1. This is a petition by M/s. Birla Jute Manufacturing Co. Ltd. challenging the order of assessment of the Assistant Commissioner of Sales Tax, Satna, dated 23rd December, 1970, including the amounts of railway freight in their taxable turnover for purposes of the Central Sales Tax Act, 1956, for the assessment year 1965-66.

2. The petitioner owns the Satna Cement Works at Satna, which is engaged in the business of manufacture and sale of cement. Cement is a controlled commodity. Under the Cement Control Order, 1961, made by the Central Government for purposes of securing the equitable distribution and availability at fair price of cement throughout the country, in exercise of their powers under Section 18C of the Industries (Development and Regulation) Act, 1951, the entire quantity of cement produced by the petitioner has to be sold to the State Trading Corporation at the price fixed under clause 6(1 )(a). That price is ex works price. The petitioner then acts as an agent of the State Trading Corporation in effecting sales to the consumers. The sales are of two different types : (a) to Government departments, through the Director-General of Supplies and Disposals, New Delhi, and (b) sales to non-Government consumers. The price at which the State Trading Corporation may sell cement to such persons is fixed under clause 6(2)(a), and that price is F.O.R. destination.

3. During the period from 1st April, 1965, to 31st March, 1966, the gross turnover of inter-State sales effected by the petitioner amounted to Rs. 7,81,58,770.03. Out of this, the amount of Rs. 1,54,69,579.77 represented the freight on despatches of cement sold to consumers. These figures are taken from the quarterly returns (annexures E-l to E-4) and the statement of railway freight (annexure E-6). The petitioner had in its quarterly returns claimed a deduction of the freight amounting to Rs. 1,54,69,579.77 as a "rebate" from its taxable turnover and pressed that claim during the assessment proceedings. The Assistant Commissioner of Sales Tax has, however, disallowed the claim for deduction on the ground that the freight is not separately charged. Against that decision the petitioner has straightaway filed this writ petition alleging that the impugned order of assessment is illegal and in excess of jurisdiction.

4. The short question for consideration is whether the amounts of freight incurred in the inter-State sales were liable to be excluded from the taxable turnover of the petitioner. The petitioner contends that in the case of all sales, i.e., both to Government and non-Government buyers, the terms and conditions under which, the sales were effected, the freight was payable by the buyers alone and that, in no case, there was any liability or obligation upon the petitioner to pay the freight. Nor has the petitioner paid any amount as freight in respect of any of the sale transactions. It is, therefore, urged that the amounts of freight cannot be, in law, treated as part of the sale price, and consequently of the taxable turnover. To substantiate this contention, the petitioner has placed on record the relevant documents governing the sales.

5. In respect of supplies to Government departments, the contracts of sale were all governed by the Rate Contract No. SM-I/RC-4116/Cement/ STC/2986 dated 11th August, 1956, Sub-clause (vi) of clause 16 whereof reads as follows :

Cement shall be dispatched 'freight to pay' at public tarrif rate, unless otherwise instructed by the indentor. The consignee shall pay the freight and all other charges at destination. Selling agents will afford credit for freight in their bills. Except in the case of public siding, wherever any destination siding charges are charged by the railways in the railway receipts the same will have to be borne by the consignee and no credit for the same will be allowed by the selling agents in their bills. In the case of public siding charges, credit will be afforded by the selling agents in their bills.

The petitioner has annexed two bills in the form prescribed by the Director-General of Supplies and Disposals (annexures C-2 and C-3) governing a particular transaction. They illustrate the manner in which the bills were required to be drawn on the respective Government departments in respect of the supplies of cement to them.

6. Similarly, the sales made to buyers other than Government departments are evidenced by the bill (annexure C-l), which is drawn in the same manner. In case of such non-Government buyers, the order was placed by such buyers in accordance with the allotment of cement to them by the Cement Controller ; the acceptance of the order by the petitioner was in the form, annexure D. Among other conditions, the following are relevant:

(2) The cement will be consigned 'freight to pay'.

