http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: M/S BLACK DIAMOND BEVERAGES & ANR.

       Vs.

RESPONDENT: THE COMMERCIAL TAX OFFICER, CENTRALSECTION, ASSESSMENT WING,

DATE OF JUDGMENT:       16/09/1997

BENCH: S. P. BHARUCHA, M. JAGANNADHA RAO

ACT:

HEADNOTE:

JUDGMENT: Present:              Hon’ble Mr. Justice S.P. Bharucha              Hon’ble Mr. Justice M.Jagannadh Rao H.N. Salve,  and, Raju  Ramachandran Sr.Advs.,  P.H. Parekh, Sameer Parekh  and Ms.M.Chaudhary,  Advs. with  them for the appellants. B.Sen, and  S,Hedge, Sr,Advs.,  Dilip Sinha, J.R. Das and D. Krishnan, Advs.  with them for the Respondent for M/s. Sinha & Das. Advs.                       J U D G M E N T The following judgment of the Court was delivered:                             WITH        (Civil Appeal Nos. 1084, 1085 & 1086 of 1992)                       J U D G M E N T M. JAGANNADHA RAO, J.      The Bengal  Taxation Tribunal, by order dated 26.9.1991 dismissed the  applications R.No.  354 of 1990, 130 of 1991, 415 of  1989 and  431 of 1989 and Civil Appeals 1083 of 1992 to 1086  to 1992 are filed against the dismissal of the said applications.      The issue  involved in  these appeals  is  whether  the freight  and  handling  charges,  hereinafter  described  as "freight charges" or "delivery charges" are to be treated as included within  the words  "money consideration’ in Section 2(d) of  the West  Bengal Sales  Tax Act,  1954 (hereinafter called the 1954 Act) which defines "sales price"      According to  the appellants,  ‘freight charges’ cannot be included  in the  meaning of the word ‘money transaction" in the  definition of ‘sale price’ in the Section 2(d) in as much as it was not the intention of the legislature to treat the said charges as part of the "money consideration’. It is the case  of the  appellants that the material on record and the conduct  of the parties and in particular, the Cash Memo No. 97751  exhibited in  the case  which shows that delivery charges were  separately collected as distinct from the cost of goods,  was evidence that they were not part of the ‘sale price’. It  is also  the case of the appellants that Section 2(d) of the 1954 Act specifically includes in the definition of ‘sale  price’ any  sum charged  for containers  or  other materials for the packing of the notified commodities and in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

the absence of a similar inclusion of ‘freight’ such charges must, by  implication be treated as outside the ‘sale price’ learned counsel  also submitted  that under  Section 2(h) of Bengal Finance  (Sale Tax)  Act 1941 - which applies to non- specified  goods   -  the   definition   of   ‘sale   price’ specifically  excluded   ‘delivery  charges’  if  separately charged and  the 1954 Act must have, of necessity, contained a specific  clause including  ‘freight charges’  within  the meaning of  ‘sale price’.  Otherwise there charges would not be part  of ‘sale  price’. Learned counsel for the appellant placed strong  reliance on  the decision  of this  Court  in Hyderabad Asbestos  Cement Products  Ltd Vs. State of Andhra Pradesh (1969) 24 STC 487.      On  the   other  hand,  the  learned  counsel  for  the respondent pointed out that the majority of the Tax Tribunal has held  that, on  facts,  the  obligation  of  paying  the ‘freight  charges’  was  on  the  appellant  -  sellers  and therefore the  same must be treated as included in the ‘sale price’ under  Section 2(d).  Learned counsel relied upon the decision of  this Court  in Hindustan  Sugar Mills  Ltd  Vs. State of  Rajasthan 1978 (4) SCC 271 = 43 STC 13. to contend that the first part of Section 2(p) defining ‘sale price’ in the Rajasthan  Sales Tax  Act 1954  was in pari materia with the first part of the definition of ‘sale price’ in the 1954 Act and therefore ‘sale price’ meant the amount payable to a dealer as  consideration for  the sale  of good and the test what the  consideration was  for the sale. As stated in that Judgment, it was immaterial to inquire how the consideration was made up, whether it included excise duty or sales tax on freight. The  question is  what is  the amount  payable  the purchaser to  the dealer  as consideration  for the sale and not what  is the net consideration retainable by the dealer. learned  counsel   also  relied   upon  T.V.L  Ramco  Cement Distributing Co.  Ltd. Vs.  State of Tamil Nadu 1993 (1) SCC 192.      The 1954  Act generally  provides for  levy of a single point tax  at the  first stage on commodities notified under Section 25  of the Act. On the other hand, the 1941 Act is a general statute  providing for multi-point levy of sales tax on commodities  not covered  by the 1954 Act. Sub-clause (d) of Section 2 of the 1954 Act reads as follows:      "S.2  (d)   "Sale-price"  used   in      relation  to  a  dealer  means  the      amount of  the money  consideration      for   the    sale    of    notified      commodities manufactured,  made  or      processed by him in West Bengal, or      brought by  him  into  West  Bengal      from any place outside West Bengal,      for the  purpose of  sale  in  West      Bengal, less  any  sum  allowed  as      cash discount  according  to  trade      practice,  but   includes  any  sum      charged  for  containers  or  other      materials  for   the  packaging  of      notified commodities".      We  shall   first  deal  with  the  contention  of  the appellants’ counsel based upon the non-inclusion of ‘freight charges’ in  the definition of sale price in Section 2(d) of the 1954 Act.      It is  clear that  the definition  of ‘sale  price’  in Section 2(d)  uses the  words ‘means"  and  ‘includes’.  The first part of the definition defines the meaning of the word ‘sale price’  and must,  in our view, be given its ordinary, popular or natural meaning. The interpretation thereof is in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

