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PETITIONER: TVL, RAMCO CEMENT DISTRIBUTION CO. PVT.LTD.,TAMIL NADU ETC.

       Vs.

RESPONDENT: STATE OF TAMIL NADU

DATE OF JUDGMENT20/10/1992

BENCH: [S. RANGANATHAN AND B.P. JEEVAN REDDY, JJ.]

ACT: Central sales  Tax Act,  1956/Tamil Nadu  General sales  Tax Act, 1956/Tamil Nadu General sales Tax Rules, 1959: Sections 2  (h) and (j)/ Sections 2(p) , (g) and 3(1) Rule 6 - sales Tax- Assessment of - Taxable turn over - Computation of- Freight  charges, packing  charges and  excise  duty  on packing   materials- whether  includible in  sale price  for purpose of both Central sales Tax and Tamil Nadu sales Tax.

HEADNOTE: The appellants-assessees  in the  first set  of appeals were selling  agents of  appellants   in the  second set  of appeals. For the assessment year 1996-70, they were assessed to sales  tax on  taxable turn-over of Rs. 2,37,66,245 which included an  amount of  Rs. 29,71,527  representing  freight charges. The  assessee claimed  exclusion of freight charges in computing the taxable turnover on the ground that freight had been  independently charged  in the  invoices. This  was rejected by the assessing authority, the appellate authority as well  as  Tribunal.  Aggrieved,  the  assessee  preferred revisions to the High court. The High  court held  that in  cases arising  under the Central sales  Tax Act,  the freight,  packing  charges  and excise duty  on packing  materials had to be included in the sale price  for the  computation of sales tax, that in cases arising under the Tamil Nadu General sales Tax Act and Tamil Nadu Additional  sales Tax Act, freight, packing charges and excise duty  on packing  materials were  not  liable  to  be included in  the sale  price for the computation of the sale price, and  that  the  assessees  were  not  liable  to  pay additional sales  tax  on  freight,  packing  materials  and excise duty on packing materials in the cases  arising under the Tamil Nadu Additional sales Tax Act. Aggrieved, both  the as  well  as  well  as  the  state Government filed appeals before this Court. On behalf  of the  state it was contended that the High court, having  held that the amounts in question were liable to the  included in  the turnover  for purposes  of  Central sales Tax  Act, ought  to have  also held that these amounts were liable  to be  included in  the  taxable  turnover  for purposes of  Tamil Nadu  General sales Tax Act and the Tamil Nadu Additional  sales Tax  Act also, and relief granted for purposes of the local sales tax was erroneous. On behalf of the assessees, it was contended that, even for the  purpose of C.S.T., the freight charges, the cost of packing  materials  and  the  excise  duty  on  the  packing materials should  have been  excluded in  the computation of

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the taxable  turnover, that  the Cement Control order, under the terms  of which sales of cement were effected during the relevant  period   by  all   cement  manufacturers,  had  no relevance to the question at issue, that all that the cement control order  laid down  was that  Cement could not be sold at a  price higher  than a price fixed by the cement control order on  terms described  "  as  free  on  rail  (F.O.R)  , destination’, that  the order  did not  stand in  the way of cement manufacturers  charging a price less than the ceiling fixed under  the  order,  nor  did  it  preclude  individual contracts  by   the  cement   manufacturers    with  various purchasers that  the latter  should bear the freight charges that the  assessees had  and that  the assessees had entered into contract  with the  purchasers which clearly stipulated that the  freight would  be   payable by  the latter, as per terms and condition of sale, the instant case was one where, despite the  terms of the control order, the assessees chose to sell  the goos  free on rail at the point where the goods were loaded  on rail  and that  the liability to pay freight was entirely  that of  the purchasers  ,  and  that    these contracts were  not inconsistent  with or  repugnant to  the terms of  the cement    control  order  and  therefore,  the assessees were entitled to exclude the amounts of freight as not forming the part of the turnover at all. Allowing    the    appeals    of    the    state    and dismissing those of the  appellant-dealers, this court, HELD: 1.  The freight  charges should   be  included in arriving at  the taxable  turnover for  purposes of  Central sales Tax  as Tamil  Nadu sales  Tax Act;  and  the  packing charges and  excise duty  thereon should also be included in arriving at  the   tax able  turnover or  purposes  of  both central sales Tax and Tamil Nadu sales Tax. [94-D,E] 2.1 The  whole purpose  of the cement control order was that cement  should be  available for  sale at all places in the country  at a controlled price. No. doubt, the price was described   as a  maximum  beyond which the sale price could not go  but the intention, which was also carried out by all the suppliers, was that cement was to be sold at what may be described as  a controlled  price on  terms ’free’  on  rail destination’. In  other words,  the producer was entitled to the controlled  price irrespective  of the amount of freight which  might   have  been   incurred  in   respect  of   the transaction. Having  regard to  the fact that the freight on consignments to  places near  the factory  and  consignments places far  away from  the factories  could show  a  lot  of variation the control order created a machinery by which all freight charges  were credited  to a  common account and any particular  cement   manufacturer  incurring   more  than  a specified amount  was entitled  to the  reimbursed  for  the excess freight  incurred by  him. The  whole  control  order proceeds on  the footing  that the freight charges are to be met  by   the  producer  and  that  he  was  entitled  to  a consolidated price  irrespective of  the freight he may have incurred. Hence  the sale price, on the terms of the Central sales Tax  Act, could  only be the controlled price as fixed by the Cement control order. [87-F-H; 88-A-C] Hindustan Sugar  Mills  Ltd.  v.  State  of  Rajasthan, (1979) 43  S.T.C.13, relied on. Hyderabad Asbestos  Cements products  Ltd. v.  State of Andhara Pradesh, (1969) 24 S.T.C.487, distinguished. 2.2 The  High court  was, therefore, fully justified in denying the benefit of deduction of freight charges from the controlled price  to arrive  at the turnover of the assessee for ter purpose of the central sales Tax Act. [89-C] 3.1. In  coming to  the different conclusion in respect

