that under the C.S.T. Act packing charges are also liable to be included in the sale price for the purpose of assessment of sales tax.

32. Reference was made to G.O. No. 3921, Revenue, dated 1st September, 1960, issued by the Government of Tamil Nadu in exercise of the powers conferred by sub-section (5) of section 8 of the C.S.T. Act, 1956. By the said G.O. the Government of Tamil Nadu have directed that with effect from 1st April, 1959, no tax under the said Act, shall be payable by any dealer in respect of packing materials used for goods sold in the course of inter-State trade or commerce when the packing charges are specified and charged for separately without including them in the price of goods sold. It is admitted that this notification was cancelled by G.O.P. 7237, Revenue, dated 4th December, 1973. However, for the period during when this notification was in force, i.e., for 1969-70, the Tribunal held that the claim of the assessees for exclusion of the packing charges from the C.S.T. Act was admissible. Against the said order, the department has not come up in revision.

33. The same conclusion should follow as regards the inclusion of excise duty as well. The Supreme Court as a matter of fact has specifically stated in Hindustan Sugar Mills Ltd.'s case : [1979]1SCR276 that excise duty also goes to make up the sale consideration which passes from the purchaser to the dealer. This is what Bhagwati, J., has observed with regard to excise duty :

'Take for example, excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him, he always passes on the excise duty to the purchaser. Ordinarily, it is now shown as a separate item in the bill, but it is included in the price charged by him. The 'sale price' in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But, even so, it would be part of the 'sale price' because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability, statutory or otherwise, under which the purchaser would be liable to pay the amount of excise duty to the dealer. And, on this reasoning, it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill. In ether case, it would be part of the sale price.'

34. The learned Judge also quoted the following observations of Goddard, L.J., in Love v. Norman Weight (Builders) Ltd. [1944] 1 All ER 613 which had been quoted with approval by S. K. Das, J., in George Oakes (Pvt.) Ltd. v. State of Madras : [1962]2SCR570 :

'Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not.'

35. In other words, the ratio of the decision is that the price which a purchaser pays is what the seller demands. He does not care to consider the ingredients which go to make up the consideration which the seller demands for the goods sold. The total consideration which the purchaser pays to the seller, although it may be made up of different items, such as excise duty, packing charges, freight and other taxes, will be the sale price. The sale price cannot be divided into different items which go to make-up the totality of the consideration.

36. Our attention has been drawn to the decision in McDowell & Co. Ltd. v. Commercial Tax Officer : [1977]1SCR914 . This decision was relied on by the learned counsel to bring home the distinction between 'excise duty' and 'sale tax'. The appellants before the Supreme Court were manufacturers of Indian liquors. Under the rules the manufacture can remove liquor from the distilleries only after prepayment of the excise duty. Every buyer of Indian liquor from the appellants' distilleries obtained distillery pass for the release of the liquor after making payment of the excise duty and presented the same at the concerned distillery, whereupon a bill of sale or invoice was prepared by the distillery showing the price of the liquor. The bill did not include the excise duty paid by the buyer. The appellants' books of account also did not contain any reference regarding the excise duty paid by the purchasers in the manner stated above. The question arose whether the excise duty paid by the purchasers could also be included in the sale price of the liquor sold by the manufacturer. The learned Judge made a distinction between the nature of the excise duty and the nature of the sale tax. It was clearly laid down that the excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. Countervailing duty was also explained as one to equalise the burden on alcoholic liquors imported from outside the State, and is leviable only in the cases where similar goods are actually produced or manufactured in the State on which excise duties are being levied. On the other hand, sales tax was explained to be a tax on the sale of goods. The learned Judges further held that excise duty and countervailing duty paid directly by the buyers of the Indian Liquor did not constitute a part of the turnover of the appellants before the Supreme Court. This decision does not in any way help the assessees in these cases. In McDowell's case : [1977]1SCR914 the Supreme Court did not have to consider the impact of the Cement Control Order as in Hindustan Sugar Mills Ltd.'s case : [1979]1SCR276 . The Supreme Court has in the latter case clearly laid down that the provisions of the Cement Control Order will have overriding effect not only on the terms of contract, but also on the provisions of the C.S.T. Act. Admittedly, when the assessees buy jute bags, they pay for the same. The price which they pay for the same includes the excise duty as well. As the price of the jute bags form an element of sale of cement, necessarily therefore the cost of jute bags as well as the excise duty paid thereon go to form the totality of the sale consideration for packed cement. We have therefore no hesitation in holding that excise duty paid on packing materials also is liable to sales tax under the provisions of the C.S.T. Act.