(3) The supply will be billed at the standard rate ruling on the date of despatch and will be subject to credit being given for railway freight from our works, the actual freight being payable by you.

7. The question whether sales tax was payable on freight was under consideration of the Director-General of- Supplies and Disposals in respect of sales to Government departments. The relevant correspondence on the subject is placed on record (annexures R-l to R-3). The Government of India in the Ministry of Industrial Development and Internal Trade, having pursued the matter with the Director-General of Supplies and Disposals and the Ministry of Law, informed the petitioner that sales tax was payable only on the net price after deducting the actual freight from the F.O.R. destination price. Along with the letter of the Government of India (annexure R-3), the extract of the Law Ministry's note was forwarded in support of that view. It appears that the Government of India was of that view following the decision of their Lordships of the Supreme Court in Hyderabad, Asbestos Cement Products Ltd. v. State of A.P. [1969] 24 S.T.C. 487 (S.C.)

8. Having heard the parties, we are of the view that the railway freight forms part of the price, in a contract for sale of goods, where the sale price is F.O.R. destination, and, therefore, must fall within the meaning of the term "sale price", .as defined in Section 2(h), and consequently must be included in the "turnover" of a dealer, within the meaning of Section 2(j) of the Central Sales Tax Act, 1956. The relevant provisions read as follows:

2.(h) '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 cases where such cost is separately charged;....

(j) 'turnover' used in relation to any dealer liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in the prescribed manner.

9. The question whether the railway freight forms part of the sale price of a dealer, in relation to a contract where the price is "F.O.R. destination", is now settled by a series of decisions, interpreting the terms "sale price" and "taxable turnover", appearing in different sales tax laws of different States. The definitions appearing therein are almost identical as those contained in Section 2 (h) and (j) of the Central Sales Tax Act. The principles laid down in the decisions interpreting like provisions in other sales tax laws must, therefore, govern the present case.

10. There are two decisions on the subject by this court. In Commissioner of Sales Tax, M.P. v. Anwarkhan Mahboob Co. [1956] 7 S.T.C. 197, a Division Bench was dealing with the question under exactly similar circumstances. There, the assessee was a manufacturer of bidis, quoted rates "F.O.R. destination", in his contracts with his customers and despatched the goods "freight to pay". The customers paid the freight separately to the railway company. The net amounts billed to the customers by the assessee excluded the railway freight which were paid separately by the customers. In dealing with the question whether the railway freight, in the circumstances, formed part of the sale price, the Division Bench observed as follows:

If we adhere to the words of the statute, as we are bound to do, the definition of sale price would in the circumstances stated include railway freight, though actually paid by the purchaser. In other words, the determining factor is not the terms in which the bill is made but the terms of the actual contract between the parties, and if the contract was, as stated, 'F.O.R. destination' it must mean that the price was intended between the parties to be inclusive of the railway freight.

The decision turned on the definition of sale price in Section 2(h) of the C.P. and Berar Sales Tax Act, 1947. In Commissioner of Sales Tax, M.P. v. Maratha Syndicate Pvt. Ltd., Gwalior 1970 R.N. 235, another Division Bench, in dealing with an assessee who adopted the same method of drawing a bill, i.e., to mention the total price of the goods sold and then deduct the freight, held that the assessee was liable to pay tax on the amount which was deducted from the bill as freight.

11. Their Lordships of the Supreme Court have taken the same view under somewhat the same circumstances, while interpreting a similar provision in Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool., Kurnool [1960] 11 S.T.C. 827 (S.C.). Under Rule 5(1 )(g) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, in determining the net turnover of a dealer, he is entitled to have deducted from his gross turnover-

all amounts falling under the two heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold:

(i) freight;

(ii)...

