HINDUSTAN SUGAR MILLS ETC. v. STATE OF RAJASTHAN AND ORS.
Citation: [1979] 1 S.C.R. 276; 1978 INSC 141
Court: Supreme Court of India
Bench: P.N. BHAGWATI , V.D. TULZAPURKAR
Judgment date:
Case summary
1978 INSC 141. Supreme Court of India judgment dated 1978-08-22. HINDUSTAN SUGAR MILLS ETC. v. STATE OF RAJASTHAN AND ORS. Read the judgment and case...
Judgment text
278 SUPREME COURT REPORTS [1979] I S. C. R. . -_-"'/;',.. --:-··,. ,, 1\ ·- --- -- ·, • '276 . A • 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 i-effected under the Cement Control Order 1967, the amount of freight forms I 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 and 25 of the Industries (Development and Regulation) Act, 1951. n; 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 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 Government under clause ( 4) at the destination point". During i. he relevant assessment years, the assessee entered into diverse contracts 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. ive clause. Ohvious1y, therefore, this exclusion clause can be availed of by the assessee only i~ the State seeks to rely on the inclusive clause for the purpose of bringing particular amount within the definition of 'sale price'.
But if the State is able to show that t-he particular amount falls within the first part of the definition and is therefore, part of the 'sale price', the exclusi~1 clause cannot avail the assessee to take the amount in question out of the definition of 'sal~ price'. In the instant case, since the amount of the freight forms part of the 'sale price' within the meaning of the first part of the definition, it is not necessary for the State to i•. lvoke the inclusive clause and in fact the State has not done so. The exclusion clause is, therefore, irrelevant and cannot be called in aid by the assessee. [295 F-H, 296 AJ • (c} Even if the exclusion clause were read as oo. exception to tJ1e first part of the definition which, cannot be done, it cannot avail the assessee. It is only where the cost of freight is separately charged that it would fall within the e"\clu5ioo clause and in the context of the definition as a whole, it is obvious that· the expression ". . . cost of freight . . .
is separately charged" is used in contradistinction to a case where the cost of freight is not separately charged but is included in the price. It is not intended to apply to a case where the cost of freight is part of the prk:e but the dealer chooses to split up the price and claim the amount of freight as a separate item in the invoice. Where the cost of freight is pb:rt of the price, it would fall within the first part ; of the definition and to such a case, the exclusion clause in the second part have no application. [296 A. CJ Obscr~·ation : (a) In respect of the assessee's several transactions of cement with the Central Government through the Director General of Supplies and Disposals, the opinion given by the Law Depairtment of the Government of India viz. , "that freight was not part of 'sale price' within the meaning of the definition of that term and hence no sales tax would be payable by the assessee on the amount of freight" was not correct and was unjustified.
[296 E~H] (b) As this statement misled the assessee into not claiming the mriount of sales tax on the freight component of the pi:ice from the Central Governn1ent, in the circumstances fairness and justice demand that the Central Government, should pay to the assessee the la·mount of sales tax on the freight component of the price in respect of transactions of sa. le of cement entered into by tbe assessce with them under the provisions of the control order. [297 A. CJ HINDUSTAN SUGAR MILLS v. RAJASTHAN (Bhagwati, !. ) 281 'CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1122 of 1976. From the Judgment and Order dated 10-9-1976 of the Rajasthan :High Court in D. B. Civil Writ Petition No. 1080 of 1976. V. M. Tarkunde, V. K. Shinghal, N. N. Goswamy and Arvind Minocha for the appellant in C. A. No. 1122 of 1976. F. S. Nariman , Y. S. Chitale, A. K. Srivastava, V. Bhasin, C. V. ! Francis and Vineet Kumar for the appellant in C. A. No. 1310 of 1976. S. J. Sorabjee, L. N. Sinha, S. M.
