1. Sri Ramanathan Farms Private Limited, dealers in gypsum, was originally assessed for the assessment year 1962-63 on a turnover of Rs. 6,43,745.64 under the Central Sales Tax Act. On the ground that certain turnover has escaped assessment, reassessment proceedings were initiated. Finding that the sales effected by the assessee of gypsum to M/s. Mysore Iron and Steel Limited, Bhadravati, was on f.o.r. contract basis and that the sale price included the freight but mistakenly omitted to include the turnover relating to freight in the taxable turnover, the assessing officer revised the turnover including a turnover of Rs. 99,964.25 which represented the freight value in the price. Having failed in the appeal before the Appellate Assistant Commissioner the assessee preferred a further appeal to the Tribunal. The Tribunal however held that the freight paid on the goods by the purchasing firm to the railway out of the amount payable as sale price does not form part of the sales turnover and on that ground allowed the appeal and deleted the addition made. It is against this order of the Tribunal, the State of Tamil Nadu have filed this revision petition.
2. At the time of reassessment the original contract entered into by the assessee with M/s. Mysore Iron and Steel Limited, Bhadravati, the purchasing firm, and the connected documents were produced. Since the tender notice of M/s. Mysore Iron and Steel Limited, Bhadravati, was alone in the assessment file, we cannot for the documents relating to the contract and the assessee has now produced the same. It is seen from the documents that the purchasing firm called for quotations from the assessee and specifically stated that the price should be quoted f.o.r. Bhadravati basis. The assessee in his letter dated 11th January, 1962, submitted its tender, the relevant clauses of which were as follows : 'We have pleasure to inform you that we undertake to supply 3,000 (three thousand) M/tonnes of gypsum during the year 1962 commencing from March in instalments of 250/300 tonnes per month under freight to pay at rates and on conditions set forth hereunder : (1) Price. - Gypsum 80 per cent purity f.o.r. Bhadravati at Rs. 57.50 (Rupees fifty-seven and naye paise fifty only) per ton with pro rata increase or decrease on the basis of the percentage of purity at 68.70 per cent of Ca SO4 2H2O. Sales tax extra if applicable. (2) The price quoted is on the basis of the railway freight now existing. If there is to be any increase by way of freight and surcharge, we shall be permitted to charge the increase on you by adding the same to the price quoted.' This tender was accepted by the purchasing firm. A sample form of invoice dated 4th March, 1962, may be quoted here :
'To value of 29.1 tons of gypsum Rs. 1,696.82 Add increase in railway freight for 29.1 tons at Rs. 1.05 per M. ton Rs. 30.56 ------------ Rs. 1,727.38 Deduct railway freight 832.75 ------------ Balance Rs. 894.63 Add sales tax at 1 per cent Rs. 8.95 ------------ Rs. 903.58 Deduct advance received Rs. 620.00 ------------ Net amount due Rs. 283.58' ------------
3. The Tribunal thought that the agreement that the invoice could be raised with freight to pay and the deduction of the actual railway freight paid in the invoice showed that the freight did not form part of the price itself. In that view, the addition of Rs. 99,264.25 to the assessable turnover was deleted. We are unable to agree with this view of the Tribunal. As may be seen from the letter calling for tenders, the actual tender dated 11th January, 1962, and the acceptance of the tender that the price agreed to was at the rate of Rs. 57.50 per ton f.o.r. Bhadravati; the term relating to freight to pay is only a mode of payment of the price and does not in any way show that the price was exclusive of the freight. In fact, the second clause extracted above of the tender clearly shows that even if these was any increase in freight and surcharge, it will have to be added to the price quoted. If really the freight did not form part of the price, escalation clause or the freight payment clause should have stated that the freight is the responsibility of the buyer. The other terms and conditions in the tender and acceptance also show that the title in the goods passes to the purchaser only after it was tested and taken delivery of by the purchasing firm. Section 2(h) of the Central Sales Tax Act defines sale price as meaning : '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 coast of installation in cases where such cost is separately charged'. It was argued by the learned counsel for the assessee that the method of preparing the invoice as also the practice of sending the goods with freight to pay brings the present transaction within the exception mentioned in the last portion of the definition. We are of the view that neither the invoice prepared nor the tender and acceptance show that the freight was separately charged. As already stated, the freight is included in the price agreed to between the parties and the amount paid by way of freight is only deducted from the total price or value of the goods as in the case of advance received. The point need not detain us any further as an identical question came up for consideration before the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan : 1SCR276 . With reference to a transaction of similar nature the Supreme Court observed as follows :
'We may now take another example which is very much near to the one which we have already discussed. The dealer may, instead of transporting the goods from his factory or his place of business and selling them there, enter into a contract of sale f.o.r. destination railway station. Where such a contract is made, the seller undertakes an obligation to put the goods on rail and arrange to have them carried to the destination railway station at his expense. The delivery of the goods to the purchaser in such a case is complete at the destination railway station and till then the risk continues to remain with the dealer. The freight is payable by the dealer since he has to arrange for the goods to be carried by rail to the destination railway station at his expense and there is no obligation on the purchaser to pay the freight. The purchaser is concerned only to pay the agreed price for the delivery of the goods at the destination railway station. The agreed price being inclusive of the freight, it would be a matter of indifference to the purchaser as to what is the amount of freight. Even if there is any fluctuation in the amount of freight, since the making of the contract, the purchaser would have no concern, because he is liable to pay only the agreed price which includes the freight, whatever it be. The dealer may, in such a case, pay the freight and charge the agreed price to the purchaser, or he may obtain a railway receipt on the basis of 'freight to pay' and request the purchaser to pay the freight at the time of taking delivery of the goods from the railway at the destination railway station and give the purchaser credit for the amount of the freight against the agreed price. The latter would merely be a convenient mode of paying the agreed price. Since it is the obligation of the dealer to deliver the goods free on rail destination railway station, the dealer is liable to pay the freight as between him and the purchaser and the purchaser can very well refuse to accept the railway receipt which is not 'freight pre-paid' but 'freight to pay'. But he may, ordinarily as a reasonable businessman he would, accept such railway receipt and pay the amount of freight on behalf of the dealer. When the purchasers pay the amount of freight in such a case, it would be as part of the agreed price and not as freight vis-a-vis the dealer. The amount of freight paid by the purchaser and shown in the bill as deducted from the agreed price would, therefore, clearly form part of 'sale price' and fall within the first part of the definition.'
4. This really concludes the question. As observed by the Supreme Court this is a case where the dealer and the purchaser agreed that the railway receipt should be on the basis of freight to pay though the price agreed included the freight as well. The amount of freight paid by the purchaser was shown in the bill and deducted from the agreed price. The freight therefore clearly formed part of the sale price and fell within the first portion of the definition of 'sale price' in section 2(h) of the Central Sales Tax Act. In fact, since the price agreed to was f.o.r. destination there cannot be any case for charging freight separately and even if the bill had been raised in separate form, we would have very much doubted as to whether the freight could have been deducted from the taxable turnover.
5. Though the learned counsel for the assessee cited Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh and Tungabhadra Industries Ltd. v. Commercial Tax Officer : 2SCR14 , since these decisions also were considered by the Supreme Court in the latest decision in Hindustan Sugar Mills Ltd.'s case : 1SCR276 , we did not consider it necessary to refer to them separately in this judgment.
6. For the foregoing reasons, we are of the view that the view of the Tribunal that the freight did not form part of the price is not correct and is liable to be set aside and according we set aside the order of the Tribunal and restore the order of the assessing officer. The petitioner will be entitled to his costs. Counsel's fee Rs. 250.
7. Petition allowed.