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of the  local Act,  from that  reached  in  respect  of  the Central  Act , viz., that since freight was one of the items specified in  clause (i) of Rule 6 (c) of Tamil Nadu General sales Tax Rules, 1959, and since the assessees had specified and charged  for freight  separately in their invoices, they were entitled  to  the  deduction  of  the  freight  in  the computation of  the taxable  turnover, the  High  court  has over- looked  the significance of the inclusion of the words " without  including them in the price of the goods sold" in clause (c)  of the Tamil Nadu General Sales Tax Rules. These words make  it clear  that the freight charges are not to be deducted in  the computation  of the taxable turnover merely because they are specified and charged for separately by the dealer.[90-G,H; 91-A] 3.2. A  further pre-requisite  for their  deduction  is that these  charges should  not have  been included  in  the price of  the goods  sold. Once it is concluded that freight has been  included as  part of  the price  sold and that the liability to pay the freight remains with the dealer, though permitted to  be set  off against  the  sale  price  by  the purchaser or  consumer, it follows that the deduction of the freight as  separate item  in  the  computation  of  taxable turnover is  not permissible.  Rule 6(c)  will apply only in cases where  the sale  price charged  does not  include  the freight charges  and the  dealer separately  collect freight from the  consumer without  including the  same in  the sale price. The  High court was, therefore, in error in excluding freight charges from the taxable turnover for the purpose of the Tamil Nadu Act. [91-A-C; 93-F] Tungabhadra Industries  Ltd. v. Commercial Tax officer, Kurnool, (1990) 11 S.T.C. 827; Dyer Meakin Breweries Ltd. v. State of Kerala , (1970) 26 S.T.C 248; Johar & sons (p) Ltd. v. sales Tax officer, Ernakulam, (1971) 27 S.T.C.120; C.C.T. V. Ashok   Marketing  Ltd., (1973)  32 S.T.C.411;  State  of Mysore  v.  Panyam  cements  and  Mineral  Industries  Ltd., (1974)33 S.T.C.  407; State  of  Tamil  Nadu  v.  Parry  and company,(1976)  38   S.T.C.122;  State   of  Tamil  Nadu  v. Chettinad cement  Corporation Ltd.,  (1976) 38 S.T.C.519 and premier Breweries  Ltd. v.  state of  Karnataka,  (1984)  56 S.T.C. 14, relied on. The position  in regard  to packing  charges as well as the excise  duty  thereon  is  also  no  different.  Packing charges from  part of " sale price" because the expression " any sum  charged for  anything done by the dealer in respect of the  goods" used in the definition in Section 2(h) of the central sales  Tax Act.  Nor will,  the  assessee  be  in  a position to claim a deduction in respect of these charges by virtue of  Rule 6(c)  of the Sales Tax Rules. Therefore, the packing charges  and excise  duty  thereon  cannot  also  be deducted in  computing the  taxable turnover for the purpose of the Tamil Nadu Acts.[93-G, H; 94-A-C] Hindustan Sugar  Mills Ltd.  v. State  of  Rajasthan  & ors., (1979)  43 S.T.C.  13 and Commissioner of sales Tax v. Rai Bharat Das & Bros.,(1988) 71 S.T.C. 277 (SC), relied on. State of  Tamil Nadu  v. Vanniaperumal & Co., (1990) 76 S.T.C.203; Dalmia  Cement (Bharat)  Ltd. v.  State of  Tamil Nadu, (1991)  81 S.T.C.  327; Dalmia Cement (Bharat) Ltd. v. State of Tamil Nadu, (1991) 83 S.T.C.442, approved.

