HINDUSTAN SUGAR MILLS ETC. versus STATE OF RAJASTHAN AND ORS.

Citation: [1979] 1 S.C.R. 276 · Decided: 22-08-1978 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

.A 
B 
c 
n; 
E 
F 
G 
H 
.-_-"'/;',..--:-··,.,, 1\ 
·-
--- --
·, 
'276 
HINDUSTAN SUGAR MILLS ETC. 
v. 
STATE OF RAJASTHAN AND ORS. 
·August 22, 1978 
[P .. N .. BHAGWATI AND V. 0. TULZAPURKAR, JJ.] 
Sale Price, under section 2(p) of the Rajastlzan Sales· Tax Act, 1954 and-
Scction 2(_1!) of Central Sales __ Tax- Act. 1956-JV!zetlzer, in sales of cement 
effected under the Cement Control Order 1967, the amount of freight forms 
part of the "sale price" so as to be exigible to sales tax under the Rajasthan 
Act and Control ~tct-Distinction "J;etween contrtact of sale for f.o.r. destination 
railway ~station' and a 'contrtact l1:here price alone is so'. 
The appellant assessee owned a cement factory known as Udaipur Cement: 
Works at Udaipur. During the assessment year -1971-72.and_ 1972-73, 
the 
sale of- cement was controIIed under the Cement Control ·Order, 1967, issued 
by the Cen!ral Government., in exercise of the powers conferred by Sections 
18 G and 25 of the Industries (Development and 
Regulation) Act, 
1951. 
Clause 7 of the Control Order.specified a.retention.Price of Rs. '161.40 per·_ 
rnetric tonne for Cement manufactured. by all producers, other than 
thoSe 
:rr.entioned in items 1 to 5 of the schedule, which included the assessee. The· 
rr.aximum price at which a prcxfucer 
could sell cement was __ prescribed 
in 
clause (8) \VbiCh said that no producer shall sell "any other vafiety Of cement 
at a price exceeding Rs. 214.65 per metric tonne free on rail destination rail-
·way station plus the excise duty :paid thereon .. , plus .. such charges as may be 
fixed by the Central Government in respect of packing in jute bags or in any 
other ccntaincrs". The Explanation to dause 8 clarified that for the purpose· 
of the Control Order, the express.ion 'free on rail destination railway station•· 
means .. the price including the cost of transport by the cheapest mode except 
where any other mode of transport has been .specified. by the Central Govern-
ment under clause ( 4) at the destination point". 
During i.he relevant assessment years, the assessee entered into diverse con-
tracts of sale of cement with purchasers at the price of Rs. 214.65 per metric 
tonne, "free on rail destination railway station" plus· packing charges 
plus 
excise duty. 
These contracts were on the terms and tonditions set out in 
the form of ''General terms ·and conditions of supply" adopted by the assessee. 
The assessee, in fulfilment of these 
contracts, despatched· cement to the 
purchasers at various destinations by rail and the railway receipts were made-
out on the basis of 'freight to pay'. The invoices sent by the assessee shov.:ed 
the 'free on rail destination railv;ay ttation• price of the cement despatched, 
at the.rate Of Rs. 214.65 per metric"tonne and added the amounts representing 
excise dut}' ·and packing charges and deducted the amount of railway freight, 
since it v,ras to be paid by the purchasers. The assessee did not charge in the 
invoices sales tax On the railway freight, since in its view it did nqt form 
part of the •sale_ price'; but in order to provide against a possible claim '\\o'hich 
might be made by the Sales Tax Authorities, tfi.e assessee claimed by way of 
deposit an amount 'towards contingent liability tO sales tax on railway freight 
to be paid by you' that is, the purchasers. 
• 
• 
\ 
i-
I 
• 
<------
/ 
) 
' 
• 
y: 
HINDUSTAN SUGAR MILLS v. RAJASTHAN (Bhagwati, J.) 
277 
In the assessment of the assessee to sales tax under the Rajasthan Sales 
Tax Act, 1954 and the Central Sales Tax Act, 1956, the Sales Tax Authorities 
took the view that tp.e amount of freight formed part of the "sale price" and 
was, therefore, liable to be included in the turnover of the assessee for the 
purposes of assessment of sales tax. The assessee challenged the correctness 
of the view by filing a writ petition in the High Court of Rajasthan, but the 
High Court agreed with the view taken by the Sales Tax Authorities and held 
that since under clause 8 of the Control Order, the price payable by the pur-
chasers was f.o.r. destination price, the amount of freight included in it formed 
part of 'sale price' 
B 
Dismissing the appeals, the Court 
HELD : 1. By reason of the provisions of the Cement Control 
Order 
1967, which governed the transactions of sale of cement entered into by the 
C 
assessee with the purchasers, the amount of freight formed part of the "sale 
price" within the meaning of the first part o

Excerpt shown. Read the full judgment & AI analysis in Lexace.