37. Now, we take up for consideration the question whether the assessees are liable to to pay sales tax on freight, packing charges and excise duty on packing materials under the provisions of the T.N.G.S.T. Act and the T.N.A.S.T. Act. Under the T.N.G.S.T. Act, sale price is not defined as in the case of the C.S.T. Act or the Rajasthan Sales Tax Act. The charging section so far as T.N.G.S.T. Act is concerned in section 3. Section 3 reads as follows :

'3. (1) Every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than fifty thousand rupees and every casual trader or agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax for each year at the rate of four per cent of his taxable turnover.'

38. The rest of the sub-section in section 3 is not relevant for our present purpose. 'Turnover' in section 2(r) is defined as meaning 'the aggregate amount for which goods are bought or sold, or supplied, or distributed, by a dealer, either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce, other than tea grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover'. The explanations are omitted.

39. Section 2(p) defines 'taxable turnover' as follows :

'Taxable turnover' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed.'

40. Thus the scheme of the T.N.G.S.T. Act is that sales tax is payable on the taxable turnover of a dealer who is defined as any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes a local authority, company or Hindu undivided family, firm or other association of persons which carries on such business, a casual trader, a commission agent, a broker or a del credere agent, or an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal and every local branch of a firm or company situated outside the State. Taxable turnover has to be determined only after making the statutory deductions from the turnover of a dealer. Section 53 confers powers on the Government to make rules to carry out the purpose of the Act. Section 53(2)(b) confers powers on the Government to make rules for determining the total turnover or turnover of a dealer for the purpose of the Act. The Tamil Nadu General Sales Tax Rules, 1959, have accordingly been framed by the Government in accordance with the powers conferred on it by section 53 of the T.N.G.S.T. Act. Rule 6 reads as follows :

'6. The tax or taxes under section 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 -

(a) all amounts for which goods specified in the Third Schedule to the Act are sold;

(b) all amounts for which goods exempted by a notification under section 17 are sold or purchased, as the case may be provided that the terms and conditions, if any, for the exemption in the notification are complied with;

(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;

(cc) all amounts falling under the head charges for packing, that is to say, cost of packing materials and cost of labour.

(i) when charged for by the dealer separately without including such amounts in the price of the goods sold in respect of the goods liable to tax at the hands of the assessee; and

(ii) whether or not such amounts are specified and charged for by the dealer separately, in respect of the goods not liable to tax at the hands of the assessee.'

41. The following principle emerges when we read sections 3, 2(p) and 2(r) of the T.N.G.S.T. Act and rule 6(cc) of the T.N.G.S.T. Rules. A dealer is liable to pay sales tax on his taxable turnover. 'Turnover' means the aggregate of the amounts received by him for the goods sold. The definition of 'turnover', therefore, will take in its fold not only the actual price of the goods, but the cost of freight charges for delivery and cost of packing materials and cost of labour. To arrive at the net taxable turnover, the necessary statutory deductions provided for under rule 6 have to be made in terms of the definition of 'taxable turnover' contained in section 2(p). Rule 6(c) provides for the deduction of freight from the total turnover of a dealer. It must, therefore, necessarily follow that in arriving at the taxable turnover of a dealer under the provisions of the T.N.G.S.T. Act read along with the Rules made thereunder, the freight charges will have to be deducted.

42. Similarly, under rule 6(cc) all amounts falling under the head 'charges for packing, that is to say, cost of packing materials and cost of labour : will have to be deducted. This is to be so when packing charges are are charged for by the dealer separately without including such amounts in the price of the goods sold. So far as these cases are concerned, it is not disputed that packing charges are charged for separately. Consequently, there is no difficulty in arriving at the conclusion that the cost of packing materials and the cost of labour will have to be deducted from the total turnover of a dealer under rule 6(cc) of the Rules, when such charges are shown separately. It, therefore, follows that the cost of jute bags used for cement in these cases has got to be necessarily excluded from the computation of the taxable turnover, for the purpose of assessment of sales tax under rule 6 of the Rules framed in exercise of the powers conferred by section 53 of the T.N.G.S.T. Act.

