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PETITIONER: HINDUSTAN SUGAR MILLS ETC.

       Vs.

RESPONDENT: STATE OF RAJASTHAN AND ORS.

DATE OF JUDGMENT22/08/1978

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. TULZAPURKAR, V.D.

CITATION:  1978 AIR 1496            1978 SCC  (4) 271  CITATOR INFO :  F          1980 SC 346  (3,4)  F          1980 SC 952  (2,3)  C          1981 SC1681  (1)  RF         1981 SC1887  (2,5,16,17)  RF         1986 SC 649  (34)  RF         1986 SC1556  (16)

ACT:      Sale Price,  under section  2(p) of the Rajasthan Sales Tax Act,  1954 and  Section 2(h)  of Central  Sales Tax Act, 1956-whether, in  sales of  cement effected under the Cement Control Act  and Control Act-Distinction between contract of sale for f.o.r. destination railway station’ and a ’contract where price alone is so’.

HEADNOTE:      The appellant  assessee owned a cement factory known as Udaipur Cement  Works at Udaipur. During the assessment year 1971-72 and 1972-73, the sale of cement was controlled under the Cement  Control  order,  1967,  issued  by  the  Central Government, in  exercise of the powers conferred by Sections 18 and  25 of  the Industries  (Development and  Regulation) Act. 1951.  Clause  7  of  the  Control  Order  specified  a retention price  of Rs.  161.40 per  metric tonne for cement manufactured by all producers, other than those Mentioned in items 1  to 5  of the schedule, which included the assessee. Tho maximum  price at which a producer could sell cement was prescribed in  clause (8)  which said that no producer shall sell "any  other variety  of cement at a price exceeding Rs. 214.65 per  metric tonne  free on  rail destination  railway station plus  the excise  duty  paid  thereon",  plus  "such charges as may be fixed by the Central Government in respect of packing  in jute  bags or  in any  other containers". The Explanation to  clause 8  clarified that  for the purpose of the Control  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 clauses (4) at the destination point".      During the  relevant  assessment  years,  the  assesses entered into  diverse contracts   of  sale of  cement  with purchasers at  the price  of Rs.  214.65 per  metric  tonne, "free on  rail destination  railway  station"  plus  packing

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charges plus  excise duty. These contracts were on the terms and conditions  set out  in the  form of  "General terms and conditions of supply" adopted by the assessee. The assessee, in fulfilment  of these  contracts, despatched cement to the purchasers at  various destinations  by rail and the railway receipts were made out on the basis of ’freight to pay’. The invoices sent  by the  assessee showed  the  ’free  on  rail destination railway  station’ price of the cement despatched at the  rate of  Rs. 214.65  per metric  tonne and added the amounts representing  excise duty  and packing  charges  and deducted the  amount of  railway freight, since it was to be paid by  the purchasers.  The assessee did not charge in the invoices sales tax on the railway freight, since in its view it did  not form  part of  the ’sale price’; but in order to provide against  a possible claim which might be made by the Sales Tax  Authorities,  the  assessee  claimed  by  way  of deposit an amount ’towards contingent liability to sales tax on  railway  freight  to  be  paid  by  you’  that  is,  the purchasers. 277      In the  assessment of  the assessee  to sales tax under the Rajasthan  Sales A  Tax Act,  1954 and the Central Sales Tax Act,  1956, the Sales Tax Authorities took the view that the amount  of freight  formed part  of the "sale price" and was, therefore, liable to be included in the turnover of the assessee for  the purposes  of assessment  of sales tax. The assessee challenged  the correctness of the view by filing a Writ petition  in the  High Court of Rajasthan, but the High Court  agreed   with  the   view  taken  by  the  Sales  Tax Authorities and  held that  since  under  clause  8  of  the Control order,  the price  payable by  the purr- chasers was f.o.. destination  price, the  amount of freight included in it formed part of ’sale price      Dismissing the appeals, the Court ^      HELD: 1.  By reason  of the  provisions of  the  Cement Control order  1967, 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 and was  includible in the turnover of the assessee. [296 D- E]      2. (a)  The Control  order is  paramount; it  has over- riding 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 and  any such  term or  conditions to the extent to which it  is in  conflict with the provisions of the control order would  stand excluded.  It is a statutory order having binding force and effect and it must govern the transactions of sale  of cement  entered into  by the  assessee with  the purchasers.                                      [292 C, 293 B-C, 295 A]      (b)  The   Control  order   is   designed   to   ensure availability of  cement at  a uniform prise throughout India irrespective of  the distance  from the place of manufacture and clause  8 of  the order  provides 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. It was at  this maximum  price of  Rs. 214.65  per metric tonne f.o.r. destination  railway station  that, in  pursuance  of this clause, the assessee sold cement to various purchasers. The price was clearly inclusive of freight. [292 D-E] li’      (c) Under  the scheme  of the Control order the freight is paid  by the  producer who  then  recovers  it  from  the

