TMI Blog2001 (9) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... 1996-97, on the subsidy towards the sale of urea and also for the equated freight charges given by the Government of India. The petitioner-Neyveli Lignite Corporation, is manufacturing the fertiliser, urea and other chemicals at Neyveli, Cuddalore District and they are bound to sell the fertiliser commodity for the price fixed by the Government of India under clause 3 of the Control Order. But in order to meet the other expenses of the manufacturer, the Government gives subsidy by way of reimbursement for the quantity moved out from the factory of the petitioner and in addition to that for the quantity dispatched to other places, for which the petitioner is incurring the freight charges, the Government of India gives the equated freight subsidy. The assessing authority has levied tax for the subsidy given by the Government of India both for the commodity and also for the expenses of freight. It is the contention of the petitioner that the subsidy given by the Government of India cannot come under taxable turnover and therefore the assessment order has to be set aside. 2.. Similar contention has been raised in the T.Ps., which were originally filed before the High Court and transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturer and sufficient supplies are available, the Government of India took administrative decision and it introduced on December 31, 1977, a Retention Price Scheme. This was introduced with effect from November 1, 1977, and this scheme, inter alia, contemplated the fixation of maximum sale price of fertiliser under clause 3 of the Fertiliser (Control) Order; determination of retention price for each manufacturer; scheme of reimbursement of the difference between retention price fixed for the industry and the maximum selling price fixed under clause 3 of the Fertiliser (Control) Order; submission of claims by the manufacturer supported by details of manufacture along with copy of Central excise records to be addressed to the Executive Director, Fertiliser Industry Co-ordination Committee, New Delhi; and disbursement of an amount of subsidy to the claimant-industry being the difference between the retention price and the selling price fixed under clause 3 of the Fertiliser (Control) Order. 5.. The procedure enunciated on December 31, 1977, was then substituted by another one as stipulated in the Government's letter of September 29, 1980. Broadly speaking, according to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ways referred to in clause (n) by a dealer whether for cash or for deferred payment or other valuable consideration. Clause (n) of section 2 defines "sale" as meaning transfer of property in goods by one person to another in the course of business for cash, deferred payment or other valuable consideration. 10.. It appears to us that it is that sale consideration, whether in cash or otherwise, which is receivable in respect of sales made by a dealer which can possibly form part of the turnover of a dealer. It is that sum which can be legitimately regarded as forming part of the aggregate amount for which the goods have been bought or sold. The sum has to be paid either by the purchaser or on his behalf by some other person. 11.. In the instant case, as far as the Fertiliser (Control) Order is concerned, the appellant is only required to receive either the fixed price determined or the maximum price which may be fixed. For example, vide notification dated January 30, 1988, maximum price per tonne of different types of fertiliser specified therein was fixed. In respect of urea, the maximum price per tonne fixed was Rs. 2,350. No manufacturer of urea could sell the same at a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be useful to refer to the decisions of this Court which also lead to the conclusion that the subsidy so received cannot be regarded as a part of the taxable turnover. In State of Tamil Nadu v. Kothari Sugars Chemicals Ltd. [1996] 101 STC 197 (SC); (1996) 7 SCC 751, excess amount was paid by the purchaser to the cane grower as advance over and above minimum cane price fixed under clause 3 and the additional cane price fixed under clause 5-A of the Sugarcane (Control) Order. The question arose whether this excess amount so paid can be regarded as a part of the price paid by the purchaser to the grower for the purposes of levy of sales tax on purchase. After referring to the provisions of the Sugarcane (Control) Order, 1966, and the scheme of paying to the cane grower as advance, this Court observed as follows: "7. In these matters there is admittedly no statutory basis since the "State advice" to the purchasers to pay a certain amount in addition to the minimum cane price fixed under clause 3, in anticipation of fixation of the additional cane price under clause 5-A, does not have any statutory basis. The amount paid as advance under the State advice also does not have any contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in the turnover". It is clear from the aforesaid observations that it is that amount which flows from the purchaser to the seller which alone would form part of the turnover of the seller. Any sum received de hors the contract of sale from another entity, whether it be Government or anyone else, cannot be regarded as being an amount which would form part of the sale price on which tax is payable. 