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M/S. India Meters Ltd vs State Of Tamil Nadu on 7 September, 2010
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Bhandari Bench: Dalveer Bhandari, Deepak Verma REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1032-33 OF 2003 M/s India Meters Limited .. Appellant Versus State of Tamil Nadu .. Respondent JUDGMENT Dalveer Bhandari, J. 1. These appeals are directed against the judgment and order dated 20.11.2001 passed by the High Court of Judicature at Madras in Writ Petition No. 21298 of 2001 and Tax Case No. 980 of 1993. 2 2. The appellant is a company incorporated under the provisions of the Companies Act. The appellant manufactures electric meters and supplies it to the Electricity Boards. The appellant is also a dealer registered under the provisions of the Tamil Nadu General Sales Tax Act, 1959 as well as the Central Sales Tax Act, 1956. 3. Brief facts which are necessary to dispose of these appeals are recapitulated as under: The Deputy Commercial Tax Officer, Group-VIII, the Assessing Officer, Enforcement South passed two separate orders under the Tamil Nadu General Sales Tax Act (hereinafter referred to as TNGST Act) and Central Sales Tax Act (hereinafter referred to as CST Act) on 30.6.1989 holding that the freight and insurance charges were liable to be taxed

Petition in the High Court of Madras against the order of the Tamil Nadu Taxation Special Tribunal. It was urged in the High Court that the clause in the contract dealing with payment, provided that "payment for 100 per cent value of each consignment together with full excise duty and sales tax will be made in Central Payment, Madras, immediately on receipt of certified copies of acknowledgement of delivery challans from the Chief Store Keepers of the systems concerned, subject to purchase order terms." 9. According to the clause provided in the contract the transfer of title to the goods was to take place only on delivery of goods at the customer's place and that the customer's obligation to pay would arise only after the delivery had been so affected. The contract also provided in the clause dealing 5 with the price that it was payable per unit ex-factory delivery. It provided for the payment of excise duty and statutory levies, in addition to such ex-factory price, as also the fact that the ex-factory price mentioned was exclusive of sales tax. 10. The clause dealing with Sales Tax in clause 3 (b) further provided that

freight, and under the terms of the contract the price received by the company for the sale of goods is the invoice amount less the freight". 14. In the instant case, the obligation to pay the freight was clearly on the appellant as there was no sale at all, unless the goods were delivered at the premises of the buyer and in order 8 to so deliver, the assessee necessarily had to incur freight charges. 15. The transfer of title to the goods as provided in clause 10 read with clause 6 of the agreement was to be at the place of delivery in the premises of the buyer. Though the contract mentioned the price of the electric meters as ex-factory price, the delivery was not at the factory gate. The specification of what the price would be at the factory gate, therefore, does not in the context of the term subject to which the sale was agreed to be effected, render it the point or the location at which the sale can be said to have been completed. Had the sale been completed at the factory gate, the expenses incurred thereafter by way of freight charges would then

case of Hindustan Sugar Mills (supra) observed as under: "(i) that the freight charges should be included in arriving at the taxable turnover for purposes of Central Sales Tax and Tamil Nadu Sales Tax; and (ii) that packing charges and excise duty thereon should also be included in arriving at the taxable turnover for purposes of both Central Sales Tax and Tamil Nadu Sales Tax." 37. In Bihar State Electricity Board & Another v. Usha Martin Industries & Another (1997) 5 SCC 289 this court relied on the judgment of this Court in the case of Hindustan Sugar Mills (supra) and reiterated legal position that sale price would be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of goods. 38. In the case of Black Diamond Beverages and Anr. v. Commercial Tax Officer, Central Section, Assessment Wingh, Calcutta & Others (1998) 1 SCC 458 this court 19 observed that freight and handling charges would be included in the sale price. 39. In Commissioner of Central Excise, Delhi v. Maruti Udyog Ltd. (2002) 3 SCC 547 this court observed as under: "... ... ...The sale price realised by the respondent