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purchaser. Clause  9 clearly  contemplates that  the  f.o.r. destination railway  station price  would be realised by the producer, four  the excess  of such price over the retention price and  selling agency  commission is required to be paid over by  the  producer  to  the  controller  in  the  Cement Regulation Account.  The amount of freight has, there- fore, to be  realised by  the producer from the purchaser and that postulates that  it is  the producer who pays the freight to the railway  authorities. The  proviso to  clause. (9) makes this  doubly   clear  by  providing  that  "the  expenditure incurred by  the producer on freight.... shall be reimbursed to the  producer and  again clause (II) uses the expression" ....paying or  equalising the  expenditure incurred  by  the producer on freight". [294 A-C]      (d) When  the producer  pays the  freight, he  does  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. [294 D-E] 278      (e)If the  obligation to  pay the  freight were  on the purchaser, 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 the his  own liability  and the assessee would have no claim to recover  it from the purchaser. Then, the terms of clause 9 proviso  to that  clause and claue 11 of the Control order would not  be satisfied.  It would  not be  possibie to give effect to  clause 9,  if what is realised by the assessee is not the f.o.r. destination railway price but that price less the amount  of freight.  The assessee also would not be able to 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. [294 E-G]      (f )  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 deemed to be excluded by. it. [294 H, 295 A]      3. (a)  The definition of Sale Price in section 2(p) of the Rajasthan Sales Tax Act, 1954 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  and therefore,  the  concept  of  real  price  or  actual  price retainable by the dealer would be irrelevant. The test would be.  what   was  the  consideration  that  passed  from  the purchaser to  the dealer for the sale of the goods. The only relevant question  to ask  being what was the amount paid by the purchaser  to the  dealer as  consideration for the sale and not  as to  what was the net consideration retainable by the dealer,  it would be immaterial to enquire as to how the amount of  consideration was  made up,  whether it  included excise duty or sales tax or freight. [286 D, F-G]      The amount  of sales  tax payable  by a dealer, whether included in  the price  or added to it as a separate item as is usually  the case,  forms part of the "sale Price". It is payable by  the purchaser  to the  dealer  is  part  of  the consideration for  the sale  of the  goods and  hence  falls

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within the first part of the definition. And so would be the case regarding  the amount  of freight and handling charges. It would be payable by the Purchaser not under any statutory or other liability but as part of the consideration for sale of the  goods and  it would  therefore form  part  of  "sale price"  within   the  meaning  of  the  first  part  of  the definition. [287 A-D, 288 D-F]      M/s. George  oakes (P) Ltd. v. The State of Madras, XII S.T.C. (S.C.)  476; Dyer  Meakin Breweries Ltd. v. Sales Tax Officer., Ernakulam, XXVII S.T.C. (S.C.) 120 applied.      Sri Sundararajan  & Co.  Ltd. v.  The State  of  Madras (VIII S.T.C.  Mad. 105);  Paorika Ltd.  and Anr. v. Board of Trade  (1944)  1  All.  E.R.  372;  Love  v.  Norman  Wright (Builders) Ltd. [1944] 1 All. E.R. 618; referred to. 279      (b) In  a contract  of sale  f.o.r. destination railway station, the delivery of At  goods to the purchaser would be complete at  the destination  railway station  and till then the risk  would continue  to remain  with  the  dealer.  The agreed price  being inclusive  of the freight, it would be a matter of  indifference to  the purchaser as to what was the amount of  freight paid  by the  dealer. 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.  Though the purchaser can very well  refuse to accept the railway receipt which is not ’freight prepaid’,  but freight to pay’, he ordinarily, as a reasonable businessman  would, accept such a railway receipt and pay the amount of freight o l behalf of the dealer. When the purchaser,  pays 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 purhaser 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. [288 G-H, 289 A-E]      (c) In a case, where the contract of sale is not f.o.r. destination railway  station, but the price alone is so, the contract  would   not  have  all  the  incidents  of  f.o.r. destination railway station ’contract’, but merely the price would be  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 tailing 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  even,  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 reeeipt  "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