no way  controlled or  affected by  the  second  part  which ‘includes’ certain other things in the definition. This is a well-settled principle  of construction.  Craies on  Statute Law (7th Edn. 1.214) says:      "An  interpretation   clause  which      extends the  meaning of a word does      not take  away its ordinary meaning      .... Lord Selborne said in Robinson      Vs.  Barton   Eccles  Local   Board      (1883)8 App.Case  798 (801)  :  "An      interpretation clause  of this kind      is not  meant to  prevent the  word      receiving  its  ordinary,  popular,      and  natural  sense  whenever  that      would be  properly applicable,  but      to enable  the word  as used in the      Act ...  to be applied to something      to which it would not ordinarily be      applicable".      Therefore, the  inclusive part of the definition cannot prevant  the  main  provision  from  receiving  its  natural meaning.      In view  of the  above principle  of  construction  the first part  of the  definition of sale price in Section 2(d) of the  1954 Act  must be  given its  own  meaning  and  the respondent’s counsel  is therefore  right in urging that the first part  of Section  2(d) which  is similar  to the first part of  Section 2(p)  in the Rajasthan Sales Tax Act, 1954, must be  given the  same meaning  given to  similar words in Hindustan Sugar  Mills Ltd  Vs. State of Rajasthan (1978 (4( SCC 271.  What the  said  meaning  is  well  shall  consider separately. If,  therefore, by  virtue  of  Hindustan  Sugar Mills Case,  the first part is to be interpreted as bringing within its  natural meaning  the ‘freight  charges’ then the contention for  the appellants that like ‘packaging charges’ these ‘freight  charges’ must  have also  been  specifically included in Section 2(d) cannot be accepted.      The other  contention of  the learned  counsel for  the appellant that  Section  2(h)  of  the  1941  Act  expressly excluded ‘freight charges’ and for that reason that 1954 Act must have  contained an express provision including ‘freight charges’ is equally untenable. Now the first part of Section 2(h) defining  ‘sale price"  in the 1941 Act, as well as the first part  of Section  2(d) of  the 1954  Act and the first part  of   Section  2(p)   of  the   Rajasthan  Act,   1954, (interpreted in  Hindustan Sugar Mills Case) are similar. In our view, the exclusionary words in Section 2(h) of the 1941 Act were  only intended  to exclude  certain specific things which were otherwise within the first part of such exclusion could also  be ex  abundante cautela.  The non-inclusion  of ‘freight charges’ expressly in the 1954 Act has no impact on the natural  meaning of  the first part of Section 2(d) just as the exclusion of ‘packaging charges’ in Section 2(d) does not have  any impact  on the  first part of the same Section 2(d). The  first part  of the definition remains to have its natural  meaning   unaffected  by   what  other  things  are expressly  included   in  the   second  part;  and  is  also unaffected by  what is  not expressly  included.  Therefore, neither the  inclusion of  ‘package charges’ in Section 2(d) of the  1954 Act nor the exclusion of ‘freight charges’ from Section 2(h)  of the  1941 Act  and the  absence of any such express inclusion  of freight  charges in  the 1954 Act does not, in  our view, alter or affect whatever meaning is to be attributed to  the first  part of  the  1954  Act  which  is similar to  the first  part of Section 2(p) on the Rajasthan

