1989 (4) TMI 316 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of contingency deposit collection by the Coffee Board.
2. Legality of sales tax collection by the Coffee Board after April 1, 1984.
3. Excessiveness of the contingency deposit amount.

Detailed Analysis:

1. Legality of Contingency Deposit Collection by the Coffee Board:
The primary contention of the petitioners was that the Coffee Board was not entitled to collect a contingency deposit and create a fund not provided for in sections 30, 31, and 32 of the Coffee Act. Section 30 specifies only two categories of funds: the general fund and the pool fund. Petitioners argued that the creation of a third category of fund, the contingency deposit, was outside the purview of the Act.

Upon analysis, the court found no substance in this contention. Section 31(1) directs certain categories of amounts to be credited into the general fund but does not exhaustively list all possible receipts. The court noted that the Act does not bar the creation of a contingency fund to provide for a contingent liability. The Board is entitled to perform acts incidental or ancillary to its functions under the Act. The court concluded that the petitioners' contention based on sections 30, 31, and 32 failed.

The court further noted that the contingency fund was created under extraordinary circumstances due to the pending Supreme Court decision on the Board's liability for purchase tax. The Board initially intended to include the purchase tax in the minimum reserve price, but this met resistance from the pool sale dealers, leading to a boycott of the auctions. After discussions with the dealers, the Board decided on the contingency deposit system. This system was equitable and just to all parties, allowing dealers to get a refund if the Supreme Court negated the tax liability and protecting growers from depleted pool funds if the liability was upheld.

The court also found that the petitioners had acquiesced in the procedure, as they made the deposits without objection and only raised the issue after two years. The collection was consensual and at the instance and request of the dealers. Therefore, the collection was not open to challenge under article 226, and the petitioners were not entitled to the declaration sought.

2. Legality of Sales Tax Collection by the Coffee Board After April 1, 1984:
The court observed that the Board had committed an error in collecting sales tax after April 1, 1984. However, the amounts collected were paid over to the State as tax. The petitioners' entitlement to a refund would arise only if any amount remained with the Board. Since the amounts were handed over to the State, no directions for a refund could be issued.

3. Excessiveness of the Contingency Deposit Amount:
The petitioners contended that the contingency deposit was in excess of the purchase tax due, as it was collected on the bid amount, which included costs beyond the purchase price. The court noted that the amount of the contingency deposit was fixed after discussions and representation from the dealers, and no objections were raised at that time. The petitioners themselves did not object to the collection for a long time. Consequently, this contention also failed.

Conclusion:
The court dismissed the original petitions, finding no merit in the petitioners' claims. The procedure of collecting the contingency deposit was in the best interests of both growers and dealers, particularly protecting dealers' interests. The Board acted fairly and equitably, and the petitioners' claim lacked equity or justice, as it would unjustly enrich them at the expense of the growers.

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