lain, S. C. Bhandari and B. B. Singh for the respondents in both the appeals. Anantha Babu and A. Subba Rao for the intervener in C. A. No. 1122 of 1976. The Judgment of the Coun was delivered by BHAGWATI, J. These appeals by special leave raise an interesting question of law relating to the applicability of the definition of "sale price" in section 2(p) of the Rajasthan Sales Tax Act, 1954 and 2(h) of Central Safos Tax Act, 1956. The question is whether in sales of e were the general terms and conditions on which contracts were entered into by the asseissce with the purchasers. Clauses 5, 8 and 11 of the "General terms and conditio"ns of supply" were strongly relied upon on behalf of the assessee and we shall, therefore, set them out in extenso : 5. Although the price of cement is on the basis of F. O. R. destination railway station, consignments will 11'2VertheleSJs be despatched "freight to pay" and credit afforded in our Bill for the amount of freight payable.
The purchaser should accord- } ingly arrange to pay Railway freight/Road tra"nsport charges at the destination at the time of taking delivery. JI 8. Once the consignment is handed over to the Carrier and a ..... receipt is obtained, the responsibility of the Company 02ases. ~· > The Company does not accept any liability for any delay. shortage, damage or Joss of goods in tra"nsit. Claim should be lodged with the Carriers by the Buyers dirooctly. . ,. - 11. In respect of any claim for over charge of freight, the purchaser shall put up claim with the concerned Railway authorities. The asscssee, 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 assesseo2 showed the "free on rail destination railway station" rrice of the cement despatched at the rate of Rs. 214.
65 per metric trmne and added tho amounts representing excise duty and packing HINDUSTAN SUGAR MILLS v. RAJASTHAN (Bhagwati, J. ) 285 charges and deducted the amount of railway freight since it was to be paid by the purchasers. The assessee did not charg~ in the invoices sales tax on the amount of railway freight, since in its view it did not form part of the "sale price", but i"n order to provide against a possible claim which might b~ made by the sales tax authorities, the 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. Each invoice also contained a statement at the commence-ment that : "E. ,~ry care is taken in packing and despatching goods and our responsibility for shortage, Joss, delay or damage ceases after delivery at Works Sidi"ng. All such claims should be preferred with the railways or the carriens concerned".
The purchasers received the railways receipts from the banks against payment of the amounts of the invoices and thereafter took delivery of the cement despatched by the assessee after making payment of the railway freight. The question arose in the assessment of the :assessee to sales tax under the Rajasthan Sales Tax Act, 1954 and the Central Sales Tax Act, 1956 as to whether the amount of freight deducted from the free on rail destination railway station price (hereiRafter for the sake of brevity referred to as F. O. R. destination price) in the invoices made ·out by the assessee and paid by the purchasers formed part of the "sale t price! ' within the meaning of the definition of that term in section 2 (p) of Rajasthan Sales Tax Act, 1954 and section 2(h) of the Central Sales Tax Act, 1956. The Sales Tax Authorities took the view that the amount of freight formed part of the "sale price" and was, therefore, liable to be included in the turnover of the assessee for the purpose of.
assessment of Sales Tax. The assessee challenged the correctness of this 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 purchasers was F. 0. R. destination price, the amount of freight inoluded in it formed part of the "sale price". The assessee thereupon preferred Civil Appeal No. 1122 of 1976 after obtaining special leave from this Court. It will thus be seen that Civil Appeal No. 1122 of 1976 is directed against the judgment of the Rajasthan High Court which has taken a view against the assessee. The other appeal, namely, Civil Appeal No. 1310 of 1976 which ha~ been heard alongwith Civil Appeal No. 1122 of 1976 has been filed by the assessee directly against an ad-verse order made by the assessing authorities but the question in that appeal is the same as in Civil Appeal No. 1122 of 1976.
