- (1.) THIS reference has been made to this larger Bench by a learned single Member of this Board under the following circumstances: M/s. Kamal & Co. , Mirza Ismail Road, Jaipur, is a registered dealer. THIS firm carries on the business of sale of automobiles and spare parts and also manufactures bodies and carries on repairs and service of vehicles. During the course of the assessments for the year 1957-58 by the Sales Tax Officer, Jaipur City, the respondent dealer claimed exemption for the amount separately charged on account of transhipment charges and octroi amounting to Rs 13,764/- and Rs. 560/- respectively on the ground that these amounts did not form part of the sale price and should therefore be excluded from the taxable turnover. The Sales Tax Officer disallowed this contention, but the Dy. Commissioner (Appeals) having scrutinised the bills, granted the required relief to the respondent by exempting these charges from the operation of sales tax. Having felt aggrieved by this order, the Sales Tax Officer filed a revision before the Board of Revenue.
(2.) THE learned counsel for the petitioner assailed the decision of the appellate authority on the ground that freight paid by the dealer before delivery should not be excluded from the operation of the sales tax. In support of his contention, he cited a Division Bench authority of this Board in M/s. Rajputana Automobiles, Katcheri Road, Ajmer vs. the State of Rajasthan (Revision No. 72 (Ajmer) Sales Tax 1962, decided on 22-3-1963 and the case of M/s. K. B. Kanda Swami Brothers vs. the State of Madras (Sic State of Madras A/s R. M. K. Vishwanatha Pillai) reported at Volume VIII Sales Tax cases 1057 Page 601 of the Madras High Court. On the other hand, the learned counsel for the respondent referred to the definition of the term sale price as given in Sec. 2 Sub-Sec. (p) of the Rajasthan Sales Tax Act 1954 and argued that in determining the sale price of an article, the cost of freight or delivery has to be excluded. In support of his contention, he relied on (a.) Nabhi Brothers vs. the Commissioner of Sales Tax Orissa (1960 Sales Tax Cases, Page 605) and (b) Tunagbhadra Industries Limited Kurnool vs. the Commercial Taxes Officer, Kurnool at Page 827 in the same report and (c) Vadya-charya vs. the State of Mysore Vol. XIII 1962 Sales Tax Cases Page 465. Having examined these cases, the learned member came to the conclusion that the previous decision of this Board in the case of Rajasthan Automobiles was not a good law and required to be reviewed by a larger Bench. It was observed by the learned Member that relying upon the authority of the Supreme Court in the Tungabhadra case and the judgments of Mysore and Orissa High Courts, he would have persuaded himself to decide this case in favour of the respondent, but in view of the previous ruling of this Board and in the absence of any decision of the Rajasthan High Court, he felt hesitant and decided to make a reference to the full Bench for their final decision. Accordingly, the following reference was made by him; In the facts and-circumstances of this case, where the respondent firm has separately charged the cost of freight and delivery of the vehicles supplied to the customers whether the sales-tax is payable on the turnover including the cost of freight or delivery of the vehicle or whether such freights or costs are to be excluded in view of the decision (sic definition) given in (six of) the sale price. In the opinion of the learned Member, the plain meaning of the definition of the term sale price would exclude the cost of freight and delivery from taxable turnover provided it was separately charged. A preliminary objection was raised before us by the learned Government Advocate. It was urged that a D. B. of this Board having laid down the law in the case of the Rajputana Automobiles, a single Member was bound to follow the view of the D. B. of the same court. In support of this contention, the learned Government Advocate brought to our notice the view taken by another single Member of this Board in M/s. Ladhuram Bhanwarlal vs. State of Rajasthan (1964 RRD 191 ). In this case, the learned Member of this Board decided to rectify his own judgment under sec. 17 of the Rajasthan Sales Tax Act on the ground that the early decision of the D. B. of this Board had not been brought to his notice and he, therefore, felt called upon to invoke his powers of rectification when the same was brought to his notice. In our opinion, this authority has no relevance to the circumstances of this case. In the present case, the learned Member did not proceed to give his judgment in contravention of the view held by a D. B. of this Board. On the contrary, he chose to refer the matter to a largerbench, thereby showing due deference to the view taken by the D. B. in the case of Rajputana Automobiles. Of course, if he had decided the case in contravention of the above rule, it would have been a different matter. But in following the course which he has done, we are of the opinion that he has acted with due propriety. Sec. 11 of the Rajasthan Land Revenue Act is very clear on this point. It empowers the Chairman or any other Member of the Board sitting singly for the disposal of any case or proceeding, if he thinks fit, for reasons to be recorded in writing, to refer any question of law or custom having the force of law, for the opinion of a larger Bench. We, therefore, overrule this preliminary objection raised by the learned Government Advocate. Now turning to the merits of the case, we are called upon to interpret the definition