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reimbursement of  the  freight  which  was  payable  by  the Purchaser but  in fact disburse(l by the dealer and hence it would not form part of the ’sale price’. [289; G-H, 290 A-C]      Hyderabad Asbestos  Central Products  Ltd. v.  State of Andhra  Pradesh   XXIV  S.T.C.   (S.C.)   487;   Tungabhadra Industries Ltd.  Kurnool v.  Commercial Tax  Officer Kurnool (XI STC 827); explained.      4.  The   second  part  of  the  definition  enacts  an inclusive clause  and 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  or the  goods at  the  time  of  or  before  the delivery thereof’.  is to  be regarded  as part of the ’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 280 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, therefor,  fall within  the inclusive  clause on  its plain terms  but it  is taken  out by  the exclusion clause, "other than  the cost  of frieght or delivery or the cost of installation in case where such cost is separately charged". [295 C, F]      (b) This  exclusion  clause  does  not  operate  as  an exception to  the first  part of  the definition.  lt 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 it 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’.  In the  instant case, since the  amount of  the freight  forms part  of the  ’sale price’  within   the  meaning  of  the  first  part  of  the definition, 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. [295 F-H, 296 A]      (c) Even  if the  exclusion  clause  were  read  as  an exception to the first pal-t of the definition which, cannot be done,  it cannot avail the assessee. It is only there the cost of  fl-eight 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 fright 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

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clause in the second part have no application. [296 A-C] Observation:      (a) In  respect of  the assessee’s several transactions of cement  with the  Central Government through the Director General of  Supplies and Disposals, the opinion given by the law Department  of  the  Government  of  India  viz.,  "that freight was  not part  of ’sale price’ within the meaning of the definition  of that term and hence no sales tax would be payable by  the assessee on the amount of frieght‘’ was not. correct and was unjustified. [296 E-H]      (b) As  this statement  misled the  assessee  into  not claiming the amount of sales tax on the freight component on the price  from the  Central Government in the circumstances fairness and  justice demand  that the  Central  Government, should pay  to the  assessee the  amount of sales tax on the freight component of the price in respect of transactions of sale of  cement entered into by the assessee with them under the provisions of the control order. [297 A-C] 281

JUDGMENT:      CIVIL APPELLATE JUDRISDICTION: Civil Appeal No. 1122 of 1976.      From the  Judgment and  order dated  10-9-1976  of  the Rajasthan High  Court in  D. B. Civil Writ Petition No. 1080 of 1976.      V. M.  Tarkunde, V.  K. Shinghal,  N.  N.  Goswamy  and Arvind Minocha for the appellant in C.A. No. 1122 of 1976.      F. S.  Nariman, Y.  S. Chitale  A.  K.  Srivastava,  V. Bhasin, C.  V. Francis and Vineet Kumar for the appellant in C.A. No. 1122 of 1976      S. J. Sorabjee, L. N. Sinha, S. M. Jain, S. C. Bhandari and B. B. Singh for the respondents in both the appeals.      Anantha Babu  and A.  Subba Rao  for the  intervener in C.A. No. 1122 of 1976      The Judgment of the Court was delivered by      BHAGWATI, J.  These appeals  by special  leave raise an interesting question of law relating to the applicability of the definition  of "sale  price"  in  section  2(p)  of  the Rajasthan Sales  Tax Act, 1954 and 2(h) of Central Sales Tax Act, 1956.  The question  is  whether  in  sales  of  cement effected under  the Cement Control order 1967, the amount of freight forms  part of the "sale price" so as to be exigible to Sales  Tax under  these Acts.  The facts  giving rise  to these appeals  are in  material respects identical and hence it would be sufficient if we state the facts of Civil Appeal No. 1122  of 1976 which was argued as the main appeal before us      The appellant  in this  appeal is Hindustan Sugar Mills Ltd. (hereinafter referred to as the assessee). The assessee owns a  cement factory  known as  Udaipur  Cement  Works  at Udaipur in Rajasthan and it manufactures and sells cement to purchasers both  inside and  outside Rajasthan.  The  appeal relates to assessment of the assessee to sales tax under the Rajasthan Sales Tax Act, 1954 and the Central Sales Tax Act" 1956 for  the assessment  years 1971-72  and 1972-73. During these assessment  years the  sale of  cement was  controlled under the  Cement Control order, l 967 (hereinafter referred to as  the Control  order). The  Control order was issued by the Central  Government in  exercise of the powers conferred by sections  18G and  25 of  the Industries (Development and Regulation) Act,  1951. Clause  (7)  of  the  Control  order provided  that  the  ex-factory  prices  admissible  to  the