It must be conceded straightaway that the questiou is not fme from diffic-;;lty and there is a sharp divergence of opinfon amongst different High Courts, with an almost equal number of High Courts ranging on either side. But fortunately there are two decisions of this Court which throw some light on this question. We shall refer to them in due course. Though we are concerned in these appeals with assessments made under both Rajasthan Sales Tax Act, 1954 and Central Sales Tax Act, 1956, it would be sufficient to refer only to the provisions of the Rajasthan Sales Tax Act, 1954, since the material provisions of both the Acts are identical. Section 3 of the Rajasthan Sales Tax Act, 1954 provides that every dealer whose turnover in the previous year exceeds a certain limit shall be liable to pay tax on his taxable turnover, subject to the provisions of that Act.
"Taxable turnover" is defined in section 2 ( s) to mean that part of the "turnover" which remains after deducting the aggregate amount of proceeds of certain categories of sales and "turnover", according to section 2(t), means "the aggregate of the amount of sale prices received or rec. eivable by a dealer in respect of the sale or supply of gooos-". The definition of 'sale price' is given in section 2(p). and according to that definition, it 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 th(J time of or before 'lbe delivery thereof other than the cost of freight or delivery or the cost of installation in case where such cost is separately chargeld". This definition is in two parts.
The first part says that 'sale price' means the amount payable to a dealer as consideration for the sale of any goods. Here, the concept of real price or actual price retainable by the. dealer is irrelevant. The toot is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration i• made up. whether it includes excise duty or sales tax or freight. The only relevant queistion 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. • . ~- Take for example, excise duty payable by a dealer who is a manu-facturer. When he sells goods manufactured by him, he always - passes on the excise duty to the purchaser. Ordinarily it is not shown HINDUSTAN SUGAR MILLS v. RAJASTHAN (Bhagwati, !. ) 287 as a separate item in the bill, but it is included in the price charged by him.
The 'sale price' in such a c,ase could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True, the excise duty component of the price would not be an addition to the coffers of thel dealer, as it would go to re-imburse him in respect of the excise duty aJr. eady paid by him on the manufacture of the goods. But even so, it would be part of the 'sale price' because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability, statutory or otherwise, under which the purchases would be liable to pay the amount of excise duty to the dealer.
And, on this reasoning, it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill. In either case, it would be part of the 'sale price'. So also, the amount of sales tax payable by a dealer, whether included in the price or added to it as a separate item as is usually the case, forms part of the :sale price'. It iis payable by the purchaser to the, dealer as; part of the consideration for the sale of the goods and hence falls within the first part of the definition. This position is now well settled as a result of the decision of this Court in Ml s George Oakes (Pvt. ) Ltd. Versus The State of Madras & Ors. (XII STC 476) whether the view taken by Madras High Court in Sri Sundararajan & Co. Ltd. Versus The State of Madras (VIII STC 105) was approved. There S. K. Das, J . , speaking on behalf of the Court, approved of the following observations of Lawrence, J. , in Paprika Ltd. & An~.
Versus Board of Trade (1944) All E. R. 372) : "Whenever a sale attracts purchase tax, that tax prc-sumafUy affects the price which the seller who is liable to pay the tax demands but it does not cease to be the price which the buyer has to pay even the price is expressed as 'x' plus purchase tax. " The learned Judge also quoted with approval what Goddard, L. J. , G-said in Love v. Norman Wright (Builders) Ltd. ((1944) 1 Ali E. R. 618] : •·where an article is taxed, whether by purchase tax, ,.. customs duty, or excise duty, the tax becomes part of the ' price wldch ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost pins profit plus tax. So if a selier offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass ,it on to the buyer.
If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or no!. " and summed up the· position in the following words : "So far as the purchaser is concerned, he pays for lhc goods what the seller demands, namely, the price even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the wnsideration for the sale and included in the turnover. " We may theu take a case where a dealer transports goods from his factory to his place of business and sells them at a' price whi:h is arrived at &Jter taking into account 'freight and handling charge>' incurred by him in transporting the goods. The amount of 'freight and handling charges' in~luded in the.
price would obviously b<> the 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 the goods. The same would be the legal position even if the 'freight and handling charges' are shown separately in the• bill and added to the price of the goods, for the character of the payment would remain the same. Since 'freight and handling charges' represent expenditure incurred by the dealer in making the goods available to the purchaser at the place of sale, they would constitute an addition to the cost of the goods to the dealer and would clearly be a component of the price charged to the purchaser. The amount of 'freight and handling charges' would be payable by the purchaser not under any statutory or other liability but as part of the consideration for the sale of the goods and it wouid, therefore, iorm part of 'sale price' within the meaning of the first part I of the definition.
