Sukhdev Singh Kang, J.
1. This judgment will dispose of G.S.T. Ref. Nos. 10 to 13 of 1980.
2.On applications filed by the Excise and Taxation Commissioner, Haryana, under Section 42(1) of the Haryana General Sales Tax Act, 1973 (hereinafter referred to as 'the Act'), the Sales Tax Tribunal, Haryana, has referred the following two questions of law for our opinion :
(i) Whether, on the facts and circumstances of this case, the amount of freight charged on the goods and later on reduced from the bill would be liable to deduction from the turnover of the dealer in terms of Section 2(j) of the Central Sales Tax Act, 1956 and 2(i) of the Punjab General Sales Tax Act as applicable to the State of Haryana ?
(ii) Whether, on the facts and circumstances of the case and in view of the judgments of the High Courts of the Madhya Pradesh, Tamil Nadu and Supreme Court, the ratio of the Hyderabad judgment is applicable to the sales transactions in these cases ?
The factual matrix giving rise to these questions may be viewed :
Janki Dass and Co., Sonepat, i.e., the respondent, is a registered dealer under the Punjab General Sales Tax Act, 1948, as applicable to the State of Haryana at the material time and the Central Sales Tax Act, 1956. The respondent is the sole distributor of Atlas Cycle Industries Ltd., Sonepat, all over the country. The Assessing Authority while framing assessment for the year 1964-65, under the State Sales Tax Act, vide his order dated July 12, 1973, held that the amount of freight charged on the goods and later on reduced from the bill was a part of the turnover of the dealer and the same was liable to sales tax under both the Acts. Similarly, while framing assessment for the assessment year 1965-66, the Assessing Authority levied tax on the freight amount included in the price of goods in the first instance and later on reduced from the bill under the State Sales Tax Act and the Central Sales Tax Act, vide order dated August 19, 1973.
3. Aggrieved by these orders, the respondent went up in appeal before the Deputy Excise and Taxation Commissioner, Ambala, who did not agree with the contentions raised by the respondent and dismissed the appeals and confirmed the order of the Assessing Authority. Still dissatisfied, the respondent filed four appeals against the orders of the Deputy Excise and Taxation Commissioner before the Tribunal. It was argued on behalf of the respondent that the terms and conditions printed in the price list and the form of order placed by the purchaser were similar to the terms and conditions present in the case reported as Hyderabad Asbestos Cement Products Ltd. v. State of A.P. [1969] 24 STC 487 and in that case, their Lordships of the Supreme Court had held that under such circumstances, freight does not form part of the turnover of a dealer. The departmental representative, on the other hand, had argued before the Tribunal that the judgment in the Hyderabad Asbestos case [1969] 24 STC 487 (SC), was distinguishable because of Clauses (4) and (16) of the terms and conditions of the present case. The Tribunal, after painstakingly analysing the statutory provisions and, more particularly, the definition of 'sale price' given in Section 2(h) of the Central Sales Tax Act and the definition of 'turnover' enacted in Section 2(i) of the Punjab General Sales Tax Act and various authorities cited before him, came to the conclusion that in view of the definitions referred to above, the sales tax on freight was leviable only in cases where the freight was actually charged by the selling dealer from the purchasing dealer or the same was, under some contract, payable to the selling dealer. Interpreting the terms of the contract, he highlighted a condition that the railway receipt will be 'freight to pay', and the railway freight will be deducted from the invoices and will be payable to the dealer at its destination. The Tribunal recorded a finding of fact that the freight was neither payable to nor was it charged by the appellant-company. The freight could not, therefore, be included in the turnover. The Tribunal held that the appeals were fully covered by the ratio of the Supreme Court's judgment in Hyderabad Asbestos Cement Products Ltd. case [1969] 24 STC 487. Consequently, he held that sales tax was not leviable on freight under either of the Acts. It is in this background that the questions of law extracted in the opening part of the judgment have been referred to us under Section 42(1) of the Act for our opinion.