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producer for  the different  varieties of cement shall be as specified in  the Schedule  and the Schedule, as it stood at the material time, specified a retention price of Rs. 161.40 per metric  tonne for  cement manufactured  by all producers other than 282 those  mentioned  at  Items  1  to  5,  which  included  the assessee. The  maximum price  at which a producer could sell cement was  prescribed in  clause (8)  which  said  that  no producer shall  sell "any other variety of cement at a price exceeding  Rs.   214.65  per   metric  tonne  free  on  rail destination  railway  station  plus  the  excise  duty  paid thereon". The  proviso to  Clause (8)  provided that  in the case of  packed cement,  there shall  be added to this price such charges  as may  be fixed  by the Central Government in respect of  packing in  jute bags or in any other containers The Explanation  to  this  clause  clarified  that  for  the purpose of  the Control  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". Clause (9)  and (11)  provided for  the creation of a Cement Regulation Account in the following terms :.           9. Payments to Cement Regulation Account:           Every  producer   shall,  in   respect   of   such      transaction by  way of  sale of cement effected by him,      pay within one month of the close of the month in which      sales  take   place,  to   the  Controller,  an  amount      equivalent to  the amount, if any, by which the free on      rail destination  price of  such cement realised by him      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. 3.00 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 or  the containers  under the  first proviso to      clause 8: r      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 clause  4, by  such  mode  of      transport in  respect of  such  transactions  shall  be      reimbursed to  the producer  by the Controller from out      of the  Cement Regulation Account referred to in clause      11.      *                        *                *           * * 283      11 . Cement Regulation Account A                (1) The  Controller shall maintain an account           to be  known as  the 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.      (2) The  amount credited  under sub-clause (l) shall be      spent only for the following purposes, namely:                (i)  paying  or  equalising  the  expenditure                incurred  by   the  producer  on  freight  in

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              accordance with the provisions of this order;                (ii) equalising  concession, if  any, granted                in  the  matter  of  price  for  supplies  to                Government or  for purposes  of export  under                the third proviso to clause                (iii) expenses  incurred by the Controller in                discharging the  functions under  this  order                subject to  such limits,  if any,  as may  be                laid down  by the  Central Government in this                behalf."      Clause (14)  which is  the last  clause laid  down  the procedure for  making claims  for payment  from  the  Cement Regulation Account.  It provided  that "every producer shall make  an   application   regarding   his   claim   for   any reimbursement  towards   equalising  freight  or  equalising concession in  the matter  of export price to the Controller who may,  in settling  the claim,  require the  producer  to furnish all details, relating thereto, including the cost of freight incurred,  excise duty,  if  any,  paid‘  etc."  The underlying object  behind these  provisions was  that cement should be  available at uniform price throughout the country and that  is why it was provided that no producer shall sell cement at  a price  exceeding Rs.  214.65 per  metric  tonne "free on  rail destination  railway  station"  plus  packing charges and excise duty. This was the maximum price at which the Central  Government intended  that  cement  should  be.- available any  where in  India, irrespective of the distance from the place of manufacture. Now this price was worked out on the basis of average freight and since the actual freight would necessarily  be more  or less than the average freight depending on  the distance  of the place of destination from the manufacturing  site, clauses  9 and  11 of  the Control, order provided  a machinery  by which  the producer could be ensured  the  retention  price  specified  in  the  Schedule alongwith selling agency commission the rate of Rs. 3.00 per metric tonne, packing charges and excise 2-526SCI/78 284 duty.  This  result  was  achieved  by  providing  that  the producer should  hand over  to the  Controller the excess of the  "free   on  rail  destination  railway  station"  price including packing  charges and  excise duty  realised by him over the retention price, selling agency commission, packing charges and  excise duty  and he  should then be re-imbursed the amount  of  expenditure  actually  incurred  by  him  on freight by the cheapest mode of transport. This would leave, with the  producer the  retention price  together  with  the selling agency  commission, packing  charges and excise duty and also reimburse him the actual freight paid by him.      During The  relevant  assessment  years,  the  assessee entered into  diverse  contracts  of  sale  of  cement  with purchasers at the price of Rs. 214.65 per metric tonne ’free on rail  destination railway  station" plus  packing charges and excise  duty. These  contracts were  on  the  terms  and conditions set  out  in  the  form  of  ’General  terms  and conditions of supply" adopted by the assessee. A copy of the "General terms and conditions of supply’‘ was handed over to us by  the  learned  counsel  appearing  on  behalf  of  the assessee at  the hearing  of the  appeals  and  it  was  not disputed on  behalf of the State that these were the general terms and conditions on which contracts were entered into by the assessee  with the  purchasers. Clauses  5, 8 and l l of the "General  terms and  conditions of supply" were Strongly relied  upon  on  behalf  of  the  assessee  and  we  shall, therefore, set them out in extenso:      5.   Although the  price of  cement is  on the basis of