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

Act, 1954.      If, therefore,  the first  limb of  Section 2(b) of the Act is  similar to  Section 2(p) of the Rajasthan Act, 1954, the question  then is  as to  what was  actually decided  in Hindustan Sugar  Mills’ Case?  In that case, this Court held that this  part of  the definition of ‘sale price’ meant the amount payable  to a dealer as consideration for the sale of any goods.  It was pointed out that the test was  as to what was the  consideration passing  from the  purchaser  to  the dealer for  the sale of goods?. It was immaterial to inquire as to  how the  amount of consideration was made up, whether it included  excise duty  or sales  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".  It was  further held  that the concept of real price  or   actual  price   retainable  by  the  dealer  was irrelevant. Reference  in that  connection was  made by this Court to  what Goddard L.J. stated in Love Vs. Norman Wright (Builders) Ltd  1944  (1)  AII.E.R.  618.  This  Court  then observed that  if the  dealer  transported  goods  from  his factory to  his place  of business  and sold them at a price which was  arrived at after taking into account "freight and handling charges" incurred by him in transporting the goods, then the  said charges  would obviously be 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 goods. It was  also observed  that the  same would  be the position even  if  the  ‘freight  and  handling  charges  were  shown separately in  the bill and added to the price of the goods, for the  character of  the payment  would be the same. If on the facts,  the ‘freight  and handling  charges’ represented the expenditure  incurred by  the dealer in making the goods available to  the purchaser at the place of sale, then those charges would  contribute an  addition to  the cost  of  the goods to  the dealer and would clearly be a component of the price charged  from the  purchaser. This Court held that the amount of ‘freight and handling charges’ would be payable be the purchaser not under any statutory or other liability but as part  of the  consideration for the sale of the goods and would form  part of  ‘sale price’.  That  is  the  ratio  of Hindustan Sugar  Mills Case.  In the discussion by his Court in the above case reference was made to the freight expenses of a  dealer who  transported good  from the  factory to his place of business. But this does not mean that his Court did not intend  that freight expenses upto the point of delivery were not  to be included in ‘sale price’. As rightly pointed out by  the Tribunal  (in para  32 (b)  of the  order), this Court had  also referred  in Hindustan  Sugar Mills’ Case at page 29  of STC)  to the  freight charges  "at the  place of sale", which  could clearly  be  referable  to  the  freight charges upto the point of delivery.      Having referred  to the  true meaning of the first limb of Section  2(d) of  the 1954 Act, we shall now refer to the Tribunal’s findings. The majority of the Tribunal found that the venue  of   the sale  was the place of the buyer and the time of  the sale  was the  point of  delivery. The purchase orders were  place mostly  there, the goods were received by the buyer  there. Payment  and  receipt  of  the  goods  was simultaneous. The  Tribunal held that collection of delivery charges separately  was only  notional in nature rather than real. It  was stated  that the  appellant also admitted that defective goods  returned by  the buyer  were taken back and thus defects during transportation were not at buyer’s risk. The appellant’s case that the sale took place ex factory but

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

delivery was  at the  buyer’s place was not established. The Tribunal pointed  out that in fact a single excise gate pass was issued  by the appellant to one of its own employees who put the  goods in  the truck. The goods were despatched in a lot and there was no appropriation of any particular item to any particular  buyer. The  fact that  the appellant changed over from  a private  permit for  the  truck  to  a  ‘public carrier’ permit  did not,  according to  the Tribunal,  mean that the  carriage of  goods was  in respect  of  goods  not belonging to  the permit  holder or  in connection  with his trade or  business. Finally,  the Tribunal  (in its majority Judgment) concluded (para 31 of its order):      "We have  found from  the  fact  of      these  cases  that  the  applicants      were under  an obligation  to incur      the  expenditure  towards  delivery      charge, because  they were  to make      the goods  available for  sales  to      the customers at their places".      The said  finding is  supported by  ample material  and circumstances  as  noticed  by  the  Tribunal  and,  in  our opinion, clearly  brings the  case of  the appellants within the ration of the decisions in Hindustan Sugar Mills Case.      Learned  counsel   for  the  appellants  placed  strong reliance on  Hyderabad Asbestos  Products Ltd  Vs. State  of Andhra Pradesh  (1969) 24 STC 487. In our view, that case is clearly distinguishable.  The reason  as to why in that case Shah J.  (as he  then was)  held that  the ‘freight charges’ were not  part of  the ‘sale  price’ was  fully explained in Hindustan Sugar  Mill Case  itself namely,  (see page  31 of STC), that  the terms  of the  contract in that case were in written from  and showed  that "it  was only the price which was f.o.r  destination", and  that as against the customers, ‘delivery was complete as soon as the goods were put on rail and  payment   of  freight   was  the   obligation  of   the customers....". By  clause 16 of the contract the purchasers undertook to  pay the  freight, and therefore clause 4 stood modified. It  was on  those facts  that it was held that the payment of  ‘freight charges’  was not the obligation of the purchasers. Hence  the appellant  cannot rely  on  Hyderabad Asbestos Products  Case. We  may  also  state  that  learned counsel for  the respondent  is right  in relying  upon V.L. Ramco Cement  Distribution Co  Vs. State of Tamil Nadu where Hyderabad Asbestos  Case  was  distinguished  on  facts  and Hindustan Sugar Mills case was applied.      Learned counsel  for the  appellant  also  relied  upon Southern Motors  Vs. State  of Karnataka (1996) 102 STC 235. The decision  too does  not help the appellant. In that case this Court  held that  the High  Court erred  in interfering with the  orders of the Sale Tax Appellate Tribunal when the Tribunal and  merely followed the decision of the High Court in the  case of the same assessee in previous years, wherein it was  found on  identical facts that the ‘freight charges’ were not part of the sale-price.      For the  aforesaid reasons, these appeals are dismissed with costs.