This position is also well settled having regard to the decisions of this Court in Dyer Meakin Breweries Ltd. \'. Sales ~ Tax Officer, Ernakulam (XXVII STC 120). We may now take another example which is very much near te> the one which we have already discussed. The dealer may, instead of transporting the goods from his factory or his place of business and selling them there, enter into a contract of sale F. O. R. destination railway station. Where such a contract is made, the seller undertakes an obligation to pnt the goods on rail and arrange to have them carried to the destination railway station at his expense. The delivery of· the goods to the purchaser in such a case is complete at the disti-nation railway station and till then the risk continues to remain with BUIDllsTAN SUGAR MILLS v. RAJASTHAN (Bhagwati, /. ) 289 the dealer.
The freight is payable by the dealer sine~ he has to arrange for the goods to be carried by rail to the destination railway station at his expense and there is no obligation on the purchaser to pay the freight. The purchaser is concerned only to pay the agreed price for the delivery of the goods at the destination railway station. The agreed price being inclusive of the freight, it would be a matter of indifference to the purchaser as to what is the amount of freight. Even if there is any fluctuation in the amount of freight, since the making of the contract, the purchaser would have no concern, because he is liable to pay only the agreed price which includes the freight, whatever it be. The dealer may, in such a case.
pay the freight and Charge the agreed price to the purchaser, or he may obtain a railway receipt on the basis of freight to pay" and request the purchaser to pay the freight at the time of taking delivery of the goods from the railway at the destination railway station and give the purchaser credit for the amount of the freight against the agreed price. The latter would merely be a convenient mode of paying the agreed price. Since it is the obligation of the dealer to deliver the goods free on rail destination railway station, the dealer is liable to pay the freight as between him and the purchaser and the purchaser can very well refuse to accept the railway receipt which is not "freight pre-paid" but "freight to pay". But he may, ordinarily as a reasonable busi- I nessman he would, accept such railway receipt and pay the amount of freight on behalf of the dealer.
When the purchasers pay the amount of freight in such a case, it would be as part of the agreed price and not as freight vis-a-vis the dealer. The amount of freight paid by the purchaser and shown in the bill as deducted from the agreed price would, therefore, clearly form part of "sale price" and fall within the first part of the definition. This would plainly and indubitably be the position where the contract of sale entered into by the dealer is F. O. R. destination railway station. But here it is necessary to bear in mind a rather important distinction. There may be a case where the contract of sale may not be F. O. R. destination railway station, but the price alone may be s. ::. Where such is the case, the contract does not have all the incidents of a F. O. R.
destination railway station contract, but merely the pnc market where there is scarcity of supply, the producer will sell at the maximum price permitted to him uuder the Control Order and that is the basis on which the machinery of Cement Regulation Account is worked out in the Control Order. This machinery would become unworkable and at the least it would require the Central Government to subsidise the Cement Regulation Account iu a large way, if every producer were to sell cement at a price lower thau Rs. 214. 65 per metric tonne F. 0. R. destination railway station. It is, therefore, .. obvious that though the Control Order merely provides the maximum price of Rs. 214. 65 per metric tonne F. O. R. destination railway statio'n at which a producer may sell cement, leaving it theoretically open to him to sell it at a lower price, the basic assumption u11derlying the Ccmtrol Order is that every producer will sell at the maximum price.