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    F.O.R. destination  railway station  consignments  will      nevertheless be  despatched "freight to pay" and credit      afforded in our Bill for the amount of freight payable.      The purchaser should accordingly arrange to pay Railway      freight/Road transport  charges at  the destination  at      the time of taking delivery      8.   Once the consignment is handed over to the Carrier      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. Claim  should  be  lodged  with  the      Carriers by the Buyers directly      11.  In  respect  of  any  claim  for  over  charge  of      freight, the  purchaser shall  put up  claim  with  the      concerned Railway authorities. The assessee,  in fulfilment  of these contracts, despatched cement to the purchasers at various destinations by rail and the railway  receipts were made out on the basis of "freight to pay".  The invoices  sent   by the  assesse,- showed  the "free on  rail destination  railway station’  price  of  the cement despatched at the rate of Rs. 214.65 per metric tonne and added the amounts representing excise duty and  packing 285 charges and  deducted the amount of railway freight since it was to  be paid  by the  purchasers. The  assessee  did  not charge in  the invoices  sales tax  on the amount of railway freight. since in its view it did not form part of the "sale price", but  in order  to provide  against a  possible claim which might  be made  by  the  sales  tax  authorities,  the assessee claimed  by  way  of  deposit  an  Amount  "towards contingent liability  to sales  tax on railway freight to be paid by  you" that  is, the  purchasers. Each  invoice  also contained a  statement at the commencement that: "Every care is  taken   in  packing   and  despatching   goods  and  our responsibility for  shortage, loss,  delay or  damage ceases after delivery  at Works  Siding. All  such claims should be preferred with  the railway  or the carriers concerned". The purchasers received  the railways  receipts from  the  banks against  payment   of  the   amounts  of  the  invoices  and thereafter took  delivery of  the cement  despatched by  the assessee after making payment of the railway freight.      The question arose in the assessment of the assessee to sales tax  under the  Rajasthan Sales  Tax Act, 1954 and the Central Sales  Tax Act,  1956 as  to whether  the amount  of freight deducted  from the  free on rail destination railway station price  (hereinafter for the sake of brevity referred to as F.O.R.. destination price) in the invoices made out by the assessee  and paid  by the purchasers formed part of the "sale price"  within the  meaning of  the definition of that term in  section 2(p)  of Rajasthan  Sales Tax Act, 1954 and section 2(h)  of the  Central Sales Tax Act, 1956. The Sales Tax Authorities  took the  view that  the amount  of freight formed part  of the  "sale 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 but the High Court agreed with the view  taken by  the Sales  Tax Authorities and held that since under clause 8 of the Control order, the price payable by the  purchasers was  F.O.R. destination price, the amount of freight  included in  it formed part of the "sale price". The assessee  thereupon preferred  Civil Appeal  No. 1122 of 1976 after obtaining special leave from this Court.      It will thus be seen that Civil Appeal No. 1122 of 1976 is directed against the judgment of the Rajasthan High Court

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which has  taken a  view against  the  assessee.  The  other appeal, namely, Civil Appeal No. 1310 of 1976 which has been heard alongwith Civil Appeal No. 1122 of 1976 has been filed by the  assessee directly  against an  adverse order made by the assessing authorities but the question in that appeal is the same  as in  Civil Appeal  No. 1122  of 1976. It must be conceded straightaway  that the  question is  not free  from difficulty 286 and there is a sharp divergence of opinion amongst different High Courts,  with an  almost equal  number of  High  Courts ranging on  either  side.  But  fortunately  there  are  two decisions of  this Court  which throw  some  light  on  this question. We shall refer to them in due course.      Though  we   are  concerned   in  these   appeals  with assessments made  under both  Rajasthan Sales  Tax Act, 1954 and Central  Sales Tax  Act, 1956, it would be sufficient to refer only to the provisions of the Rajasthan Sales Tax Act, 1954, since  the material  provisions of  both the  Acts are identical. Section  3 of  the Rajasthan  Sales Tax Act, 1954 provides that  every dealer  whose turnover  in the previous year exceeds  a certain  limit shall be liable to pay tax on his taxable  turn over,  subject to  the provisions  of that Act. "Taxable  turnover" is  defined in section 2(s) to mean that part of the "turnover" which remain after deducting the aggregate amount  of proceeds of certain categories of sales and  "turnover",  according  to  section  2(t),  means  "the aggregate  of   the  amount   of  sale  prices  received  or receivable by  a dealer  in respect of the sale or supply of goods-". The  definition of ’sale price’ is given in section 2(p) and according to that definition, it 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  case where  such  cost  is  separately      charged". 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.      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 not shown 287 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.