43. The learned counsel for the department cited a Bench decision of this Court in State of Tamil Nadu v. Chettinad Cement Corporation Ltd. [1976] 38 STC 519 in support of his contention that freight could not be exempted from sale price for the purpose of sales tax under the T.N.G.S.T. Act and the Rules made thereunder. We are afraid that this decision cannot be accepted as a binding authority on the proposition of law that we are now called upon to decide. We are in agreement with the learned Judges when they say that freight will have to be included in the total turnover under the T.N.G.S.T. Act. However, by virtue of the operation of rule 6(c) freight will have to be excluded. No doubt, rule 6(c)(i) states that freight when specified and charged for by the dealer separately without including it in the price of the goods sold has to be excluded. In these cases, it is admitted that freight is shown by the assessee separately. However, since the definition of 'turnover' contained in section 2(r) takes in the aggregate amount for which goods are bought and sold, freight will have to be necessarily taken into consideration for ascertaining the 'total turnover'. Thereafter, to arrive at the 'taxable turnover', freight will have to be again deducted under rule 6(c). We are therefore of the view that this decision does not in any way help the learned counsel for the department.

44. In Mettur Chemical and Industrial Corporation Ltd. v. State of Tamil Nadu [1976] 38 STC 511 a Bench of this Court following the ratio in Mettur Chemical and Industrial Corporation Ltd. v. State of Tamil Nadu by D.C.T.O., Omalur [1976] 37 STC 288 held that under the Tamil Nadu General Sales Tax Rules, rule 6(c) excludes freight and charges for delivery from the taxable turnover, though freight and charges for delivery are separately itemised in rule 6(c) and that the delivery charges were the contractual ex-factory price and has to be treated as part of the price itself and therefore to be excluded from the taxable turnover (sic).

45. In State of Tamil Nadu v. Parry & Co. [1976] 38 STC 122 this Court held that merely because freight is shown separately in the bill, the dealer is not entitled to deduct the amount from the taxable turnover under rule 6(c) of the T.N.G.S.T. Rules, 1959. In order to claim deduction of freight, not only the freight will have to be shown and separately charged in the bill, but there should be evidence to show that it was not included in the price in the bargain made between the dealer and the purchaser. If the bargain between the parties was for payment at a particular price, the mere fact that the dealer had bifurcated the price and shown the total amount under separate headings would not enable the dealer to get the deduction of the freight from the total taxable turnover. No contention has been taken by the department in these cases that the bargain between the parties was for payment of the price at a particular rate and that the sale price included the freight also notwithstanding rule 6(c).

46. Regarding the question as to packing materials, the learned counsel for the assessees cited the decision in State of Tamil Nadu v. Cement Distributors P. Ltd. [1973] 31 STC 309. It is said decision, two questions arose for consideration. The first question was whether the producers who supplied the cement to the State Trading Corporation or its agents in gunny bags in pursuance of the directions given by the Government are liable to pay sales tax on the turnover relating to the price of the gunny bags. The other question was the one which related to the interpretation of rule 6(f) of the Rules framed under the T.N.G.S.T. Rules. The learned Judges followed the decision of the Supreme Court in New India Sugar Mills Ltd.'s case : AIR1963SC1207 and Chittar Mal Narain Das v. Commissioner of Sales Tax : [1971]1SCR671 and held that the supply of cement to the State Trading Corporation cannot be considered as sale within the meaning of the T.N.G.S.T. Act, 1959, in view of the Cement Control Order, 1958. The learned Judges also observed that there was no dispute that if the price of gunny bags is also held to have been controlled then the supply of the gunny bags cannot be considered as 'sales'. Apart from the fact that this decision arose under the Cement Control Order, 1958, there is the further fact that the decision in New India Sugar Mills Ltd.'s case : AIR1963SC1207 has been held to be in correct law in the subsequent case in Vishnu Agencies (Pvt.) Ltd.'s case : [1978]2SCR433 . This case is however important for the second question which was in favour of the assessees. In Dalmia Cement (Bharat) Ltd. v. Deputy Commercial Tax Officer [1969] 23 STC 355 which dealt with rule 6(f) of the Rules, it was held that the turnover relating to packing materials was not liable to tax. A similar view has been taken by this Court in the State of Madras, In Re [1956] 7 STC 355 wherein Rajagopalan, J., and Rajagopala Iyengar, J., took the view that the price of packing materials were liable to be excluded in the sale price under the rule which prevailed then and which was identical to rule 6(f). The Supreme Court held that the charges for packing included both the price of packing materials as well as the charges relating to labour. The present rule 6(cc) is identical with the original rule 6(f) which the Supreme Court had to interpret in this connection.