of sale price as given in the Rajasthan Sales Tax Act. Sale price is defined in sub-sec. (p) of sec. 2 as follows: "sale price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any 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 (and the expression 'purchase price' shall be construed accordingly ). " In a nutshell, the question raised by the learned single Member is whether sale price includes the cost of freight or delivery of the vehicles supplied to the customers by the respondent firm, if the same has been separately charged. Let it be said at the outset that there is no dispute with regard to the cost of freight or delivery incurred in respect of the transportation of the vehicles from the premises of the respondent to the place of delivery. The dispute is confined solely to the cost of freight incurred by the respondent in respect of the transportation of the vehicles from Bombay to the premises of the respondent firm at Jaipur. The contention of the respondent is that this cost should not be included in the sale price and should not, therefore, be held to be subject to sales tax. The learned single Member has supported this view. On the other hand, the contention of the learned Government Advocate is that the cost of freight from Bombay to Jaipur is included in the sale price and is, therefore, subject to sales tax. This was the view taken by a D. B. of this Board in the case of Rajputana Automobiles. It will be seen that the term sale price as defined in the Rajasthan Sales Tax Act means the amount payable to a dealer as consideration of 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. We are called upon to interpret the import of the phrase 'other than the cost of freight or delivery or the cost of installation in case where such cost is separately charged. " It is argued on behalf of the respondent that according to this definition, the following three charges are excluded from the definition of sale price : (a) cost of freight, (b) cost of delivery and (c) cost of installation. It is contended that the cost incurred for the transportation of a vehicle from Bombay to Jaipur is "the cost of freight" while the cost incurred for the transportation of the vehicle from Jaipur to the point of delivery would be the cost of delivery and if the Legislature had intended to restrict the scope of this phrase only to the cost of delivery it would not have used the word 'freight'. In support of this contention, reliance is placed on Nabhi Brothers vs. Commissioner of Sales Tax, Orissa (196 STC 605 ). In this case, the learned Judges had an occasion to examine the import of the term sale price as defined in sec. 2 (h) (a) of the Orissa Sales Tax Act which is in pari materia with the definition given in the Rajasthan Sales Tax Act and reads as follows: Sale price "means the amount payable to a dealer as valuable consideration for - (a) the sale or supply of any goods, less any sum allowed as cash discount according to ordinary trade practice but including any sum charged for anything done by the dealer in respect of the goods at the time of, or before delivery thereof, other than the cost of freight or delivery or the cost of installation when such cost is separately charged. " In this case the contention of the petitioner was that since he had charged railway freight oh vehicles separately in his bills issued to his customers, he was entitled to the deduction. The Sales Tax Tribunal held that if the petitioner had paid freight charges and such other charges as had been claimed in effecting delivery of goods to his customers, which are not included in the sale price, but were incurred on behalf of the purchaser he could claim deduction of such charges by virtue of sec. 2 (h) (a) since all such charges incurred by the petitioner were under the contract of agreement itself. But such charges could not be excluded from the price received by the petitioner from his customers although in calculation the price he had shown them separately in the bills drawn. The learned Judges however negatived this view and observed that from a plain reading of section it would appear that the clear intention of the Legislature was that the cost of the freight or delivery or cost of installation when separately charged was to be excluded from the sale price. It was, at the same time observed by them that no authority had been cited before them to show that inspite of the express words used in the Section the freight and the other things would be inclusive of the sale price when they are separately charged. The learned Government Advocate has countered this plea by arguing that the view taken in the case of Nabhi Brothers resulted from the fact that no authority had been produced before the learned Judges in that case. He has drawn our attention to the view taken by the Madras High Court in the State of Madras vs. R. M. K. Viswanatha Pillai (1957 S. T. C. 601) and has argued that if this authority had been cited before the learned Judges of the Orissa High Court, it was quite likely that they would have taken a different view. In this case, the plaintiff was a piece-goods merchant who was carrying a business in Tirunelveli. He purchased goods from Bombay and Ahmedabad and while selling the goods to his customers, he prepared bills showing the price which he paid at Bombay and also, as a separate item, the railway freight which he paid for getting the goods transported to Tirunelveli. He contended that under rule 5 (l) (g) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, he was entitled to claim exemption for the freight so