TMI Blog1999 (12) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... heir obligation under the Sales Tax Act. The Sales Tax Authorities were, therefore, wrong in passing the orders of penalty and upholding the same. The High Court also, in our opinion, committed an error in upholding the orders of penalty. In the result, these appeals are partly allowed. The order of the High Court and the orders of the Sales Tax Authorities imposing and upholding levy of penalty are set aside. Only to that extend the appellants succeed and their appeals are allowed. The judgment of the High Court in respect to the planting subsidy and transport subsidy is upheld. - Civil Appeal No. 7517, 7518 of 1998, 7523, 7524 of 1998, 7519, 7520, 7521, 7522 of 1998, Writ Petition No. 15705, 15706 of 1995, W.P. Nos. 15530, 15531 of 1995 - - - Dated:- 17-12-1999 - NANAVATI G.T. AND KHARE V.N. JJ. V. Balaji, P.N. Ramalingam, Sanjay Parekh, P.H. Parekh, V. Ramasubramanian and V. Krishnamurthy. Other Advocates. K. Parasaran, F.S. Nariman and R. Venkataramani. Senior Advocates. -------------------------------------------------- The judgment of the Court was delivered by G.T. NANAVATI, J .-Leave granted. 2.. These eight appeals arises out of three dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government, which was in the nature of administrative instruction, it did subsidies freight/transport charges. For the year 1990-91 the advice was that the sugarcane growers should bear transportation charges up to the distance of 30 kms. and for the distance beyond 30 kms. the charges should be borne by the sugar manufacturers. In its sales tax returns for that year it did not include the amounts paid as planting subsidy and transport subsidy in its taxable turnover as according to it the same were not includible therein. The Assistant Commissioner of Sales Tax did not agree with it and assessed tax after including these amounts. Against that order and the demand raised on its basis the appellant preferred an appeal to the Deputy Commissioner but it was dismissed. The appellant then preferred an appeal to the higher appellate authority. For the years 1991-1996 also it had followed the same pattern. Same view was taken by the sales tax authorities and against the orders passed it had filed appeals and they were pending when on November 6, 1996, to avoid recurring of such situation every year it filed six writ petitions in the Madras High Court, seeking a declaration that words agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three points. They are (i) whether planting subsidy paid by the appellants to the cane growers can be said to be a part of the price of sugarcane purchased by it from them and can legitimately be included in the turnover of the appellants; (ii) whether the transport subsidy charges in excess of 30 kms. paid by the appellants to third party lorry owners for transporting sugarcane pursuant to the State Government s direction can be aggregated with the price of sugarcane and included in the turnover of the appellants; and (iii) whether levy of penalty was justified in view of the facts and circumstances of these cases. 7.. It was contended by the learned counsel for the appellants that planting subsidy given by the appellants to the cane growers was by way of an incentive to the cane growers for planting a particular variety in the stipulated months preceding the planting season. The agreements made in that behalf were anterior in point of time to the agreements of sale and being unrelated to the sale and supply of sugarcane were independent though collateral agreements. The planting subsidy was paid per acre of land and there was no obligation on the grower to grow sugarca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts of planting subsidy and transport charges in the turnovers shown in their returns. The contention of the respondents was that after then decision of the Madras High Court in Kallakurichi Co-operative Sugar Mills Ltd. v. State of Tamil Nadu [1985] 60 STC 113, the appellants should have included the amounts of planting subsidy and transport subsidy in turnover and as they had failed to do so full amount of penalty was legally imposed upon them. 8.. In order to consider the rival contentions, legal provisions, in the context of which they arise shall have to be seen. 9.. The manufacturers of sugarcane in the State of Tamil Nadu are governed by the Madras Sugar Factories Control Act, 1949 and the Rules framed thereunder and also by the Sugarcane (Control) Order, 1966. No sugarcane can be crushed in any factory without a licence. Section 8 of the Act requires the occupier of every factory to submit to the Sugarcane Commissioner on or before the specified date, an estimate, in the prescribed form and manner, of the quantity of sugarcane required by that factory during the crushing season immediately following. The Sugarcane Commissioner, after taking into consideration t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the factory or at the sugarcane purchasing centre. Clause 3 of the Order empowers the Government to fix minimum price of sugarcane which the producer of sugar has to pay to the growers of sugarcane. Clause 5(a) of the Order provides for payment of additional price for sugarcane, as may be determined by the Central Government or the State Government, as the case may be. 11.. These provisions disclose that the Act makes provisions for ensuring adequate supply of sugarcane to the sugar factories by reserving an area for such factory and by regulating/prohibiting transactions of sale, purchase, export and import of sugarcane into or from the reserved area. These provisions and the provision regarding fixing of price by the Government also safeguard the interest of the cane growers within the reserved area. The Act, however, does not make it compulsory for a landholder within the reserved area to grow sugarcane only. The obligations under the Act arise only if the landholder grows sugarcane within the reserved area. Thus, there is no statutory obligation to grow sugarcane in the reserved area. Again this Act does not cast any obligation on the sugar factories to pay to the cane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amounts paid as planting subsidy and transport subsidy can be included in the turnover or the aggregate amount for which sugarcane was bought by the appellants from the cane growers. 12.. The Sales Tax Act provides for levy of tax on sale or purchase of goods. The amount of tax is to be determined on the basis of taxable turnover , i.e., the turnover on which a dealer is liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed. The relevant part of the definition of the term turnover as contained in section 2(r), is as under: turnover means the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (n), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration............................... ............................. Explanation (2): Subject to such conditions and restrictions, if any, as may be prescribed in this behalf- (i) (omitted) (ii) the amount for which goods are sold shall include an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 is 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. [See George Oakes (Private) Ltd. v. State of Madras [1961] 12 STC 476 (SC), and Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC); [1979] 1 SCR 276]. Weighing charges have also been held to be a part of the sale price of the goods where the goods were required to be weighed before they were sold and delivered for completing their sale. [Sarju Pd. Pritam Lal v. Judge, Revisions, Sales Tax, U.P. [1963] 14 STC 884 (All.)]