Holding

Freight and handling charges payable by the purchaser constitute part of the consideration and are therefore included in the "sale price" under Section 2(d) of the West Bengal Sales Tax Act, 1954.

Summary

The appellants, Mis Black Diamond Beverages and others, challenged the inclusion of freight or delivery charges in the definition of "sale price" under Section 2(d) of the West Bengal Sales Tax Act, 1954. They argued that the statute only included packaging charges and that, because Section 2(h) of the Bengal Finance (Sales Tax) Act, 1941 expressly excluded delivery charges, freight charges must be excluded from the sale price. The Court held that the first limb of Section 2(d) must be given its ordinary meaning, which, following Hindustan Sugar Mills Ltd. v. State of Rajasthan, includes any amount payable by the purchaser as consideration, irrespective of how it is composed. Consequently, freight and handling charges payable by the buyer form part of the consideration and are included in the sale price. The Court rejected the appellant's reliance on Hyderabad Asbestos Products Ltd. and Southern Motors cases, finding them distinguishable on facts, and dismissed the appeals with costs.

Issues considered

Whether freight or delivery charges are to be treated as part of the "money consideration" within the definition of "sale price" under Section 2(d) of the West Bengal Sales Tax Act, 1954.
Whether the exclusion of delivery charges in Section 2(h) of the Bengal Finance (Sales Tax) Act, 1941 necessitates their inclusion in the 1954 Act's definition of sale price.

Legislation cited

Bengal Finance (Sales Tax) Act, 1941s. 2(h)
Rajasthan Sales Tax Act, 1954s. 2(p)
West Bengal Sales Tax Act, 1954s. 2(d)

Subjects

sale pricefreight chargessales taxstatutory interpretationWest Bengalconsiderationtax law

Judgment

MIS BLACK DIAMOND BEVERAGES AND ANR. A
v.
THE COMMERCIAL TAX OFFICER, CENTRAL
SECTION, ASSESSMENT WING CALCUTTA AND ORS.

SEPTEMBER 16, 1997
B
[S.P. BHARUCHA AND M. JAGANNADHA RAO, JJ.]

Sales Tax:

West Bengal Sales Tax Act, 1954: Section 2(d)-"Freight or delivery C
charges"-Whether included within the definition of "Sale price"-Held,
Yes-Bengal Finance (Sales Tax) Act, 1941-Section 2(h)-Rajasthan Sales
Tax Act, 1954-Section 2(p).

Words & Phrases :
D
"Sale price"-Meaning of in the context of Section 2(d) of West Bengal
Sales Tax Act, 1954.

Section 2(d) of the West Bengal Sales Tax Act, 1954 defines "Sales
price". A dispute arose as to whether the "freight or delivery charges" are
to be treated as included within the words "money co11sideration" in Section E
2(d) of the Act. The case of the appellant was that freight charges cannot be
included in the meaning of the word 'money transaction' in the definition of
'sale price' in Section 2(d) of the Act. The Tribunal dismissed the application
filed by the appellants.
F
Hence, the present appeal.

The contention of the appellants was that Section 2(d) of the 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 charges' such charges must, G
by implication be treated as outside the sale price. Under Section 2(h) of the
Bengal Finance (Sales Tax) Act 1941 the definition of 'sale price' expressly
excluded 'delivery charges' and for that reason the Act must have of necessity
contained a specific clause including 'freight charges' within the meaning of
'sale price'. H
133
134 SUPREME COURT REPORTS (1997] SUPP. 4 S.C.R.

A The contention ofRevenne was that the obligation of paying the 'freight
charges' was on the appellant sellers and therefore must be treated as included
in the 'sale price' under Section 2(d).

Dismissing the appeals, this Court

B HELD: 1.1. The amount of'freight or handling charges' would be payable
by the purchaser not under any statutory or other liability but as part of the
consideration of the sale of the goods and would form part of 'sale price'.
(139-D)

C Hindustan Sugar Mills Ltd. v. State of Rajasthan, [1978) 4 SCC 271 =
. 43 STC 13, relied on.

1.2. 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'. It must be given its ordinary, popular or natural meaning. The
D 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. Therefore, the inclusive part of the definition cannot
prevent the main provision from receiving its natural ~eaning.[137-D; F)

E I.3. The exclusionary words in Section 2(h) of the Bengal Finance (Sales
Tax) Act, 194i were only intended to exclude certain specific things which
were otherwise within the first part or such exclusion could also be ex
abundante cautela. The non-inclusion of 'freight charges' expressly in the
Act has no impact on the natural meaning of the first part of Section 2(d) just
as the exclusion of 'packing charges' in Section 2(d) does not have any impact
F on the first part of 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 'packing charges' in Section
2(d) of the Act nor the exclusion of'freight charges' from Section 2(h) of the
G Bengal Finance Act and the absence of any such express inclusion of freight
charges in the Act does not alter or affect whatever meaning is to be attributed
to the first part of the Act which is similar to the first part of Section 2(p) of
the Rajasthan Act, 1954. [138-C-F)

T. V.L. Ramco Cement Distribution Co. v. State a/Tamil Nadu, [1993) I
H sec 192, held applicable.
BLACK DIAMOND BEVERAGES'· COMMERCIAL TAX OFFICER [M. JAGANNADHA RAO, J.] 135
Hyderabad Asbestos Products Ltd. v. State of Andhra Pradesh, (1969) A
24 STC 487, distinguished.

Southern Motors v. State of Karna/aka, (1996) 102 STC 235, held
inapplicable.

Love v. Norman Wright (Builders) Ltd., (1944) 1 All ER 618, referred B
to.