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2684-90 of 1982 etc. etc.      From the  Judgment and  order dated  23.12.1981 of  the

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Madras High  court in  Tax Cases (Revision) Nos.206-210, 586 and 825 of 1979.      M.L. Verma,  G.L. Sanghi, S.K. Verma, Manoj Prasad, Ms. Minoti Mukherji,  A.K. Srivastava,  R. Mohan,  T.  Raja,  R. Nedumaran and K. Ram Kumar for the appearing parties. The Judgment of the court was delivered by      RANGANATHAN,  J.  By  its  judgment  dated  23.12.1981, report as Ramco cement Distribution Co.(p) Ltd. v. The State of Tamil  Nadu, (1982)  51 S.T.C. 171, The Madras High Court disposed of  a batch  of 48 sales tax revision cases arising out of  the assessments, to local sales Tax(T.N.S.T) as well as Central  sales Tax  (C.S.T), of Ramco Cement Distribution Co. (p)  Ltd. (16  cases). Madras  Cements Ltd.  (8  cases), Dalmia Cement  Bharat Ltd. (21 cases) and India cement  Ltd. (3 cases)  . The  question at  issue were answered partly in favour of  Revenue and  partly in  favour of  the assessees. C.A. Nos.  5306-5336/1985 preferred  by the  state of  Tamil Nadu arise  out of  31 of  these cases;  9 relating to Ramco Cements, 16  relating to  Dalmia cements  and 6  relating to Madras Cements.  C.A. No.  2684 to  2690/82 are  appeals  by Ramco Cements  and C.A.  No. 4043-4044/1982  are  by  Madras cements from the same judgment. C.A. Nos. 315-319/1983 arise out of  the other  5 cases  relating to Dalmia Cements. C.A. Nos 280-281/1989  arise out  of a judgment of the High Court dated 17.1.1985  which  dismissed  two  revision  tax  cases pertaining to  Dalmia Cements.  One of the question involved in these  cases was  decided in favour in of the assessee by following the  decision in  51 S.T.C.  171. As  the question involved are common, all these appeals are being disposed of by a  common judgment.  In doing  so, we  shall refer to the fact in  the appeals  pertaining to  Ramco  Cements.  It  is common ground  that the facts in other cases are similar and that the  decision reached in the case of Ramco Cements will govern the other appeals as well.      Ramco  Cement   Distribution  Co.   Ltd.   (hereinafter referred to  as ’the  assessee’) are  the selling  agents of M/s. Madras  Cements Ltd.,  Rajapalayam, For  the assessment year 1969-70  , they were assessed to sales tax on a taxable turn-over of  Rs. 2,37,66,245  which   included an amount of Rs. 29,71,527,  representing freight  charges. The  assessee claimed exclusion   of  freight   charges in  computing  the taxable  turnover  on  the  ground  that  freight  had  been independently charged  in the  invoice.  It  relied  on  the decision of  the supreme  court in  the  case  of  Hyderabad Asbestos Cements  products  Ltd. v. state of Andhra Pradesh, (1969) 24  S.T.C. 487.  This contention  was rejected by the assessing authority,  the appellate authority as well as the Tribunal.  Aggrieved   by  the  above  orders  the  assessee preferred revisions   to  the High  court were enunciated as follows at the commencement of its judgment:       (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 Central sales Tax Act,     (ii)  Whether  the  packing  charges      being  the   cost  of  the  packing      materials used  by  the  dealer  in      packing cements for being delivered      to his  customers could be properly      excluded from  his turnover for the      assessment of sales tax;      (iii) Whether the excise  duty paid      on  packing  materials  used  by  a