. So also, the transport charges have been held to be a part of the sale price by this Court in the case of D.C. Johar Sons (P.) Ltd. v. Sales Tax Officer, Ernakulam [1971] 27 STC 120. The amount paid by the sugar mills to the sugarcane suppliers as khodki charges for the purpose of keeping the land on which sugarcane had been grown in good condition have also been held to be a part of the consideration for the sugarcane sold by the cane growers to the sug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at where the sale price is statutorily fixed no other amount paid by the purchaser could be added in his turnover for the purpose of assessing the purchase tax. In the case of Utkal Distributors (P.) Ltd. [1966] 17 STC 320, this Court has held that the Central sales tax paid by the assessee at the time of purchase and realised from the customers under the statutory provisions did not form part of the price paid by the customers to the assessee, as the valuable consideration for the sale was only the price fixed by the Government. This Court took that view because the controlled stock-holder was not entitled to charge a price higher than that fixed by the Government of India and thus the valuable consideration for the sale was the price fixed by the Government of India and did not include the Central sales tax. In Cauvery Sugars and Chemicals Ltd. [1972] 29 STC 1 (Mad.), the question that arose before the Madras High Court was whether cess on sugarcane levied on a sugar manufacturer under the Madras Sugar Factories Control Act could form part of a sugar manufacturer s purchase turnover of sugarcane under the Madras General Sales Tax Act, 1959. It was held that as the cess was paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in State of Tamil Nadu v. Srinivasa Timber Depot [1991] 80 STC 393 (SC) while dismissing the appeal observed that After hearing learned counsel for the parties we are of the opinion that the High Court placed reliance on its earlier judgment in Srinivasa Timber Depot v. Deputy Commercial Tax Officer [1969] 23 STC 158 (Mad.) in holding that the lot cooly charges are collected de hors the sale and such charges do not form part of the turnover. This view has held the field in the State of Tamil Nadu for the last 21 years, which is consistent with the provisions of the Tamil Nadu General Sales Tax Act, 1959. We find no good reason to take a different view. The appeal fails and is accordingly dismissed, but there will be no order as to costs . In Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 STC 487 (SC), a case on which heavy reliance was placed by the appellants, the facts were that the appellant-company had sold cement at catalogue rate and thereafter deducted railway freight. It had sent goods to out-station customers by rail under railway receipts with freight to pay. It made out invoices at the catalogue rate and the customers paid the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of this Court in State of Tamil Nadu v. Kothari Sugars Chemicals Ltd. [1996] 101 STC 197, wherein it has been held that Where, without any contractual or statutory basis the sale price of sugarcane is fixed at an amount higher than the minimum cane price fixed under clause 3 and the additional cane price fixed under clause 5-A, any sum paid by the purchaser to the grower as advance prior to fixation of the additional cane price under clause 5-A, to the extent that it is in excess of the additional cane price fixed later, cannot form part of the price of cane sugar . While so holding this Court further observed that for treating the entire amount paid by the purchaser as the price of sugarcane, it must be found proved as a fact that the higher price including the excess amount was paid as price of the sugarcane under the agreement between the grower and the purchaser irrespective of the lower amount being fixed as the aggregate of the price fixation under clauses 3 and 5-A of the Control Order. This Court also, after referring to the two decisions of the Karnataka High Court in Pandavapura Sahakara Sakkare Kharkhane (P) Limited v. State of Mysore [1973] 32 STC 104 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the Madras Sugar Factories Control Act there are certain restrictions on the transactions of sugarcane in reserved areas. A grower of sugarcane in the reserved area cannot sell any sugarcane grown in that area except to the specified sugar manufacturer. He is required to enter into an agreement by making an offer to the specified sugar mill for sale of the sugarcane grown by him. Pursuant to this offer the sugar mill has to enter into an agreement with him for purchasing of the sugarcane offered by him. The Sugarcane (Control) Order, 1966 controls distribution and movement and also the purchase price of sugarcane. As neither the Madras Sugar Factories Control Act nor the Sugarcane (Control) Order provide for any agreement between the sugarcane grower and the purchaser, i.e., the sugar mill for giving planting subsidy or freight subsidy it was contended by the learned counsel for the appellants that the agreements which the appellants have entered into with the cane growers in respect of planting subsidy are independent though collateral contracts and, therefore, they have nothing to do with the sale or purchase of sugarcane. It was submitted that the invitation to cane grower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng subsidy as purchasers of sugarcane and as a part of the consideration for which the sugarcane was ultimately purchased by them. As rightly pointed out by the Madras High Court in State of Tamil Nadu v. National Co-operative Sugar Mills Limited [1992] 86 STC 22 giving of planting subsidy earlier and supply of sugarcane later were closely linked. The planting subsidy was relatable to the supply of sugarcane. If the whole deal between the appellants and the cane growers is examined they really constitute one contract of sale. Therefore, the sums paid by the appellant as planting subsidy to the cane grower were rightly treated as a part of the sale price and included in the taxable turnover of the appellants for the purpose of assessing the purchase tax liability. 22.. For the same reasons we hold that the transport subsidy was a part of the consideration for which sugarcane was sold by the sugarcane growers to the appellants. Though the agreements between the parties provided for delivery by the sugarcane growers at the factory gate and though the transport charges paid by the appellants were not to the sugarcane growers but to third party lorry owners, they were made for secur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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