paid at Bombay because he had charged it separately in the bills which he issued to his customers. The learned Judge held that the assessee's turnover for the purpose of the rules was the amount for which the goods were sold by him and as in respect of the sales effected by him, he did not pay any freight, he was not entitled to claim exemption in regard to the freight paid for the purpose of his purchase though it was taken into account for fixing the cost price. It was observed by the learned Judge that under rule the tax was leviable only on the net turnover. Having regard to the fact that the plaintiff was a dealer in piece-goods, in the light of rule 4, his turnover for the purpose of the rules was held to be the amount for which the goods were sold by the dealer. It was, further, observed that the amount for which the goods were sold by the plaintiff would undoubtedly include the freight, because the freight which he paid went into the sale price which he charged for the goods when he sold the goods to his customers at Tirunelveli. But what was important to remember was that in respect of the sales which he effected at Tirunelveli he did not pay any freight, and there being no question of freight in connection with sales effected by him, it was clear that he was not entitled to claim the exemption in regard to the freight which he paid for the purpose of his purchase, though it was taken into account for fixing the cost price. In a case like this, it was observed that the court was concerned only with what happens at the sale point, where there was no freight at all. It will be seen from the above narration that in rejecting the contention of the plaintiff, the learned Judge took into consideration the fact that the plaintiff was a dealer in piece-goods and under Rule 4, his turnover for the purpose of the rules was the amount for which the goods were sold by the dealer.
(3.) TO examine the relevance of this rule, it is necessary to set down the definition of taxable turnover as given in the Madras Act and to see if it is in pari materia with the Rajasthan definition-Rule 5 (l) (g) of the Madras General Sales Tax (Turnover and Assessment Rules, 1939 reads as under : Rule 5 (1) The tax or taxes under sec. 3 or 5 or the notification or notifications under sec. 6 (1) shall be levied on the net turnover of a dealer. In determining the net turnover, the amounts specified in clauses (a) to (k) shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer - x x x x x x x x (g) 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) charges for packing and delivery and other such like services; x x. x x x x. x x According to sec. 2 (p) of the Madras Sales Tax Act taxable turnover means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed. It will, therefore, be seen that according to the Madras Act and Rules also the following items when specified and charged for by the dealers separately, have to be deducted from the total turnover of a dealer while determining the taxable turnover - (i) freight; (ii) charges for packing and delivery and other such like services. We have quoted above the definition of sale price as given in the Rajasthan Sales Tax Act. In the final analysis the aggregate of the sale price collected by the dealer forms his taxable turnover. Now the Rajasthan Act also provides for the exclusion of the cost of freight or delivery or the cost of installation in cases where such cost is separately charged, while determining the sale price. In the Madras Act also the same items are excluded. TO all intents and purposes, therefore, the two definitions are in pari materia. The Madras High Court has interpreted cost of freight to be only such as was incurred after the sale, and not before it. No doubt, the Orissa case relates to motor cars and spares and should be deemed to be on all fours with the present case, but it is unfortunate that the Madras Ruling was not placed before the Orissa Judges and they had no occasion to examine the same. Nevertheless, the line of argument followed in the Madras Ruling is unassailable. In this connection, it would be pertinent to observe that the definition of sale price in the Central Sales Tax Act also is similar to the definition given in the Rajasthan Sales Tax Act. According to the Central Sales Tax Act, sale price means the amount payable as consideration for the same including any sum charged for any thing done at or before the delivery of the goods other than the cost of freight or delivery where such cost is separately charged. It will be seen that in this case too, the cost of freight or delivery when the same is separately charged has to be excluded before arriving at the sale price. Now freight charges may be inward or outward and may be included in the sale price or may be charged separately in addition to the sale price. As has been stated by Patel in his Central Sales Tax Act, inward freight charges are those that are incurred by a dealer for bringing or getting the goods delivered to the warehouse. It has relation to the purchase aspect of the transaction. Outward freight charges are those that are incurred while effecting sales. It has relation to the sales aspect of the transaction. It would be obvious that what is deductable is only the charges incurred at the sales point and not at the purchase point. We are further fortified in this conclusion by observing that the conjunctive words "other than" govern all the three items namely cost of freight or cost of delivery or cost of installation. There is no dispute with regard to the interpretation of the cost of