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    dealer   for packing  cement to  be      sold  to   his  customers   can  be      excluded in his total turnover.      These questions  were answered  by the  High  Court  as follows:      "In  tax   revision  cases  arising      under the Central sales Tax 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.      In cases  arising under  the  Tamil      Nadu  General  Sales  Tax  Act  and      Tamil  Nadu  Additional  Sales  Tax      Act, we  hold that freight, packing      changes and  excise duty on packing      materials  are  not  liable  to  be      included in  the sale price for the      computation of the sale price.      The assessees are not liable to pay      additional sales  tax  on  freight,      packing materials  and excise  duty      on packing materials in those cases      arising  under   the   Tamil   Nadu      Additional sales Tax Act."      The High  court certified  the case  to be  one fit for appeal the Supreme Court and hence these appeals.      Both the  asseesses as  well as   the state urges that, the High court having held that the amounts in question were liable to be included in the turnover for purpose of Central sales Tax,  ought to  have also held that these amounts were liable to  be included  in the taxable turnover for purposes of Tamil  Nadu Additional sales Tax Act. On  the other hand, on behalf  of the  assessees it  is contended that, even for the purposes  of C.S.T.,  the freight  charges, the  cost of packing materials  and excise  duty on the packing materials should have been excluded  in the computation of the taxable turnover. It is thus there are cross appeals before us.      We have  heard learned  counsel on  both sides.  In our opinion, so  far as   C.S.T   is concerned, the issue in the present case is July and directly covered by the decision of this court  in Hindustan  Sugar mills  Limited v.  State  of Rajasthan, (1979)  43 S.T.C.13.  AS    stated  earlier,  the assessee relied  strongly on  the decision  of this court in Hyderabad Asbestos  cement Products  Ltd. v. state of Andhra Pradesh, (1969)  24 S.T.C.  487 but  this decision  has been considered and  explained in the Hindustan sugar Mills case. We do  not wish  to state the facts or discuss the issues at great length  since, in  our opinion, they are all facts and issue at  great length  sine, in  our opinion,  they are all facts and issues that were under consideration by this Court in Hindustan  Sugar  Mills  Ltd.  Learned  counsel  for  the assessee contended  that the Cement Control order, the terms of which  sales of  cement were effected during the relevant period by  all cement  manufactures, had no relevance to the question presently  at issue. According to them all that the Cement Control  order laid down was that cement could not be sold at  a price  higher than  a price  fixed by  the Cement Control order  on terms described "as free on rail (F.O.R.), destination"  It   did  not  stand  in  the  way  of  cement manufacturers with various purchasers that the letter should bear the  freight charges. In view of this, it was submitted that the  terms of the cement control order do not alter the principal enunciated by this court in the Hyderabad Asbestos

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Cement products  case. It  was then urged that, in fact, the assessees had  entered into  contracts with  the  purchasers which clearly stipulated that the freight will be payable by the letter.  The following terms and conditions of sale were cited before  us as  an instance  of the  type of  contracts entered into by the assessees:      "   Condition    2   :   Once   the      consignment is  handed over  to the      carriers and a receipt is obtained,      the responsibility  of the  company      ceases. The company does not accept      any  liability   for   any   delay,      shortage, damage  or loss  of goods      in transit. Claims should be lodged      with   the   carriers   by   buyers      directly.      Condition 3  : The consignees shall      arrange to  take  delivery  against      indemnity bond,  should the railway      receipt or bill of lading not reach      them in  time. The  company is  not      liable in any manner whatsoever and      is also  not  responsible  for  any      demurrage  or   damages  that   may      accrue due  to non-receipt  or late      receipt of  railway receipt or bill      of lading by the consignees.      Condition  4   :  Prices  shall  be      charged as  ruling on  the date  of      despatch  of   the  goods  and  the      company shall  not  be  responsible      for any  variation in  prices.  The      price of the cement supplied to the      buyers shall be the current general      gross list  price  charged  by  the      company, free  on  rail  less  such      discount as  may be  fixed  by  the      company from  time to time. But the      terms and the times of delivery and      the payments  therefore shall be in      the  absolute   discretion  of  the      company who  may vary the same from      time to  time. Each  despatch shall      be a separate contract.      Condition 10 : The condition of any      railway receipt shall be binding on      the buyer  and the date of delivery      shall mean  the date of the railway      receipt  and   in   the   case   of      consignments  sold   free  on  rail      destination,  the  railway  freight      shall be  nevertheless  payable  by      the buyers at the destinations.      Condition  11  :  The  buyer  shall      further  be   responsible  for  any      additional     freight,      should      transport  by  expensive  route  be      undertaken or  should the  quantity      despatched be  less  than  a  wagon      load.      Condition 12  : In the case of road      deliveries, freight will be allowed      upto the  nearest rail  head to the      destination  or   actual  transport      charges  whichever   is   less   or