4. It has been urged on behalf of the State of Haryana that the terms and conditions in the price list in the present cases are substantially different from the terms and conditions in the contract in Hyderabad Asbestos Cement Products Ltd. case [1969] 24 STC 487 (SC). The contract in this case was essentially an f.o.r. destination and in such contracts it is the responsibility of the seller to send the goods up to the destination and, for that reason, the amount of freight up to the destination necessarily forms a component of the price charged. In such a case, the freight paid at the destination by the purchaser, for which rebate is given in the bill, is actually on behalf of the seller and the payment is made in pursuance of the agreement between the seller and the buyer and is only for the sake of convenience of the parties concerned. Terms of an f.o.r. contract necessarily imply that the parties intended that freight up to destination is payable by the seller and in fact a part and parcel of the gross price charged when the goods are sent. The language of Clauses (4) and (16) is susceptible to only one construction that it was a contract f.o.r. destination. Reliance for this submission was placed on a decision of the Madhya Pradesh High Court in Birla Jute . v. Commissioner of Sales Tax [1972] 29 STC 639. In this case, the ratio of the Supreme Court's decision in Hyderabad Asbestos case [1969] 24 STC 487, was explained and it was held that the same was not applicable to the case like the present one. Similarly support was sought from a decision of the Madras High Court in State of Tamil Nadu v. Chettinad Cement Corporation Limited [1976] 38 STC 519, taking the same view.
5. These submissions have been countered on behalf of the respondent. It has been urged that the ratio of Hyderabad Asbestos case [1969] 24 STC 487 (SC), is fully applicable to the issues involved in the present cases. The terms of the contracts in the two sets of cases were similar, if not identical, and that the view taken by the Tribunal fully comforts the law laid down by the Final Court and that the questions should be answered in favour of the respondent.
6. It will be apposite to notice the various relevant statutory provisions at the threshold.
Section 2(h) of the Central Sales Tax Act, 1956 :
' 'Sale 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 sums 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.'
Section 2(i)(i) of the Punjab General Sales Tax Act, 1948, as applicable to the State of Haryana at the material time :
''Turnover' includes the aggregate of the amounts of sales and purchases and parts of sales and purchases actually made by any dealer during the given period less any sum allowed as cash discount according to ordinary trade practice, but including any sum charged for anything done by the dealer in respect of the goods at the time of, or before, delivery thereof.'
It will also be helpful to juxtapose the relevant clauses in the agreements in the two cases :
Present case
Hyderabad Asbestos case
(I) Terms & conditions :
All the prices are f.o.r. destination for despatch bygoods train or otherwise at the absolute discretion of the Co. The railwayreceipt shall be freight 'to pay'. The railway freight will bededucted from the invoice and will be payable by the dealer at destination.
(4) The price of the said productions supplied to the stockistsshall be the current general gross list price charged by the company, free onrail, less such discount as may be fixed by the company from time to time.
(II) Form of order
(16) ........the date of delivery shall mean the date ofthe railway receipt and in the case of consignments sold free on raildestination, the railway freight shall be nevertheless payable by thestockists at the destinations and the amount of freight shown on the railwayreceipt shall be deducted from the invoice of the company.
We request you to despatch on our account and risk bygoods train to.........the whole or any portion of the undermentioned goodsat the prices ruling at the time of despatch. We authorise you to draw on usby V.P.P. or through your bank for the full amount of the invoice, includingusual charges and such draft, we bind ourselves to pay on presentation. RR/GRshould be made out on 'to pay' basis and the freight be adjusted inthe invoice.
7. It is clear from the definition of 'sale price' in the Central Sales Tax Act that the cost of freight or delivery is not included in the turnover in cases where such cost is separately charged. Similarly, according to the definition of 'turnover' in the Punjab General Sales Tax Act the cost of freight is not includible in the turnover if it is not charged by the dealer at the time of or before the delivery of the goods.
