TMI Blog2004 (6) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 349 of 1992-93 before the Joint Commissioner of Commercial Taxes (Appeals), Belgaum (hereinafter referred to as "the first appellate authority"). The first appellate authority, while partly granting relief to the assessee, negatived the claim of the assessee to the extent the assessing authority had proceeded to include harvesting and transportation charges as part of purchase price. The assessee, aggrieved by the order passed by the first appellate authority, took up the matter in second appeal before the Tribunal. The Tribunal, in the impugned order, confirmed the order passed by the first appellate authority. 3.. Sri G.V. Shantharaju, learned Senior Counsel appearing for the assessee, challenging the correctness of the impugned order submitted that the Tribunal has seriously erred in law in including the harvesting and transportation charges as part of purchase price of the sugarcane purchased by the assessee. Elaborating this submission, the learned counsel pointed out that when the purchase price was fixed between the assessee and the sugarcane suppliers as ex-field price and the assessee, as per the terms of the agreement between the parties, was required to incur the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into between the assessee and the sugarcane growers and the purchase price of the sugarcane fixed in terms of the provisions contained in section 3 of the Sugar Control Order, 1966 would clearly show that the assessee and the sugarcane growers have fixed the price at ex-field; and since the assessee had incurred necessary expenditure for harvesting of the sugarcane crop and also transportation of the same, it could not have been included as part of the purchase price. In support of his submission, Sri Shantharaju relied upon the decision in the case of Perambalur Sugar Mills Ltd. v. State of Tamil Nadu reported in [1992] 86 STC 17 (Mad.); in the case of State of Tamil Nadu v. National Co-operative Sugar Mills Limited reported in [1992] 86 STC 22 (Mad.); in the case of State of Karnataka v. Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. reported in [1984] 57 STC 81 (Kar); in the case of Pandavapura Sahakara Sakkare Karkhane v. State of Mysore reported in [1973] 32 STC 104 (Mys); in the case of Tungabhadra Sugar Works Ltd. v. State of Karnataka reported in [1994] 93 STC 561 (Kar). 4.. However, Sri B. Anand, learned Government Advocate, strongly supporting the orders impugned, made three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sugarcane, the same has to be treated as a part of purchase price. Sri Anand, also took us through the orders impugned passed by the Tribunal and also the subordinate authorities. He also relied upon the decision of the Supreme Court in the case of State of Tamil Nadu v. Kothari Sugars Chemicals Ltd. reported in [1996] 101 STC 197; in the case of Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu reported in [1982] 51 STC 171 (Mad.); in the case of Kallakurichi Co-operative Sugar Mills Limited v. State of Tamil Nadu reported in [1985] 60 STC 113 (Mad.); in the case of Pandavapura Sahakara Sakkare Karkhane (P.) Limited v. State of Mysore reported in [1973] 32 STC 105 (Mys); in the case of Dyer Meakin Breweries Ltd. v. State of Kerala reported in [1970] 26 STC 248 (SC); in the cases of E.I.D Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes reported in [2000] 117 STC 457 (SC); Neyveli Lignite Corporation Ltd. v. Commercial Tax Officer, Cuddalore reported in [2001] 124 STC 586 (SC). He also referred to the decision in the case of Perambalur Sugar Mills Ltd. v. State of Tamil Nadu [1992] 86 STC 17 (Mad.) relied upon by Sri Shantharaju. 5.. In the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the purchase price of sugarcane fixed is inclusive of harvesting and transportation charges, there cannot be any doubt that the total consideration paid for the purchase of sugarcane has to be taken into account and it has to be treated as total turnover of the assessee. "Turnover", as provided under section 2(v) of the Act, means the aggregate amount for which goods are sold or supplied or distributed or delivered or disposed of in any of the ways referred to in clause (t) of section 2 of the Act 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. Therefore, turnover of a dealer for the purpose of fastening liability to pay tax under section 5(3)(b) of the Act has to be determined with reference to the total sale consideration paid by the dealer for the purchase of sugarcane. Therefore, when the question arises as to what is total turnover of a dealer, the question that is required to be addressed is what is the purchase price paid by the dealer for purchase of sugarcane to the grower or vender of sugarcane? The purchase price of any goods, including the sugarcane, could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement, the parties agreed that the total quantity of the sugarcane purchased is to be determined by weighing the same in the factory premises of a dealer, in our view, would not make the sale transaction incomplete, if otherwise, the materials on record show that the sale of the sugarcane has taken place ex-field and purchaser has agreed to get the standing sugarcane harvested and transported. It is open to the parties to enter into sale of standing sugarcane crop with reference to the field or total extent of land on which sugarcane crop is standing, fixing the price of sugarcane purchased depending upon the total quantity and the quality of the sugarcane purchased. With reference to the facts of each case, the transaction as to when the