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    according to the instruction of the      control authorities  from  time  to      time.      Condition 13  : The buyer shall put      up  his  claim  with  the  Railways      direct   whenever    amounts    are      collected in  excess of the freight      indicated in  the Railway  receipt.      The company will allow freight only      at the scheduled wagon load rate."      basing  themselves   on  these  terms  and  conditions, learned counsel  for the  assessee contended that this was a case where,  despite the  terms of  the control  order,  the assessees chose  to sell the goods free on rail and that the liability to  pay point  where the goods were loaded on rail and that  the liability  to pay freight was entirely that of the purchasers.  It was  contended that these contracts were not inconsistent  with or  repugnant to  the  terms  of  the Cement Control  Order and  that on  the same  basis  as  the decision of  this court  in the  Hyderabad  Asbestos  Cement products Ltd.  case, the  assesses are   entitled to exclude the amounts  of freight  as not forming the part of the turn over at all.      Interesting as  these arguments  are, we find that they are merely  a repetition  of what  was urged  in the case of Hindustan Sugar Mills Ltd. In that case also the point urged was that  the Cement  Control order  only fixes  the maximum price and  that there  was nothing  to prevent  the producer opted to  sell his  cement at  price lower  than the control price and  allow credit  to the  purchaser where the smaller amount by  deducting the freight, the sale price can only be the smaller  amount of  the bill. The second argument, based in the  terms of  the contract between the parties, was also addressed in  the Hindustan  Sugar Mills  case.  There  also clauses 5,8  and 11  of the  general terms  and condition of supply were  strongly relied upon on behalf of the assessee. Under  those  terms  and  conditions,  it  was  specifically mentioned that although the price of cement was on the basis of F.O.R.   destination  railway station, consignments would nevertheless be  despatched   ’freight to  pay’  and  credit afforded in  the bill  for the amount of freight payable and that the purchaser should accordingly arrange to pay railway freight or road transport charges at the  destination at the time of  taking delivery. This Court, after referring to the above  contention,  pointed  out  that,  if  the  terms  and conditions of  the contract  had   stood alone, the assessee might have  been entitled    to  succeed  in  excluding  the freight      charges on  the principle of Hyderabad asbestos cement Products Ltd. case but that relief could not be given to the  assessee in view of the scheme and provisions of the cements control  order and  their implications. The terms of the Cement  control  order  have  been  fully  analysed  and discussed      at pages  33 to  35 of  the report. There is, therefore no  difference either  on facts  or  in  principal between this  case and  the Hindustan Sugar Mills Ltd. case. on the  other hand,  as pointed out by the learned Judges in that case, the whole purpose of the cement control order was do not find any reason to doubt or dissent from the decision in the  Hindustan Sugar  Mills Ltd. case. On the other hand, as pointed out by the learned Judges in that case, the whole purpose of  the Cement  Control order  was cement  should be available for  sale at  all  places  in  the  country  at  a controlled price.  No doubt,  the price  was described  as a maximum beyond  which the  sale price  could not  go but the intention, which was also carried out by  all the suppliers,