And in fact, in both the cases before us, every transaction of sale of cement by the assessee was at the price of Rs. 214. 65 per metric tonne F. O. R. destination railway station. This, however, by itself would not be determinative of the controversy because the question would remain as to who, between the assessee and the purchaser, is liable to pay the freight and that requires us to consider whether lh6re is anything in the Control Order which overrides the relevant provisions of the contract bearing on this question and by necessary impli-cation, exclude them. Clause (9) clearly contemplates that the F. O. R. destination railway station price wauld be "~aliscd by the producer, for the excess of such price over the retention price and selling agency commission is required to be paid over by the producer to the controller in tiie Cement Regulation Account.
The amount of freight has, therefore, to be realised by the producer from the purchaser and that postulates that it is the producer who pays the freight to the railway authorities. The proviso to clause (9) makes this doubly clear by providing that "the expenditure incurred by the producer on freight-- shall be reimbursed to the producer" and again clause ( 11) uses the ·expression "-paying of equalising the expenditure Incurred by the producer on freight". It is, therefore, clear that under lhc scheme of the Control Order the freight is paid by the p1oducer and he then recovers it from the purchaser. But that does not con-clude the controversy.
The question still remains : When the producer pays the freight, does he do so because, as between him and the purchaser, he is liable to pay the freight and he then recovers it as part of the price or the obligation to pay the freight is on the purchaser and the producer pays it on behalf of the purchaser and then "~covers it by way of reimbursement. We are of the view that the former, and not the latter, represents the correct legal position. If the obligation to pay the freight were on the purchaser and in fact the purchaser paid the freight, as happened in both the cases before us in respect of every transaction of sale of cement, the amount of freight would obviously be deducted from th'! F. O. R. destination railway station price in the invoice and only the balance would be realised by the assessee.
There would be no question of the assessee realising the amount of freight from the purchaser because the purchaser would have paid the freight in discharge of his own liability and the assessee would have no claim to recover it from the purchaser. Then how would the terms of clause (9), proviso to that clause and Clause (11) of the Control Order be satisfied ? How would it be possible to give effect to clause (9) if what is realised by the assessee is not the F. O. R. destination raliway station pric0 but tbat price less the amount of freight ? How would the asscssee claim to, be entitled to be reimbursed under the proviso ta r clause (9) if he has not incurred any expenditure on the freight? The entire statutory scheme would become unworkable. The scheme of the Control Order clearly proceeds on the basis that the freight is payable by the producer and the recovers it from the purchaser at patt HINDUSTAN SUGAR MILLS v. RAJASTHAN (Bhagwati, !. ) 295 of the F. O. R.
destination railway station price. The provision in the contract that the delivery to the purchaser shall be complete as soon as the goods are put on rail and payment of the freight shall be the responsibility of the purchaser is wholly inconsistent with the scheme of the Coutrol Order and must be held to be excluded by it. The Control Order is paramount : it has overriding effect and if it stipulates that the freight shall be payable by the producer, such stipulaticn must prevail, notwithstanding any term or condition the contract to the contrary. The conclusion is, therefore, inevitabb that the amount of freight forms part of the 'sale price' within the meaning of the first part of the definition. This renders it unnecessary to consider the second part of the definition, but the latter clause of the second part was strongiy relied upon on behalf of the assessee to support the exclusion of the amount of freight from 'sale price' and hence we must proceed to consider it.
The second part enacts an inclusive clanse. It says that 'sale price' includes "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 case where sucla cost is separately charged. " Therefore, 'any sum charged for anylhlrig done by the dealer in respect of the goods at the time of or J before the delivery thereof' is to be regarded as part of 'sale price', even if it does iiot fall within the first part of the definition. But there is an exception carved out of this inclusie>n. Not all sums charged for -something done by the dealer in respeet of the goods at the tune of or before the delivery thereof are covered by the ihclusive clause.
The cost of freight or delivery or the cost of installation certainly represents an amount charged for transportation or installation of the ~s at the time of or before the delivery thereof and would, there-forfJ, fall within the inclusive clause on its plain terms but it is taken out by the exclusion clause, "other than the cost of freight or delivery or t\o cost of installation in case where such cost is separately chal'ged". This exclusion clause does not operate as an exception to the first part of the definition. It merely enacts an exclusion out of • the inclusive clause and takes out something which would otherwise be within the inclnsive clanse. Obvionsly, therefore, this exclusion clause can be availed of by the assessee only if the State seeks to rely on the inclusive clause for the purpose of bringing a particular amount within the definition of 'sale price'.