Craies on Statute Law, 7th Edn. 1.214, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1083 of 1992.

From the Judgment and Order dated 26.9.91 of the West Bengal Taxation C
Tribunal Calcutta in R.N. No. 354of1990.

WITH

C.A. Nos. 1084, 1085 & 1086/92.
D
H.N. Salve, Raju Ramachandran, P.H. Parekh, Sameer Parekh and Ms. M.
Chaudhary for the Appellants.

B. Sen, S. Hegde, Dilip Sinha, J.R. Das and D. Krishnan for the
Respondents for Mis. Sinha and Das.

The Judgment of the Court was delivered by
E

M. JAGANNADHA RAO, J. The West Bengal Taxation Tribunal, by
order dated 26.9.1991 dismissed the applications R. No. 354of1990, 130 of
1991, 415 of 1989 and 431 of 1989 and Civil Appeals 1083 of 1992 to 1086 of
1992 are filed against the dismissal of the said applications. F
The 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 "sale price". G
According to the' appellants, 'freight charges' cannot be included in the
meaning of the word 'money transaction' in the definition of 'sale price' in
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 H
136 SUPREME COURT REPORTS [1997) SUPP. 4 S.C.R.

A 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
B the packing of the notified commodities and in the absence of a similar
inclusion of 'freight charges' such charges must, by implication be treated as
outside the 'sale price'. Learned counsel also submitted that under Section
2(h) of Bengal Finance (Sales 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
c specific clause including 'freight charges' within the meaning of'sale price'.
Otherwise these charges would not be part of 'sale price'. Learned counsel
for the appellant placed strong reliance on the decision of this Court in
Hyderabad Asbestos Cement Products Ltd. v. State ofAndhra Pradesh (1969)
24 STC 487.
D
On the 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).
r Learned counsel relied upon the decision of this Court in Hindustan Sugar
J.:j
Ali/ls Ltd. v. Stale 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 goods and the test was what the
F 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 by
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
G T. V.l. Ramco Cement Distributing Co. ltd. v. State of Tamil Nadu, [1993] 1
sec 192.
The 1954 Act generally provides for levy of a single point tax at the first
stage on commodities notified under Section 25 of that Act. On the other
hand, the 1941 Act is a general statute providing for multi-point levy of sales
H tax on commodities not covered by the 1954 Act. Sub-clause (d) of Section
BLACK DIAMOND BEVERAGES''· COMMERCIAL TAX OFFICER [M JAGANNADHA RAO, J.] J37
2 of the 1954 reads as follows : A
"S.2(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 sales in West Bengal, less any sum allowed as cash B
discount according to trade practice, but includes any sum charged
for containers or other materials for the packaging of notified
commodities''.

We shall first deal with the contention of the appellants' counsel based C
upon the non-inclusion of 'freight charges' in the definition of sale price in
Section 2(d) of the 1954 Act.

It is 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, D
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:

''An interpretation clause which extends the meaning of a word does E
not take away its ordinary meaning ..... Lord Selborne said in Robinson
v. Barton Eccles Local Board, (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 F
be applied to something to which it would not ordinarily be applicable".

Therefore, the inclusive part of the definition cannot prevent the main provision
from receiving its natural meaning.

In 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 G
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 wo1ds in Hindustan Sugar Mills Ltd. v. State o/Rajasthan, [1978] 4
SCC 271. What the said meaning is we shall consider separately. If, therefore, H
138 SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A 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.

The other contention of the learned counsel for the appellant that
B Section 2(h) of the 1941 Act expressly excluded 'freight charges' and forthat
reason the 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,
C (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
D 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
E 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.
F
If, therefore, the first limb of Section 2(d) 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
G 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
H is the net consideration retainable by the dealer". It was further held that the
BLACK DIAMOND BEVERAGES ''- COMMERCIAL TAX OFFICER [M. JAGANNADHA RAO, J.] 139
concept of real price or actual price retainable by the dealer was irrelevant. A
Reference in that connection was made by this Court to what Goddard L.J.
stated in Love v. Norman Wright (Builders) Ltd, (l 944) I All. 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 B
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. It was 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 C
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 by D
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 this
Court in the above case, reference was made to the freight expenses of a
dealer who transported goods from the factory to his place of business. But E
this does not mean that this 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 would clearly be referable to the freight charges
upto the point of delivery. F

Having 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 G
placed 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 H
140 SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A at buyer's risk. The 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
B 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):
c
"We 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 customers
at their places".

D The 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 ratio of the decision in Hindustan Sugar Mills Case.

Learned counsel for the appellants placed strong reliance on Hyderabad
E Asbestos Products Ltd. v. State ofAndhra 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 itselfnamely,
(see Page 31 of STC), that the terms of the contract in that case were in
written form and showed that "it was only the price which was f.o.r.
F 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
G 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 T. V.L. Ramco Cement Distribution Co. v. State of
Tamil Nadu, where Hyderabad Asbestos Case was distinguished on facts and
Hindustan Sugar Mills Case was applied.

H Learned counsel for the appellant also relied upon Southern Motors v.
BL.ACK· DIAMOND BEVERAGES '· COMMERCIAL TAX OFFICER [M. JAGANNADHA RAO, J.] 141

State of Karnataka, (1996) 102 STC 235. That decision too does not help the A
appellant. In that case this Court held that the High Court erred in interfering
with the orders of the Sales Tax Appellate Tribunal when the Tribunal had
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 B
'freight charges' were not part of the sale-price.

For the aforesaid reasons, these appeals are dismissed with costs.

S.V.K.I. Appeals dismissed. C