Black Diamond Beverages & ANR Vs. The Commercial Tax Officer, Central
Section, Assessment Wing  INSC 737 (16 September 1997)
BHARUCHA, M. JAGANNADHA RAO
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.
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.
following judgment of the Court was delivered:
Appeal Nos. 1084, 1085 & 1086 of 1992)
JAGANNADHA RAO, J.
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.
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 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 Pradesh (1969) 24 STC 487.
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 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 192.
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:
(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
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.
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 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:
interpretation clause which extends the meaning of a word does not take away
its ordinary meaning .... Lord Selborne said in Robinson (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".
the inclusive part of the definition cannot prevant the main provision from
receiving its natural meaning.
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 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.
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 Act, 1954.
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 (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.
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.
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.
appellant's case that the sale took place ex factory but 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):
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".
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.
counsel for the appellants placed strong 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. Hyderabad Asbestos Case was
distinguished on facts and Hindustan Sugar Mills case was applied.
counsel for the appellant also relied upon 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.
the aforesaid reasons, these appeals are dismissed with costs.