In that case, the assessee, who was a manufacturer of groundnut, refined and hydrogenated oils, claimed exemption on a sum of Rs. 3,88,377-13-3 on the ground that it represented the freight in respect of the goods sold by him, asserting that they had been charged for separately. In rejecting the claim, their Lordships observed as follows :

...It would be seen that in order to claim the benefit of this exemption the freight should (i) have been specified and charged for by the dealer separately, and (ii) the same should not have been included in the price of the goods sold. The learned Judges of the High Court held that neither of these conditions was satisfied by the bills produced by the appellant. We consider, the decision of the High Court on this point was correct. In the specimen bill which the learned counsel for the appellants has placed before us, after setting out the quantity sold by weight (23,760 Ib.) the price is specified as 15 annas 9 pies per Ib. and the total amount of the price is determined at Rs. 23,388-12-0. From this the railway freight of Rs. 1,439-12-0 is deducted and the balance is shown as the sum on which sales tax has been computed. From the contents of this invoice it would be seen that the appellant has charged a price inclusive of the railway freight and would therefore be outside the terms of Rule 5(1 )(g) which requires that in order to enable a dealer to claim the deduction it should be charged for separately and not included in the price of the goods sold. The conditions of the rule not having been complied with, the appellant was not entitled to the deduction in respect of freight.

12. Two other decisions of their Lordships of the Supreme Court in Dyer Meakin Breweries Ltd. v. State Of Kerala. [1970] 26 S.T.C. 248 (S.C.) and D. C. Johar & Sons (Private) Ltd. v. Sales Tax Officer, Ernakulam, and Anr. [1971] 27 S.T.C. 120 (S.C.) were relied upon by the revenue before us. In Dyer Meakin Breweries Ltd. [1970] 26 S.T.C. 248 (S.C.), the assessee who was a manufacturer of liquor, transported the goods from its breweries and distilleries in Uttar Pradesh and Haryana to its place of business in Ernakulam and sold them there. When selling liquor to the customers, the assessee made out separate bills for ex factory price and for "freight and handling charges". The assessee claimed that the amount charged for "freight and handling charges" incurred by it in transporting the goods from the breweries and distilleries to the warehouse at Ernakulam had to be deducted under Rule 9(f) of the Kerala General Sales Tax Rules, 1963, in determining the taxable turnover. In rejecting the claim, their Lordships stated that all the expenditure incurred by the assessee towards freight and handling charges was incurred prior to the sale and was a component of the price for which the goods were sold and the assessee was not entitled to the deduction claimed. In dealing with Rule 9(f), they stated as follows :

...Rule 9(f) seeks to exclude only those charges which are incurred by the dealer either expressly or by necessary implication for and on behalf of the purchaser after the sale when the dealer undertakes to transport the goods and to deliver the same or where the expenditure is incurred as an incident of sale. It is not intended to exclude from the taxable turnover any component of the price, expenditure incurred by the dealer which he had to incur before sale and to make the goods available to the intending customer at the place of sale.

13. In D.C. Johar & Sons (Private) Ltd. [1971] 27 S.T.C. 120 (S.C.), the facts were identical to those in Dyer Meakin Breweries Ltd}, except that the assessee was not a producer or manufacturer of liquor, but only a selling dealer at Ernakulam. It was held by their Lordships that the assessee was not entitled to claim exemption of freight and delivery charges, in respect of which separate bills were made, from the taxable turnover, on the ground that they formed a component part of the price for which the goods were sold, following their view in Dyer Meakin Breweries Ltd. [1970] 26 S.T.C. 248 (S.C.)

