TMI Blog1968 (9) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... terised as sugar-cane and whether sale of sugar-cane setts as such can be subject to the levy of sales tax under item 62 of the First Schedule to the Act. In W.Ps. Nos. 1043 and 1044 of 1968 the petitioner is seeking a rule for the issue of a writ of prohibition under Article 226 of the Constitution of India restraining the respondent from proceeding with the revision and assessment of the petitioner under the Act as proposed by him in his notices Nos. M.G.S.T. 432/62-63 and 432/66-67 dated 27th February, 1968, and 23rd February, 1968, respectively. In W.Ps. Nos. 1802 to 1804 of 1968, the petitioner prays for the issuance of a writ of certiorari to quash the orders of the respondent dated 28th March, 1968, 30th March, 1968, and 22nd March, 1968 in M.G.S.T. 389/62-63, 410/62-63 and 432/62-63 respectively. In W.P. No. 588 of 1968 the petitioner is seeking for a writ of prohibition prohibiting the respondent from proceeding with the assessment as contemplated by him in his notice No. A2 4158/65-66 dated 31st January, 1968. In W.P. No. 589 of 1968 the petitioner is asking for a writ of certiorari to quash the order of assessment of the respondent in his proceedings No. 3974/6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat botanists and other agricultural experts consider that such setts are suitable only for planting purposes and they are not sugar-cane as popularly and commercially understood. According to him, sugar-cane setts, because of their low sucrose content, are useless for producing sugar and it cannot be a substitute for sugar-cane in any manner whatsoever. On the other question whether the petitioners in each of these cases are dealers of sugar-cane setts, his contention is that as sugar-cane is taxable only at single point under section 3(2) of the Madras General Sales Tax Act, 1959, it cannot be subject to such tax twice, once at the stage when they are sold as sugar-cane setts and at another time as sugar. He has taken us through the correspondence that passed between the ryot, the sugar-cane sett grower and the petitioner and tried to establish that in so far as the petitioner is concerned, there was no purchase of sugar-cane setts as such by the petitioner from the sugar-cane sett grower or the ryot and if at all the part played by the petitioner in such transactions was that of a financier to advance moneys to the ryot to purchase good quality sugar-cane setts so that ultimatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Britannica. Sugar-cane seed is very small, rather silky and rarely viable-See Van Nostrand's Scientific Encyclopaedia. It is said that sugar-cane seeds are so small that nearly 100 sugar-cane seeds would be required to equal the weight of a single wheat grain (Encyclopaedia Britannica). Therefore propagation of sugar-cane is by cuttings 8 to 10 inches long known as "seeds", made from the upper joints of old canes. They are placed in trenches and merely covered with soil. They begin to sprout in about two weeks and the crop is harvested in 10 to 20 months. See Chambers's Encyclopaedia. Thus sugar-cane can be conveniently classified as a genus of which sugar-cane sett is a specie. But yet it would be commercial and etymological perversity if sugar-cane setts are to be equated and understood as sugarcane itself. Sugar-cane setts are botanical seeds from which spring sugarcane. The physical and chemical properties of sugar-cane setts are entirely different from sugar-cane. The sucrose content in both varies. The physical appearance is different. The use to which one can be put is totally different from the use to which the other can be put. Even more, in mercantile contracts it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it may not be quite necessary for us to consider this aspect. But as the revenue urged in the alternative that sale of sugar-cane setts being the subject of the bargain between the parties and being goods, they are in any event liable to tax as they are the subject-matter of a sale and purchase between the parties to such a bargain. It is to repel this contention of the revenue that it has become necessary for us to consider the material facts in the cases to find whether the petitioners are dealers in sugar-cane setts and whether at all they have purchased the same resulting in such purchases being exigible to tax. Before adverting to the respective contentions of the parties it is necessary to note that under the Madras Sugar Factories Control Act, 1949 (Act 20 of 1949), which is an Act to provide for the licensing of sugar factories and regulating the supply and the prices of sugar-cane used in such factories, it is obligatory on the part of the occupier of every factory to submit to the Sugar-cane Commissioner an estimate of the quantity of sugar-cane which would be required by that factory during the crushing season. The Sugar-cane Commissioner thereafter declares any area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of sugar-cane setts to the ryot, who is obliged to supply sugar-cane ultimately to the mills, and he also indicates the person who is willing to supply such setts to the ryot in question. It is significant to note that the sugar factories are not only obliged in law to purchase the sugar-cane from and out of the lands allotted and allocated by the Cane Development Officer but equally they are also involuntarily compelled to see that the ryot, from whom they expect such supplies of sugar-cane, purchases sugar-cane setts from a farm owned by different persons in an area specified by the Cane Development Officer. Apparently this formula is adopted more in the interests of the mills so that they could secure the best raw material. The factories are indeed given the option to select the farms for seed purposes and it is in this behalf that the Cane SubInspector or other officer of the factory intimates to the sugar mills about the availability of such sugar-cane setts from a particular individual and that the ryot in question from whom the mills are obliged to purchase the sugar-cane is also willing to purchase the sugar-cane setts from the seed farm-owner nominated by the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The receipt signed by the ryot, which also forms part and parcel of the delivery order, is very very instructive. The ryot acknowledges receipt of the sugar-cane setts and advises the mills to debit his special crushing season account with the cost of the sugar-cane setts. The ryot also contemporaneously executes a promissory note acknowledging his liability to pay the value of the sugar-cane setts purchased by him from the farm-owner in the manner stated above. These clinching factors which appear in the record establish beyond doubt that the part played by the mills is that of a financier, who advances money to the ryot, such advances being more to its own interests rather than to subserve any other purpose. By such a financial arrangement, the mills are able to secure the best raw material and the ryot obtains the same in time and contemporaneously neither the ryot nor the sugar mills deviate from the established regulations and custom of the trade in arranging for such finances. In a sale there must be a vendor and a buyer and goods should have been delivered by the seller to the buyer by reason of such a sale. No one of these elements which make up a sale are present in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was exempt from taxation under section 3(3) of the 1939 Act, the dealer before him who was not so exempt, was liable on the amount for which they were bought by him. It is by reason of this distinctive principle that the ratio in the above decision proceeded to say that the tax is levied upon the last taxable purchaser who deals with the commodity in its raw state. Even this is absent in the instant case. It is not provided anywhere that the last purchaser who is not exempt from tax otherwise is the purchaser who is liable to pay sales tax on the incidence of purchase. Even on this ground the contention of the revenue should fail. Suffice it, however, in this case, to say that as the mills are not dealers and as they have not purchased the sugar-cane setts in a manner known to law and as is popularly understood, the transactions involving the sale of sugar-cane setts by the farm grower are not exigible to tax as proposed by the respondent. In the result W.Ps. Nos. 588, 589, 1043, 1044 and 1802 to 1804 of 1968 and T.C. No. 2 of 1968 are allowed with one set of costs in W.P. No. 1802 of 1968. Counsel's fee Rs. 250. Petitions allowed. - - TaxTMI - TMITax - CST, VAT & Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X
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