But if the State is able to show that the particular amount falls within the first part of the definition and is, therefore, part of the 'sale price', the exclusion clause cannot avail the as~essee to take the amount in question out of the definition of 'sale price'. Here,· on the view taken by us, the amount of freight forms part of the 'sale price' within the meaning of the first part of the definition and it is not necessary for the State to invoke the inclusive clause and in fact the State has not done so. The exclusion clause is, therefore, irrelevant and cannot be called in aid by the assessee. We · may point out that even if the exclusion clause were read as an ~xcep tion to the first part of the definition which, as we have pointed out, cannot be done, it cannot avail the assessee.
It is only where the cost of freight is separately charged that it would fall within the exclusion clause and in the context of the definition as a whole, it is obvious that the expression "-- cost of freight-- is separately charged" is used in contradistinction to a case where the cost of freight is not separately charged bnt is included in the price. It is not intended to apply to a case where the cost of freight is part of the price but the deafor ... chooses to split up the price and claim the amount of freight as a separate item in the invoice. Where the cost of freight is part of the price, it would fall within the first part of the definition and to such a 'r· case, the exclusion clause in the second part have no application.
D We must, therefore, hold that, by reason of the provisions of the Control Order which governed the transactions of sale of cement entered into by the assessee with the purchasers in both the appeals before us, the amount of freight formed part of the 'sale price' within the meaning of the first part of the definition of that term and was includible in the turnover of the assessee. ' Before we part with these appeals we think it necessary to advert to one rather unusual circumstance which has caused some anxiety to us.
We were told by the learned counsel appearing on behalf of the assessee and that was not disputed on behalf of the State that the assessee had entered into a large number of transactions of sale of cement with the Central Government through the Director Gen~al of Supplies and Disposals and when the assessee claimed to recover the amount of sales tax in respect of these transactions from the Central Government on the basis that freight was part of 'sale price', the Director General of Supplies and Disposals pointed out to the assessee that the Law Department of the Government of India had advised • them that freight was not part of 'sale price' within the meaning of the definition of that term and hence no sales tax would be payable by the assessee on the amount of freight and the assessee was, therefore, not justified in claiming to recover the amount of sales tax from the Central Government.
The assessee, in view of this statement made on behalf of the Central Government, did not press its claim to recover H the amount of sales tax on the freight component of the price from the Central Government. Now, it appears clearly from this judgment that the opinion given by the Law Department of the Government of HINDUSTAN SUGAR MILLS v. RAJASTHAN (Bhagwati, !. ) 297 India was not correct and the statement made on behalf of the Government of India that no sales tax will be payable by the assessee on the amount of fieight was unjustified. There can be no doubt tint this statement misled the assessee into not claiming the amount of sale tax on the freight component of the price from the Central Gov'ernment.
We think that, in the circumstances, fairness and justice demand that the Central Government should pay to the assessee the amount of sales tax on the freight component of the price in respect of transactions of sale of cement entered into by the assessee with them under the provisions of the Control Order. It is true and we are aware that there is no legal liability on the Central Government to do so, but it must be remembered that we are living in a democratic society governed by the rule of law and every Government which claims to be inspired by ethical and moral values must do what is fair and just to the citizen, regardless of legal technicalities. We hope and trust that the Central Government will not seek to defeat the legitimate claim of the assessee for reimbursement of sales tax on the amount of freight by adopting a legislatic attitude but will do what fairness and justice demand. After all, the motto of every civilized State must be : "Let right be done".
We accordingly confirm the judgment of the Rajasthan High Court in Civil Appeal No. 1122 of 1976 and the Order of the Sales Tax authority in Civil Appeal 1310 of 1976 and dismiss both the appeals with no order as to costs. S. R. Appeals dismissed. •
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