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was that cement was to be sold at what may be described as a controlled price  on terms  ’free on  rail destination’.  In other words,  the producer  was entitled  to the  controlled price irrespective of the amount of freight which might have been incurred  in respect  of the transaction. Having regard to the  fact that the freight on consignments to places near the factory  and   consignments to places to places far away from the  factories could  show  a  lot  of  variation,  the control order  created a  machinery  by  which  all  freight charges were  credited to  common account  ad any particular cement manufacturer  incurring more  than a specified amount was  entitled  to  be  reimbursed  for  the  excess  freight incurred by  him. As  the learned  Judges pointed out in the earlier decision,  the whole  control order  proceeds on the footing that  the freight  charges are  to  be  met  by  the producer   and that  he was  entitled to a cosolidated price irrespective of  the freight  he may  have incurred. In this view of  the matter,  the sale  price, on  the terms  of the Central sales Tax Act, could only be the controlled price as fixed by the cement control Order.      We find  that the  factual position  in these  cases is also not  as  described  by  the  learned  counsel  for  the assessee. The  assessee’s  arguments  in  this  regard  were sought to  be highlighted  by the  production of  one of the invoices by  which certain  goods were  despatched by Dalmia cements to  Karaikal. It  is interesting  to see  that  this invoice mentions  F.O.R.   cement price  as  the  controlled price stipulated in the Cement Controlled Order, and this is also what is contemplated by condition 4 set out earlier. To this  is  added  a  central  Excise  Duty.  Thereafter,  the assessee purports  to give  credit for railway freight and a net price,  which is  described as  net price  F.O.R. with a liability on  the purchasers to bear the railway freight the invoice need  not have  contained all  the details  which it purports to  contain including  all the  above  calculations starting with  the F.O.R.   price at the controlled rate. In such an  event all  that the  assessee need have done was to invoice the  purchasers at the net price F.O.R. Works Siding and despatch  the goods  under ’freight to pay’ . It is also interesting to  see that the invoice specifically includes a deposit to " cover any levy of sales tax on freight" . It is clear that  the invoice  has been  drawn up  in terms of the control order.  The price  charged by the assessee is F.O.R. Central Excise  Duty has  been added on    this footing. The invoice mentions  the amount  of railway freight and permits it to  be deducted  only because the freight will be paid to the Railways by the Purchasers on behalf of the assessee and credit is  given therefor  in the  invoice. This  process is necessary because  the amounts  of freight  for which credit has been given have to be eventually adjusted while settling accounts between  the manufacturer  of cement  and obtaining reimbursement, if  any , from the pool account. The producer will have  to satisfy  the concerned  authorities  that,  in certain instances,  the freight  paid is  in excess  of  the freight which  a producer can be called upon to pay in terms of para  9 of  the Cement  Control order. In our opinion the invoice placed  before us  only reinforce  the  factual  and legal position outlined by this Court in the Hindustan Sugar Mills Ltd.  case in  regard to the purpose and effect of the terms of the Cement Control Order.      For the  reasons above mentioned, we are of the opinion that the  High court  was fully  justified in  applying  the decision in  Hindustan Sugar  Mills Ltd. to the present case and denying the benefit of deduction of freight charges from the   controlled price  to arrive  at the  turnover  of  the

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assessee for the purpose of the Central sales Tax Act.      Turning now  to the  appeals filed  by the  state,  the contention, as  earlier mentioned,  is that  the High  court should have arrived at the same conclusion on the provisions of the  Tamil Nadu  General Sales  Tax Act  and   Additional sales  Tax Act as it did under the Central Sales Tax Act and that in  view of the decision of this Court in the Hindustan Sugar Mills case the relief granted for purpose of the local sales tax  is erroneous. In coming to a different conclusion on the  provisions of  the local  sales Tax  Act   from that reached in  respect of  the Central  Act, the High Court has relied upon the fact that the local sales tax is charged not on the  turnover of  the dealer  but  only  on  his  taxable turnover.  The   explanation  ’taxable  turnover’  has  been defined in section 2(p) as follows:      "2(p)- ’taxable turnover’ means the      turnover of which a dealer shall be      liable to  pay  tax  as  determined      after making  such  deduction  from      his  total  turnover  and  in  such      manner as may be prescribed ."      The Tamil  Nadu General  sales Tax  Rules,  1959,  have prescribed  rules  for  the  determination  of  the  taxable turnover. Rules 6 reads thus:      " Rules  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  amount specified  in      the following clause shall, subject      to the                   conditions      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 goods specified      in the  Third Schedule  to the  Act      are sold;      (b)  all  amounts  for  which  goos      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    with    out      including him  in the  price of the      goods sold-      (i) freight;      (ii)(omitted);      (iii) charges for delivery;      (cc) all  amounts falling under the      head charged  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