8. It is manifest from a perusal of the terms of contract in the present case and Hyderabad Asbestos case [1969] 24 STC 487 (SC), that the dealers in both the cases were not under an obligation to pay the freight of the goods despatched free on rail (f.o.r.) destination. It was explicitly made clear in both cases that the railway freight shall be payable by the purchaser at the destination and that the amount of freight shown in the railway receipt shall be deducted from the invoice. In the present cases, it has been made further clear that the purchaser had expressly stated that they authorised the respondent dealers that they bound themselves to pay on presentation. RR/GR should be made out on 'to pay' basis and the freight be adjusted in the invoice. There is nothing to suggest in the language of the contract or the catalogue that it was the responsibility of the seller to send the goods up to the destination and that freight was paid by the purchaser on behalf of the seller. In Hyderabad Asbestos Cement Products Ltd. case [1969] 24 STC 487 (SC), a dealer, to meet competition from other manufacturers, maintained a uniform catalogue rate all over the country in respect of the goods manufactured. The company sent goods to outstation customers by rail under railway receipts with 'freight to pay'. It made out an invoice at the catalogue rate, and the customer paid the amount of invoice less the freight for releasing the railway receipt and took delivery of the goods on payment of the railway freight. The result was that the net price received by the company was the catalogue rate less the railway freight charged in respect of the goods transported to the destination.
9. The facts were quite similar to the facts in the present cases as found by the Tribunal. On these facts it was held by their Lordships of the Supreme Court:
'(i) that under the terms of the contract there was no obligation on the part of the company to pay the freight and the price received by the company for the sale of the goods was the invoice amount less the freight ;
(ii) that the form in which the invoice was made out was not determinative of the contract between the company and its customers. If, apprehending that it may have to pay sales tax on the freight, the company collected sales tax on the freight, the true nature of the contract between the company and the purchasers could not on that account be altered. That the company might be liable to refund the amount of excess sales tax to its purchasers was a matter between the company and the purchasers and the State could not seek to levy tax on railway freight if it was not made part of the price.'
10. This very view has been reiterated by the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13. It was observed by their Lordships :
'There may be a case where the contract of sale may not be f.o.r. destination railway station, but the price alone may be so. Where such is the case, the contract does not have all the incidents of a f.o.r. destination railway station contract, but merely the price is stipulated on that basis. The terms of such a contract may provide that the delivery shall be complete when the goods are put on rail and thereafter it shall be at the risk of the purchaser. Such a stipulation would make the railway agent of the purchaser for taking delivery of the goods. The freight in such a case would be payable by the purchaser though the price agreed upon is f.o.r. destination railway station. The price of the goods receivable by the dealer would, in that event, be the f.o.r. destination railway station price less the amount of freight payable by the purchaser. That would be the consideration payable by the purchaser to the dealer for the sale of the goods and the amount of freight being payable by the purchaser would not be included in the 'sale price' within the meaning of the first part of the definition. The position would be the same even if the dealer pays the freight and obtains railway receipt 'freight pre paid' and claims the full f.o.r. destination railway station price in the bill. The amount representing freight would not be payable as part of the consideration for the sale of the goods but by way of reimbursement of the freight which was payable by the purchaser but in fact disbursed by the dealer and hence it would not form part of the 'sale price'.'