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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 purchases 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 either case, it would be part of the ’sale price’. So also, the amount of sales tax payable by a dealer, whether included in the price or added  to it  as a  separate item  as is usually in case, forms part  of the  ’sale  price’.  It  is  payable  by  the purchaser to the dealer as part of the consideration for the sale of  the goods  and hence falls within the first part of the definition.  This position  is now  well  settled  as  a result of  the decision  of this  Court in  M/s George Oakes (Pvt.) Ltd.  Versus The State of Madras & ors. (XII STC 476) whether  the   view  taken  by  Madras  High  Court  in  Sri Sundararajan & Co. Ltd. Versus The State of Madras (VIII STC 105) was  approved. There  S. K. Das, J., speaking on behalf of the  Court, approved  of the  following  observations  of Lawrence, J.,  in Paprika  Ltd. & Anr. Versus Board of Trade (1944) All E.R. 372):           "Whenever a  sale attracts  purchase tax, that tax      presumably affects  the price  which the  seller who is      liable to  pay the tax demands but it does not cease to      be the  price which the buyer has to pay even the price      is expressed as ’x’ plus purchase tax." The learned  Judge also  quoted with  approval what Goddard, L.J., said  in Love. Norman Wright (Builders) Ltd. [(1944) 1 All E.R. 6181:           "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 288      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.’‘ and summed up the position in the following words:           "So far as the purchaser is concerned, he pays for      the goods  what the  seller demands,  namely, the price      eve though  it may  include  tax.  That  is  the  whole      consideration for  the sale  and there is no reason why      the whole  amount paid  to the  seller by the purchaser      should not be treated as the consideration for the sale      and included in the turnover." 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 the 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

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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 place  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 he.  payable by  the purchaser not under any statutory or other liability ’out 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. This position is also well settled having regard to the decisions of this Court in Dyer Meakin Breweries Ltd. v. sales Tax officer, Ernakulam (XXVII STC 120).      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 distination  railway- station  and till  then  the  risk continues to remain with 289 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. I‘he 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 s  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.      This would  plainly and  indubitably  be  the  position where the  con- tract  of sale entered into by the dealer is F.O.R..  destination   railway  station.   But  here  it  is necessary to  bear in  mind a  rather important distinction.

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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 290 that event, he 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 prepaid"  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’.      This was  precisely the  basis on which the decision in Hyerabad Asbestos  Cement Products  Ltd. v.  State of Andhra Pradesh (XXIV  STC 487)  was given  by this Court. There the appellant maintained  a uniform  catalogue rate all over the country in  respect of  its manufactures  and the  catalogue rate obviously included freight in transporting goods to the customers. The  appellant despatched  goods lo the customers by rail  under railway  receipts with  "freight to  pay" and made out  invoices at  the catalogue rate, deducted discount from it  and charged  sales tax on the balance and then gave credit  for  the  amount  of  freight  to  be  paid  by  the customers. The  question arose  in the 1.. assessment of the appellant to  sales tax whether the amount of freight formed part of  the ’sale  price’ and was, therefore, includible in the turnover  of the  appellant. The  terms of the contracts with the  customers were  in a  printed form and clauses (4) and (16)  thereof provided as follows: (4) The prices of the said productions  supplied to  the stockists  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 (16) " the date of delivery shall mean the date of  the railway  receipt and in the case of consignment sold free  on rail destination, the railway freight shall be nevertheless payable  by the  stockists at  the destinations and the  amount of  freight should  on the  railway  receipt shall be deducted from the invoice of the company‘’. It will be seen  that under  clause (4)  the price  of the goods was stipulated to  be "the  current  general  gross  list  price charged by  the company  free on rail", but clause (16) made it clear  that "the  date of delivery shall mean the date of the railway  receipt" and  though the goods may be sold free on rail destination, "the railway freight shall nevertheless be payable  by the  stockists at  the destinations  and  the amount of  freight shall be deducted from the invoice of the company" The  combined  reading  of  clauses  (4)  and  (16) clearly