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    are specified  and charged  for  by      the dealer  separately, in  respect      of the  goods not liable to tax the      hands of the assessee".      The High  Court has  held that  since freight is one of the items  specified in  clause   (i) of rule 6(c) and since the  assessee  have  specified    and  charged  for  freight separately in  their  invoices,  they  ar  entitled  to  the deduction of  the freight  in the computation of the taxable turnover. This  is the  short ground on which the High court has reached,  in respect  of the  local  Act,  a  conclusion different from that reached in respect of the central Act.      We agree  with the  learned counsel  for the  state  of Tamil Nadu that, in coming to the above conclusion, the High court has  over-looked the  significance of the inclusion of the words "without  including them in the price of the goods sold" in clause (c). These words make it clear it clear that the  freight   charges  are   not  to  be  deducted  in  the computation of  the taxable turnover merely because they are specified   and charged  for separately  by  the  dealer.  A further pre-requisite  for their  deduction  is  that  these charges should  not   have been included in the price of the goods sold.  This takes  us back  to the consideration as to whether the  price charged  for  by  the  assessee  includes freight or  not, which  we  have  discussed  elaborately  in respect of  the levy  of Central  sales tax. once we comp to the conclusion  - as  we have-that freight has been included as part  of the price sold and that the liability to pay the freight remains  with the dealer, though permitted to be set off against  the sale price by the purchaser or consumer, it follows that  the deduction  of the  freight as  a  separate items  in   the  computation  of  taxable  turnover  is  not permissible. Rule  6(c) will  apply only  in cases where the sale price  charged does not include the freight charges and the   dealer    separately   collects   freight   from   the consumer without  including the  same in  the sale price. IN fact this  aspect has  been made clear in three decisions of this  court  dealing  with  similar  rules.  In  Tungabhadra Industries Ltd.  v. Commercial  Tax officer, Kurnool, (1960) 11 S.T.C.  827, the  dealer  claimed  deduction  of  railway freight form the amount of price of the goods sold as stated in the  bill on  the strength of rule 5(1) (g) of the madras General sales  Tax (Turnover  and Assessment  ) Rules, 1939, which is  in precisely  the same terms, as rules 6, which is now being  considered by  us. The claim was negative by this court. It observed :      "The appellant claimed exemption on      a sum  of Rs. 3,88, 377-13-3 on the      ground  that   it  represented  the      freight in  respect of  the  ground      that it  represented the freight in      respect of  the goods  sold by  the      appellant, asserting  that they had      been charged  for  separately.  The      assessing  officer   rejected   the      claim and this rejection was upheld      by the departmental authorities and      by the  High Court  in revision. It      would be  seen  that  in  order  to      claim the benefit of this exemption      the freight  should (i)  have  been      specified and  charged for  by  the      dealer  separately,  and  (ii)  the      same should  not have been included      in the price of the goods sold. The

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    learned Judges  of the  High  Court      held   that    neither   of   these      conditions  was  satisfied  by  the      bills produced by the appellant. We      consider, the  decision of the High      Court on this point was correct. In      the specimen bill which the learned      counsel  for   the  appellants  has      placed before us, after setting out      the quality sold by weight (23, 760      lb.) the  price is  specified as 15      annas 9  pies per lb. and the total      amount of  the price  is determined      at Rs.  23,388-12-0. From  this the      railway freight  of Rs.  1,439-12-0      is deduced and the balance is shown      as the  sum on  which sales tax has      been computed. From the contents of      this invoice  it would be seen 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."      The same  conclusion was  reached by this Court in Dyer Meakin Breweries  Ltd. v.  State of Kerala, (1970) 26 S.T.C. 248. Here,  the appellant-company  which manufactured liquor at various places in U.P. and Haryana, transported the goods from its breweries and distilleries to its place of business in Ernakulam and sold them there. When selling liquor to the customers the  appellant made  out separate  bills  for  ex- factory price  and for  "freight and  handling charges". The appellant claimed  that the  amount charged for "freight and handling charges"  incurred by it in transporating the goods from the  breweries and  distilleries to  the  warehouse  in Kerala were  eligible for  deduction under  rule 9(f) of the Kerala General Sales Tax Rules, 1963, a rule which is in the same terms as rule 6, with which we are now concerned in the present case.  This claim  was negatived  by this Court. The Court obvserved:      "It is  common ground that the sale      of  the   liquor  took   place   in      Ernakulam. The  company arranges to      transport liquor  for sale from the      factories  to   its  warehouse    t      Ernakulam. It  was not  brought for      any individual  customer.  All  the      expenditure incurred s prior to the      sale and  was evidently a component      of the  price for  which the  goods      were sold. it is true that separate      bills were  made out  for the price      of the  goods ex-factory  and  for"      freight  and    handling  charges".      But, in  our judgment, the Tribunal      was  right   in  holding  that  the      exemption under  clause (f) of rule

