Freight charges are includable in the taxable turnover under the Cement Control Order, 1967 and the Tamil Nadu General Sales Tax Rules, 1959.

Headnote:
SALES TAX - Turnover - Freight charges - Whether includable in the taxable turnover - Cement Control Order, 1967, cls. 8, 9, 11(1) and 11(2) - Tamil Nadu General Sales Tax Rules, 1959, r. 6(c) - Held, freight charges are includable in the taxable turnover.
Fact of the Case:

The assessee, a manufacturer of cement, reported a total and taxable turnover of Rs. 1, 56, 72, 484.29 and Rs. 1, 33, 32, 751.23 for the assessment year 1969-70. The assessee claimed a deduction of Rs. 14, 04, 131.29, representing freight charges, from the taxable turnover on the ground that they had separately specified and charged freight in their invoices. The AO and the AAC rejected the claim, but the Tribunal allowed the appeal and held that the disputed turnover could not be included in the taxable turnover.
Finding of the Court:

The Court held that the freight charges were includable in the taxable turnover. The Court observed that under cl. 8 of the Cement Control Order, 1967, the producers were bound to sell cement at a uniform rate of 129.13 per metric tonne free on rail the destination to all the dealers, irrespective of the distance of the destination station from the place of manufacture. The Court further observed that the price at which the producer could have sold and in fact agreed to sell is Rs. 129.13 per metric tonne free on rail the destination railway station and not free on rail the despatching station.
Issues: Whether the freight charges are includable in the taxable turnover.
Ratio Decidendi: The Court held that the freight charges were includable in the taxable turnover on the following grounds: * Under cl. 8 of the Cement Control Order, 1967, the producers were bound to sell cement at a uniform rate of 129.13 per metric tonne free on rail the destination to all the dealers, irrespective of the distance of the destination station from the place of manufacture. * The price at which the producer could have sold and in fact agreed to sell is Rs. 129.13 per metric tonne free on rail the destination railway station and not free on rail the despatching station. * The freight charges were not specified and charged separately by the assessee without including them in the price of the goods sold.
Final Decision: The Court allowed the tax revision case with costs and held that the freight charges were includable in the taxable turnover.

Judgment :-

V. RAMASWAMI, J. :

The respondent-assessees are manufactures of cement. For the asst. yr. 1969-70, they reported a total and taxable turnover of Rs. 1, 56, 72, 484.29 and Rs. 1, 33, 32, 751.23. The only point in dispute in this tax revision case related to a sum of Rs. 14, 04, 131.29 which represented the freight charges. On the ground that they have separately specified and charged freight in their invoices, they claimed deduction of this turnover from the taxable turnover. The AO and the AAC rejected this claim holding that the disputed turnover formed part of the price realised for the cement sold and that, therefore, it is includable in the taxable turnover. But, on a further appeal, the Tribunal purporting to follow the decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. vs. State of Andhra Pradesh allowed the appeal and held that the disputed turnover could not be included in the taxable turnover.

2. The supply and distribution of cement is regulated by the Cement Control Order, 1967 promulgated by the Central Government in exercise of their power under the Industries Development and Regulation Act, 1951. Under cl. 7 r/w the First schedule to this order, the Central Government had fixed an ex-factory price admissible to the producer for different varieties of cement as the retention price. Clauses 8, 9, 11(1) and 11(2) which are relevant for the purpose of this case read as follows :-

"8. Price at which producer may sell : No producer

" shall, himself or by any person on his behalf sell -

(a) rapid hardening cement and low heat cement at a price exceeding Rs. 174.00 per metric tonne :

(b) any other variety of cement at a price exceeding Rs. 151.00 per metric tonne; free on rail destination railway station plus the excise duty paid thereon.Provided that in the case of packed cement there shall be added to the price referred to in this clauses such charges as may be fixed by the Central Government in respect of packing or the containers and the Central Government may fix different charges for different kinds of packings or containers, as the case may be :-

Provided further that the Central Government may allow rebate, discount or commission in the price of cement sold to the Government through the Director General of Supplies and Disposals or intended for export out of India.

Explanation :-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 cl. (4) at the destination point.

"9. Payments to Cement Regulation Account :- 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 sale take place to the Controller, an 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) a selling agency commission calculated at the rate of Rs. 125 per metric 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 or the containers under the first proviso to cl. 8.

Provided that the expenditure incurred by the producer on freight by the cheapest mode of transport or where any other mode of transport has been specified by the Central Government under cl. (4) by such mode of transport in respect of such transaction shall be reimbursed to the producer by the Controller from out of the Cement Regulation Account referred to in cl. II." *

11. Cement Regulation Account :-(1) The Controller shall maintain an account to be know as the Cement Regulation Account to which shall be credited the amounts paid by the producer under cl. 9 and such othe

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