47. It was however argued by the learned counsel for the department that in any event excise duty on packing materials could not be included for the purpose of deduction from the total turnover under rule 6(cc). We do not agree. Admittedly, the assessees in all these cases are not manufacturers of cement bags. They are buying jute bags for packing cement from others. The cost of packing materials, which in the case of these assessees, are the jute bags, will include not only the actual price charged for by the dealers of jute bags, but also the excise duty paid by such dealers of cement in respect of jute bags and collected from the assessee. As we have already observed, while dealing with an identical question under the provisions of the C.S.T. Act, so far as the assessees are concerned, the consideration paid by them for the jute bags is the total cost for the same. When they buy jute bags from the dealers, they do not pause to consider how much of the consideration is made up of the actual price of the jute bags and how much of its is made up of the excise duty thereon. The cost of packing materials, namely, the jute bags, is the total consideration paid by them in their purchase, and it is that will have to be deducted from the total turnover under rule 6(cc). We have, therefore, no hesitation in holding that the excise duty paid on packing materials has necessarily to be excluded from the total turnover for arriving at the taxable turnover for the purpose of computing the sales tax under the T.N.G.S.T. Act.

48. The learned counsel for the department argued that the decision of the Supreme Court in Hindustan Sugar Mills Ltd.'s case : [1979]1SCR276 would equally apply to the T.N.G.S.T. Act. We have already referred to the definition of 'sale price' in the C.S.T. Act and the absence of a similar definition in the T.N.G.S.T. Act. Under the T.N.G.S.T. Act, sales tax is payable only on the taxable turnover. For arriving at the taxable turnover, we have necessarily to make the necessary deductions provided under rule 6(cc) from the 'total turnover'. The Supreme Court in Hindustan Sugar Mills Ltd.'s case : [1979]1SCR276 , referred to above, were not concerned with the provisions of the T.N.G.S.T. Act., and the Rules made thereunder. Consequently, we are clearly of the opinion that the ratio of Hindustan Sugar Mills Ltd.' case : [1979]1SCR276 is not attracted to the provisions of the T.N.G.S.T. Act.

49. We, therefore, hold that so far as the T.N.G.S.T. Act is concerned, by the operation of rule 6(c) and 6(cc), the assessees will be entitled to exclude the freight, cost of packing materials and excise duty on packing materials from the sale price for the purpose of assessment of sales tax.

50. The next point to be considered is whether the assessees are liable to pay addi tional sales tax under the T.N.G.S.T. Act on freight, cost of packing materials and excise duty on packing materials. When once it follows that these items which had to be excluded from the sale price for the computation of sales tax, it necessarily follows that the assessees are not liable to pay additional sales tax on freight, cost of packing materials and excise duty. We therefore answer this question in favour of the assessees.

51. The result is as follows :

In tax revision cases arising under the C.S.T. Act, we hold that the freight, packing charges and excise duty on packing materials have to be included in the sale price for the computation of sales tax.

52. In cases arising under the T.N.G.S.T. Act and the T.N.G.S.T. Act, we hold that freight, packing charges and excise duty on packing materials are not liable to be included in the sale price for the computation of the sale tax.

53 .The assessees are not liable to pay additional sales tax on freight, packing charges and excise duty in packing materials in those cases arising under the T.N.A.S.T. Act.

54. T.C. Nos. 206 to 210, 450 to 452, 470 to 474, 825, 581, 583 and 586 of 1979 which arise under the C.S.T. Act are dismissed. T.C. Nos. 31 to 37, 45 to 52, 54 to 61, 826, 827, 582, 584, 585 and 589 of 1979 are allowed.

55. In view of the mixed result in the tax revision cases there will no order as to costs.

56. Learned counsel for both sides ask for oral leave to appeal to the Supreme Court in view of the substantial questions of law that arise for consideration. We are satisfied that in the circumstances of the case, substantial questions of law are involved which require to be necessarily decided by the Supreme Court. In the circumstances we grant leave for both sides.


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