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    9  applied  when  the  freight  and      charges for  packing  and  delivery      are found  to be  incidental to the      sale and  when they  are  specified      and   charged  for  by  the  dealer      separately  and   expenditure   in-      curred for  freight and packing and      delivery charges  prior to the sale      and for transporting the goods from      the factories  to the  warehouse of      the company is not admissible under      rule 9(f)  .  Rule  9(f)  seeks  to      exclude only  those charges   which      are   incurred    by   the   dealer      either expressly  or  by  necessary      implication for  and no  behalf  of      the purchaser  after the  sale when      the dealer  undertakes to transport      the   goods and to deliver the same      or   where   the   expenditure   is      incurred as an incident of sale. It      is not  intended to  exclude  forms      the taxable  turnover any component      of the  price, expenditure incurred      by the dealer which he had to incur      before sale  and to  make the goods      available      to   the   intending      customer at the place of sale."      In Johar  and sons(p)  Ltd. v.  Tax officer  Ernakulam, (1971) 27  S.T.C.120, The  same question arose, again in the context of  the Kerala  General sales  Tax Rules,  1963. The court followed  the decision  in Dyer  Meakin Breweries Ltd. case. It  was pointed  out that  the decision in Tungabhadra Industries Ltd.  had rested on the facts of the case without going   into the  interpretation of the relevant rule of the Madras General  Sales Tax  (Turnover and Assessment ) Rules, 1939. It was, held that the Dyer Meakin decision would apply to the  case  before  the  court.  A  number  of  subsequent decisions has also held to  a like effect : C.C.T. v. Ashoka Marketing Ltd.,(1973)  32 S.T.C.  411, State  of  Mysore  v. Panyam Cements  and Mineral Industries Ltd. (1974) 33 S.T.C. state of  Tamil Nadu  v. parry  and company (1976) 38 S.T.C. 122, state  of Tamil  Nadu v.  Chettinad Cement  Corporation Ltd.,(1976) 38  S.T.C. 519  and Premier  Breweries Ltd.   v. state of  Karnataka, (1984)  56 S.T.C. 14 we are, therefore, of the  opinion that  High court  was in error in  trying to distinguish the  decision in  the Hindustan Sugar Mills case and in  excluding freight  charges from the taxable turnover for the purpose of the Tamil Nadu Act.      The position  in regard  to packing  charges as well as the excise  duty on packing charges is also no different. As pointed out  by this court in the Hindustan Sugar Mills case and in  Commissioner of sales Tax v. Rai Bharat Das & Bros., [1988] 71  S.T.C. 277  (SC), packing  charges from  part  of "sale price"  because the  expression "  any sum charged for anything done by the dealer in respect of the goods" used in the definition in section 2(h) of the Central sales Tax Act, 1956,  squarely  covers  such  charges,  as  packing  is  an integral element  of the  transaction of  sale  and  packing charges are  an integral  part of the  sale price. Once this is so,  it follows  that these  charges and  the excise duty thereon  cannot be excluded from the turnover for purpose of the Central sales Tax Act. Nor will, for the reasons earlier discussed in relation to freight charges, the assessee be in a position to claim a deduction in  respect of these charges

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by virtue of rule 6(cc) of the sales Tax Rules. In our view, this position  has been  correctly  set  out,  applying  the decision in  the case  of Rai Bharat Das and Bros., in state of Tamil  Nadu v. Vanniaperumal & co., (1990) 76 S.T.C. 203, Dalmia cement  (Bharat) Ltd.  v. state of Tamil Nadu, (1991) 81 S.T.C.  327 and  Dalmia Cement  (Bharat) Ltd. v. state of Tamil Nadu,  (1991) 83 S.T.C. 442. we are, therefore, of the opinion that  the packing  charges and  excise duty  thereon cannot also  be deducted  in computing  the taxable turnover for the purpose of the Tamil Nadu Acts.      We, therefore, hold-      (i) That  the freight  charges  could  be  included  in arriving at  the taxable turnover for purposes of C.S.T. and T.N.S.T.; and      (ii) that packing charges and excise should be included in arriving  at the  taxable turnover  for purposes  of both C.S.T. and T.N.S.T.      The appeals  by the state of TAmil Nadu are accordingly allowed and  the appeals filed by the assessee ar dismissed. There will, however, be no order regarding costs. N.P.V. C.A. Nos. 2684-90,4043-44/82 315-19/83-dismissed. C.A.-Nos-5306-36/85 and 280-81/89-allowed.