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291 showed  that   it  was  only  the  price  which  was  F.O.R. destination and   the delivery to the customers was complete as soon  as the.  goods were  put on  rail  and  payment  of freight was  the obligation of the customers as between them and the  appellant. That is why Shah, J., speaking on behalf of the  Court said:  "If clause  (4) stood  alone the  price charged by  the company  may be  deemed to  be the catalogue rate less  the discount  payable to  the purchasers.  But by clause (16)  the purchasers clearly undertook to pay railway freight which  was deducted from the invoice made out by the company. By  clause (16)  the company received the catalogue rate less the railway freight as price of the goods sold. We are unable  to agree  with the  High Court  that  "the  term relating to  the price  in the  contract between the company and the  stockists envisaged  by this  clause [clause  (16)] implies a  obligation on  the part of the company to pay the railway freight".  In our  judgment, under  the terms of the contract, there  is no  obligation on the company to pay the freight, and  under the  terms of  the  contract  the  price received by  the company  for sale  of goods  is the invoice amount less the freight" and held that the amount of freight was not part of the ’sale price’. It was, to quote again the words of Shah, J.. "not made a part of the price".      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  Versus Commercial  Tax officer Kurnool (XI STC 827). 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 292 the terms  of Rule  5(1) (g) which requires that in order to enable 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 the Hyderabad Asbestos Cement Company’s  case, 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 price. And it did  not make  any difference  to this  position that the freight was not initially paid by the appellant but was paid

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by the  purchaser and  given credit  for against  the agreed ’freight inclusive’ price in the invoice.      Now, in  the light  of this  discussion, let us turn to examine the  facts of the present appeals. The Control order here becomes  very mate rial. It is a statutory order having binding force and effect and it must govern the transactions of sale  of cement  entered into  by the  assessee with  the purchasers.  The   Control  order   is  designed  to  ensure availability of  cement at  a uniform price throughout India irrespective of  the distance  from the place of manufacture and clause  (8) provides  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. It was at this maximum  price   of  Rs.   214.65  permetric   tonne  F.O.R. destination railway  station  that,  in  pursuance  of  this clause, the  assessee sold cement to various purchasers. The price was clearly inclusive of freight. 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. Clause (8) of the "General Terms and Conditions of Supply" incorporated in the contract provided that once the goods are handed over to the  railway   and  a   railway  receipt  is  obtained,  the responsibility of  the assessee  shall cease  and  the  risk shall pass to the purchaser and, therefore, if there is non- delivery or  shortage or  delay  in.  delivery,  it  is  the purchaser who,  according to this clause, shall be entitled: to make  a claim  against the  railway. If  there were over- charge of freight then again under clause (11) it is not the assessee but  the purchaser who would be entitled to lodge a claim with  the railway  authorities. The  specimen  invoice produced by the assessee also made 293 it  clear  that  the  responsibility  of  the  assessee  for shortage, loss,  delay  or damage shall cease as soon as the goods are  delivered at  the Work Siding and all such claims may be preferred by the purchaser against the railway and in case excess freight has been charged, the purchaser shall be entitled "to lodge claim with the railways". It would, thus, be seen  that according  to these provisions 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. This would by the position apart from  the provisions  of the Control order and on this position, there can be doubt, for reasons already discussed, that the  amount of freight would not form part of the ’sale price’. But we have to consider the impact of the proivsions of the  Control order, for these provisions having statutory force and authority have over.-. riding effect and the terms and conditions  of the  contract to the extent to which they conflict with  these provisions must be held to be excluded. Let us,  therefore,  examine  the  impact  of  the  relevant provisions of  the Control order on the terms and conditions of the contract .      lt is  clear from  the scheme of the Control order that the price chargeable by a producer is contemplated to be Rs. 214.65 per  metric tonne F.O.R. destination railway station. This of  course is the maximum price at which a producer may