11. The decision of the Constitution Bench of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827, relied upon by the learned counsel for the State before us, was explained by their Lordships of the Supreme Court in Hindustan Sugar Mills Ltd. case [1979] 43 STC 13 thus :
'We may also at this stage refer to another decision of this Court earlier in point of time. That is the decision in Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool [1960] 11 STC 827 (SC). What happened in this case was that the appellant sold and despatched hydrogenated groundnut oil to the purchasers at an agreed price which was inclusive of freight. It is not very clear from the record but it does appear that the railway receipts obtained by the appellant were on the basis of 'freight to pay' and the amount of freight was paid by the purchasers and in the invoices made out by the appellant, the agreed price inclusive of freight was shown and from this the amount of freight was deducted and on the balance the amount of sales tax was computed. The appellant claimed to deduct the amount of freight from the turnover on the strength of Rule 5(1)(g) of the Turnover and Assessment Rules, which provided that in determining the net turnover of a dealer, he shall be entitled to a deduction of 'all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold : (i) freight; (ii) ........'. This Court held that the deduction claimed was not permissible since the conditions for the applicability of Rule 5(1)(g) were not satisfied. It was pointed out that it was clear from the contents of the specimen invoice produced by the appellant that 'the appellant has charged a price inclusive of the railway freight and would therefore be outside the terms of Rule 5(1)(g), which requires 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. The conditions of the rule not having been complied with, the appellant was not entitled to the deduction in respect of freight'. Here the freight was payable by the appellant because the price was inclusive of the freight and there was no stipulation in the contract, as in Hyderabad Asbestos Cement Company's case [1969] 24 STC 487 (SC), that the delivery to the purchaser shall be complete when the goods are put on rail or that the payment of freight shall be the obligation of the purchaser. And it did not make any difference to this position that the freight was not initially paid by the appellant but was paid by the purchaser and given credit for against the agreed 'freight-inclusive' price in the invoice.'
12. The principles enunciated by the Final Court in Hyderabad Asbestos Cement Products Ltd. case [1969] 24 STC 487 and the Hindustan Sugar Mills case [1979] 43 STC 13, are fully applicable to the facts of the present cases. The terms of the contract and the catalogue clearly show that the freight was payable and was paid by the purchaser. The same had been deducted from the price list/invoice and the respondent-dealer had only received the price of the goods minus the railway freight. There is nothing to suggest that the freight forms a component of the price charged and the same is paid at the destination by the purchaser, for which rebate is given in the bill, is actually on behalf of the seller and the payment thereof is made in pursuance of the agreement between the seller and the buyer for the sake of convenience of the parties. The cases of Birla Jute . v. Commissioner of Sales Tax [1972] 29 STC 639 (MP) and State of Tamil Nadu v. Chettinad Cement Corporation Limited [1976] 38 STC 519 (Mad.), are of no help to the Revenue. Both the cases deal with a controlled commodity, i.e., cement. Its sale was controlled by the Cement Control Order. The distinction has been succinctly brought out in Hindustan Sugar Mills Ltd. case [1979] 43 STC 13 (SC) thus :
'The scheme of the Control Order was that the freight was payable by the producer and he recovered 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 was complete as soon as the goods were put on rail and payment of the freight was the responsibility of the purchaser was wholly inconsistent with the scheme of the Control Order and must be held to be excluded by it. The Control Order was paramount ; it had overriding effect and if it stipulated that the freight was payable by the producer, such stipulation must prevail, notwithstanding any term or condition of the contract to the contrary. Therefore, 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, the amount of freight formed part of the 'sale price' within the meaning of the first part of the definition of that term in Section 2(p) of the Rajasthan Act and Section 2(h) of the Central Act and was includible in the turnover of the assessee.'
13. In the present cases, there is no statutory regulation controlling the sale and purchase of bicycles. So, the principles formulated above will not be applicable to the present cases.
14. In the result, we hold that in the facts and circumstances of the present cases, the amount of freight charged on the goods and later on deducted from the bill does not form part of the turnover and answer the first question in the affirmative and in favour of the assessee and against the Revenue. We also hold that the ratio of Hyderabad Asbestos Cement Products Ltd. case [1969] 24 STC 487 (SC), is fully applicable to the facts of the present cases and the decisions of the Madhya Pradesh and Madras High Courts are not attracted. Thus, the second question is also answered in the affirmative and in favour of the assessee and against the Revenue.