14. Strong reliance was placed by learned counsel for the petitioner on the decision of their Lordships in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 S.T.C. 487 (S.C.), on which the opinion of the Law Ministry is based and on the strength of which, the present writ petition is filed. It is urged that this decision of their Lordships really concludes the matter, as the facts in that case were identically the same as those in the present case. We are unable to accept the contention. No doubt, the bills prepared in respect of-(a) supplies to different Government departments through the Director-General of Supplies and Disposals under Sub-clause (vi) of clause 16 of the Rate. Con tract and (b) supplies to non-Government buyers, contained the term that the consignments would be sent "freight to pay", and in case of all sales, the payment of freight is by the buyers. To that extent the bills prepared are identically the same as those in Hyderabad Asbestos Cement Products Ltd. [1969] 24 S.T.C. 487 (S.C.) Nevertheless, the distinguishing feature is that in the present case the sales, whether to Government buyers or to non-Government buyers, were sales of a controlled commodity. The contracts of sale were, therefore, subject to the provisions of the Cement Control Order, 1961. Under clause 6(2)(a), the price at which the State Trading Corporation could sell cement was the price fixed thereunder, from time to time, F.O.R. destination, i.e., inclusive of railway freight. That being so, the amount of freight forms part of the price. The term "F.O.R." has significance to the rate or the price. Under Section 2(h) of the Central Sales Tax Act, 1956, the expression "sale price" means the amount payable to a dealer as consideration for the sale of any goods, etc. The price of cement sold by the petitioner, as agent of the State Trading Corporation, being F.O.R. destination was an all-inclusive price, including the cost of freight till destination. The Cement Control Order, 1961, has the object of making cement available to buyers throughout the country at a fixed price.

15. In our opinion, the decision of their Lordships in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 S.T.C. 487 (S.C.) is distinguishable on facts. There, the assessee was carrying on the business of manufacturing and selling asbestos cement sheets and other allied products. To meet the competition from other manufacturers, the assessee maintained a uniform catalogue rate all over the country in respect of its manufactures. It sent goods to outstation customers by rail under railway receipts with freight to pay. It made out an invoice at the catalogue rate and the customers paid the amount of the invoice less the freight for releasing the railway receipts and took delivery of the goods on payment of the railway freight. The result was that the net price received by the assessee was the catalogue rates less the railway freight charged in respect of the goods transported to the destination. Their Lordships interpreted the terms of the contract, for holding that under the contract there was no obligation on the part of the assessee to pay the freight and the price received by it for the sale of goods was the invoice amount less the freight. That was a matter of contract between the parties of a commodity of which there was a free trade. Under these circumstances, Their Lordships held that the railway freight paid by the customers did not, as a matter of contract, form part of the "sale price" within the meaning of Section 2(r) of the Andhra Pradesh General Sales Tax Act, 1957. Our attention was drawn to the fact that their Lordships reversed the decision of the Andhra Pradesh High Court based on their earlier decision in Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool [1960] 11 S.T.C. 827 (S.C.), and also that the catalogue price in that case was "F.O.R. destination". We do not' think that these circumstances are of any avail to the petitioner. The form in which the invoice is made out is not determinative of the contract between the parties. In Tungabhadra Industries Ltd. [1960] 11 S.T.C. 827 (S.C.), the freight, as here, was part of the price, while in Hyderabad Asbestos Cement Products Ltd. [1969] 24 S.T.C. 487 (S.C.), the price received by the assessee for the sale of the goods was the invoice amount less the freight. Their Lordships, therefore, did not think it necessary to refer to their earlier decision. Besides, when under the contract between the parties, the assessee deducted the railway freight from the catalogue price, the price charged was not in the true sense "F.O.R. destination".

16. The claim for deduction of the cost of freight made by the petitioner must also fail because, in the circumstances, the railway freight could not be considered as "separately charged" for purposes of the definition contained in Section 2(h) of the Central Sales Tax Act. As stated by their Lordships in Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool [1960] 11 S.T.C. 827 (S.C.), in order to enable a dealer to claim the deduction, the cost of freight should be charged for separately and not included in the price of the goods sold. In Dyer Meakin Breweries Ltd. v. State Of Kerala. [1970] 26 S.T.C. 248 (S.C.), their Lordships reiterated that such deduction from the sale price is only permissible when such freight is incurred by the seller for and on behalf of the purchaser, after the sale and the freight is "separately charged" within the meaning of the section, i.e., in addition to the price. That is also the view taken by this court in Commissioner of Sales Tax, M.P. v. Anwarkhan Mahboob Co. [1956] 7 S.T.C. 197

17. The petition, therefore, fails and is dismissed with costs. Counsel's fee Rs. 100. The remaining amount of security deposit, if any, shall be refunded to the petitioner.