16.. In Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC); (1978) 4 SCC 271, the question which arose was whether freight was includible in the expression "sale price" for the purpose of levy of sales tax. The Cement Control Order, 1967 provided for payment of railway freight by the purchaser and it is in this context that the question arose whether the freight so paid was to be regarded as a part of the taxable turnover. Examining the provisions of the Cement Control Order, it was observed that the said provisions have statutory force and it postulated the payment of price of Rs. 214.65 per metric tonne free on rail destination railway station. The Control Order was regarded as being paramount having overriding effect over contractual terms and it stipulated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of sugarcane. Planting subsidy, de hors and Control Order, was announced by the manufacturer of sugar for sugarcane growers who undertook to grow the required variety of sugarcane and to sell the same to the said manufacturer. The question arose whether payment of this subsidy constituted a part of the sale price and whether it was includible in the taxable turnover. After referring to the earlier decisions of this Court including that of Kothari Sugars [1996] 101 STC 197; (1996) 7 SCC 751, it was observed at page 471 as follows: "19. What transpires from the above case law is that the amounts paid by way of consideration by the purchaser to the seller of goods in pursuance of the contract of sale can legitimately be regarded as purchase price while calculating the turnover for the purposes of sales tax legislation. What can legitimately be brought to sales tax or purchase tax is the aggregation of the consideration for the transfer of property. All the payments should have been made pursuant to the contract of sale and not de hors it. Any amount paid as ex gratia payment or as an advance cannot be the component of the purchase price and therefore cannot legitimately be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved, the scheme of payment postulates the right of the appellant to receive the subsidy on its clearance from the factory and not necessarily after the sale of fertiliser. Even before the sale of fertiliser, the right to receive the subsidy arises and under the circumstances, it cannot be said that subsidy would form part of the sale price or turnover of the appellant. 21.. Learned Solicitor-General has drawn our attention to various decisions of the High Court which have taken a similar view. Some of them are Fertiliser Corporation of India Ltd. v. Commercial Tax Officer (OFA), Punjagutta Division, Hyderabad [1991] 83 STC 129 (AP), Coromandel Fertilisers Ltd. v. Commercial Tax Officer (OFA) Punjagutta Division, Hyderabad [1992] 85 STC 552 (AP), Natraj Organics Limited v. Assistant Commissioner (Assessment), Sales Tax, Muzaffarnagar [1995] 96 STC 261 (All), Rashtriya Chemi- cals and Fertilisers Limited v. State of U.P. [1996] 101 STC 487 (All), Bongaigaon Refinery Petrochemicals Limited v. Commissioner of Taxes, Assam [1996] 103 STC 132 (Gauhati) and Commissioner of Taxes v. Bongaigaon Refinery Petrochemicals Ltd. [1999] 114 STC 26 (Gauhati). A single Judge of the Kerala H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidy is determined with reference to the quantum of fertilisers cleared from the factory on which considerable stress was made by the Government Pleader, does not lead to any inference that the payment is made in consideration of the sale. The retention price and the transfer price are fixed with reference to various factors. The subsidy is paid for the benefit of the public, to keep the prices at a reasonable level, and at the same time to ensure a reasonable return on investment to the units, and not as consideration for the sales effected by them. I am therefore of the view that the amount of subsidy received by the petitioners for the purpose of their units, which is not related to any particular transaction of sale, but is related to other circumstances, cannot constitute turnover in their hands assessable under the KGST Act." 22.. This decision was affirmed by the division Bench in Assist- ant Commissioner of Sales Tax (Assessment), Special Circle-II, Ernakulam v. Krishak Bharathi Co-op. Ltd. [1995] 99 STC 17 (Ker) and the special leave petition filed against the same was dismissed by this Court. We are in respectful agreement with the view of the single judge of Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X
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