delivery or the cost of installation which are clearly indicative of outward aspect starting at the sale point. The fact that these conjunctive words govern all these three items would show that the three items are not dissimilar in nature. If the costs of freight were interpreted so as to include the inward freight also it would be tantamount to including inward delivery and installation also under the same clause. Evidently, this could not be the intention of the Legislature, as there can be no inward delivery, or installation ; it starts only from the sale point. TO interpret cost of delivery and installation it the purchase point prior to sale would be illogical, and cost of freight cannot be interpreted in a different manner. It may be argued that the Legislature never wastes words and the fact that they have used cost of freight as distinct from the 'cost of delivery' would show that they intended to include the inward freight also. We, however, are not impressed by this argument. The fact that these phrases have been used separately would not lead us to the conclusion, that we should interpret cost of freight to include inward freight also; while we cannot interpret, ex-hypothesis, cost of delivery and cost of installation having been incurred prior to sale. We would also like to point out that if the 'cost of freight' were interpreted to include the inward freight, the dealer could claim exemption in respect of the cost of shipment incurred by him in case of goods purchased from abroad as the cost of shipment also, would grammatically speaking, be covered by the cost of freight. Evidently, this would be an absurd interpretation. Certainly, the Legislature would not have excluded the cost of shipping freight from the sale price. Normally, when goods are sold, delivery is given by the seller at his own place of business or godown. Sometimes, however, in order to accommodated the customer's convenience the seller agrees to send the goods to the customer's place, on the condition that the customer would pay to the dealer such costs as the dealer may incur in so sending the goods. It is obviously to provide for such cases that the Legislature has laid down that the cost of fright, which is not part of the sale itself, but something done after the sale, would be excluded from the sale price, when the same is separately charged, the presumption being that there have been two contracts one for the sale of goods and the other for their transportation; and it is only the first which is the sale price, excluding the latter therefrom. Of course, the Legislature has provided as a precautionary measure that such cost shall be excluded from the turnover, although included in the sale bill, only if it is seprately charged. To conclude, the cost of frieght or charges for delivery installation or other like services contemplated by this definition have relation only to those expenses which are incurred in connection with the delivery, etc. , of the article sold, i. e. , expenses incurred at the sale point; and have no connection whatsoever with, or reference to, expenses incurred prior to the articles reaching the place of business of the selling dealer, i. e. , upon his purchases at the purchase point, and further if such charges etc. are not separately charged, they become part of the sale price. The dealer is entitled to exclude these charges from the sale price only if he has shown and charged them separately, as the law stands. A reference has also been made to Tungabhadra Industries Ltd. Kurnool vs. Commercial Tax Officer, Kurnool (STC 1960 Supreme Court 827 ). In this case, the dealer had specified in the bill of sale the total amount of the price of the goods sold and had then deducted from this amount the railway freight and had showed the balance as the sum of which sales tax was computed. It was held that as the dealer had charged a price inclusive of the railway freight, he would not be entitled to the deduction under rule 5 (l) (g), It was observed 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. It was found that neither of these conditions was satisfied by the bills produced by the appellant. In the specific bill which was placed before the learned Judges, after setting out the quantity sold by weighing the total amount the price was determined and from this, the railway freight was deducted and the balance was shown as the sum on which sales tax had been computed. The learned Judges, therefore, held that the appellant having charged a price inclusive of the railway freight, the transaction would fall outside the terms of rule 5 (l) (g) which required 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. Under the circumstances, it was held that the appellant was not entitled to the deduction in respect of freight. The facts of the Tungabadra case are therefore not applicable to the facts of the present case. The question before us is whether in the facts and the circumstances of the present case, where the respondent firm has separately charged the cost of freight and delivery of the vehicles supplied to the customers, the sales tax is payable on the turnover including the cost of freight or delivery of the vehicle or whether such costs are to be excluded in view of the definition of the sale price. As the above discussion shows our reply would be that the term sale price would exclude the cost of freight or delivery from the point of sale provided it is separately charged and that it would not exclude the cost of freight incurred by the dealer in bringing goods to his warehouse or the point of sale. . ;