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sell cement  and theoretically,  or course, there is nothing to prevent  him from  selling it at a lower price, but it is assumed by  the Central Government that in a seller’s market where there is scarcity of supply, the producer will sell at the maximum  price permitted  to him under the Control order and that  is the  basis on  which the  machinery  of  Cement Regulation Account  is worked out in the Control order. This machinery would  become unworkable and at the least it would require the  Central  Government  to  subsidies  the  Cement Regulation Account in a large way, if every producer were to sell cement  at a  price lower  than Rs.  214.65 per  metric tonne F.O.R.  destination railway station. It is, therefore, obvious that  though the  Control order  merely provides the maximum  price   of  Rs.  214.65  per  metric  tonne  F.o.R. destination railway  station at  which a  producer may  sell cement, leaving it theoretically open to him to sell it at a lower price,  the basic  assumption underlying  the  Control order is that every producer will sell at the maximum price. And in  fact, in both the cases before us, every transaction of sale  of cement  by the  assessee was at the price of Rs. 214.65 per  metric tonne  F.o.R destination railway station. This, however,  by itself  would not be determinative of the controversy because  the question  would remain  as to  who, between the assessee and the purchaser, is 294 liable to  pay the  freight and that requires us to consider whether  there  is  anything  in  the  Control  Order  which overrides the relevant provisions of the contract bearing on this question  and by  necessary implication,  exclude them. Clause (9)  clearly contemplates 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 selling agency commission is required to be paid over by the producer to the controller in the Cement Regulation Account. The amount  of freight has, therefore, to be realised by the producer from  the purchaser  and that postulates that it is the  producer   who  pays   the  freight   to  the   railway authorities. The  proviso to  clause (9)  makes this  doubly clear by  providing that  "the expenditure  incurred by  the producer on freight-shall be reimbursed to the producer" and again clause (11) uses the expression" -paying of equalising the expenditure incurred by the producer on freight". It is, therefore, clear  that under the scheme of the Control order the freight  is paid by the producer and he then recovers it from  the   purchaser.  But   that  does  not  conclude  the controversy. The  question still  remains: 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.      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 happen ed 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

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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 flight is  payable by  the producer and the recovers it from the purchaser at part 295 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  be prevail,  notwithstanding any  term  or condition 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.      This renders it unnecessary to consider the second part of the  definition, but the latter clause of the second part was strongly  relied upon  on  behalf  of  the  assessee  to support the  exclusion of  the amount  of freight from ’sale price’ and  hence we must proceed to consider it. 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 therefore 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,  there- fore,  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 296

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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 have 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.      Before we part with these appeals we think it necessary to advert  to one  rather  unusual  circumstance  which  has caused some  anxiety to  us. We  were told  by  the  learned counsel appearing on behalf of the assessee and that was not disputed on  behalf of  the  State  that  the  assessee  had entered into  a large  number of  transactions  of  sale  of cement with  the Central  Government  through  the  Director General of  Supplies and  Disposals and  when  the  assessee claimed to  recover the  amount of  sales tax  in respect of these transactions  from the Central Government on the basis that freight  was part of ’sale price‘, the Director General of Supplies  and Disposals  pointed out to the assessee that the Law  Department of  the Government  of India had advised them that  freight was  not part  of ’sale price’ within the meaning of  the definition  of that  term and hence no sales tax would  be payable  by the  assessee  on  the  amount  of freight and  the assessee  was, therefore,  not justified in claiming to recover the amount of sales tax from the Central Government. The  assessee, in view of this statement made on behalf of the Central Government, did not press its claim to recover the  amount of sales tax on the freight component of the price  from the  Central  Government.  Now,  it  appears clearly from this judgment that the opinion given by the Law Department of the Government of 297 India was  not correct  and the  statement made on behalf of the Government of India that no sales tax will be payable by the assessee on the amount of freight was unjustified. There can be no doubt that this statement misled the assessee into not claiming the amount of sale-tax on the freight component of the  price from the Central Government. We think that, in the circumstances,  fairness and  justice  demand  that  the Central Government  should pay to the assessee the amount of sales tax  on the  freight component of the price in respect of transactions  of sale  of  cement  entered  into  by  the assessee with  them under  the  provisions  of  the  Control order. It  is true  and we  are aware that there is no legal

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liability on the Central Government to do so, but it must be remembered that  we  are  living  in  a  democratic  society governed by  the rule  of ’law  and every  Government  which claims to  be inspired  by ethical  and moral values must do what is  fair and  just to thus citizen. regardless of legal technicalities.  We   hope  and   trust  that   the  Central Government will  not seek  to defect the legitimate claim of the assessee for reimbursement of sales tax on the amount of freight by  adopting a  legislatic attitude but will do what fairness and  justice demand.  After all, the motto of every civilized State must be: "Let right be done’.      We accordingly  confirm the  judgment of  the Rajasthan High Court in Civil Appeal No. 1122 of 1976 and the order of the Sales  Tax authority  in Civil  Appeal 1310  of 1976 and dismiss both the appeals with no order as to costs. S.R.                                      Appeals dismissed. 298