purchase was completed, is required to be determined by the assessing authority. While so determining, it is open to the assessing authority to lift the veil and find out, even though the parties make it appear that the purchase of the sugarcane was the basis of the ex-field price, whether as a matter of fact, the harvesting and transportation charges were actually paid by the vendor, i.e., grower of the sugarcane or actually paid by the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory price was paid under the contract and not as an ex gratia payment or towards advance. In that situation, this Court took the view that the entire amount paid should be treated as purchase price. In the case of Tungabhadra Sugar Works Ltd. [1994] 93 STC 561, the division Bench of this Court noticed that there being no prohibition against the parties aggrieved for the payment of higher price for purchase of sugarcane, the higher price paid in addition to the minimum purchase price fixed under clause (3) of the Sugar Control Order, 1966, was required to be held as purchase price fixed by the purchaser. For treating the entire amount paid by the purchase as the price of the sugarcane supplied, it was found proved as a fact that the higher price including the excess amount was paid as a price of the sugarcane in an agreement between the grower and the purchaser irrespective of lower amount being fixed as aggregate of the price fixation under clauses 3 and 5-A of the Sugar Control Order. The decision of the Madras High Court in the case of Perambalur Sugar Mills Ltd. [1992] 86 STC 17, proceeded on the basis that there was an agreement entered into by the factory wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ane growers and brought the sugarcane to the factory premises. In all such cases, the factory owners deducted transport charges from statutory price payable to the sugarcane growers in respect of the sugarcane supplied by them and when the exemption was claimed from the purchase turnover towards transport charges so deducted by the factory owners from out of the amounts payable to the sugarcane growers computed in accordance with the price fixed by the Government, the assessing authority as well as the appellate authorities took the view that the purchase price of the sugarcane having been fixed from time to time and the purchase turnover was worked out with reference to the quantity and price per metric tonne so fixed by the Government, though the mills were at liberty to recover the transport charges incurred by them from the sugarcane growers, they were not entitled to reduce the cane price fixed by the Government statutorily by deducting the amount incurred by the mills for making transport arrangements with the sugarcane growers. In that context, the Madras High Court, affirming the order of assessment made by the assessing authority, took the view that the assessees cannot cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidy paid by the factory to the cane growers can be said to be the part of price of sugarcane purchased by it and therefore, can legitimately be included in the turnover of the factory owners; and whether the transport subsidy charges, in excess of 30 kilometres, paid by the factory would be a component of the sale price and had to be included in the taxable turnover of the appellants. While considering the said question, the Supreme Court, on examination of the true nature of transactions between the factory owners and the sugarcane growers and the object of the payments made for planting subsidy and freight subsidy, took the view that they were part of the purchase price. The entire decision in the said case turned on the facts of that case. This is clear from the observations made by the Supreme Court at paragraph 21 of the judgment, which reads as hereunder: "21. .Apparently, the two agreements-one agreement in respect of planting subsidy and the other agreement for the sale of sugarcane appear to be independent but on a close scrutiny it can be noticed that they constitute one single transaction. In their petitions filed before the High Court the appellants have stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidy 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 securing regular supply of sugarcane as per the requirements. Though payments were made at the instance of Government of Tamil Nadu they also became a part of the implied agreement between the appellants and the sugarcane growers. They were not post-sale expenses. Those amounts were paid to ensure scheduled delivery of sugarcane. The sale of sugarcane became complete only thereafter. Those payments can be regarded either as payments made on behalf of the sugarcane growers or payments made in modification or variation of the earlier agreements entered into by the sugarcane growers for selling sugarcane. In either case they could legitimately be regarded as the components of the sale price as the sellers would have otherwise included those amounts in the sale price." In the case of Neyveli Lignite Corporation Ltd. [2001] 124 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 101 STC 197, the Supreme Court, while considering the question, whether for the purchase of sugarcane from the cane growers, a purchaser is liable to pay purchase tax under the State Sales Tax Act on the amount paid by the purchaser to the cane grower over and above the price fixed under clauses 3 and 5-A of the Sugarcane (Control) Order, 1966, took the view that where there is no evidence that the purchaser had agreed with the grower to pay higher price described as advance, but the excess amount forming part of the advance was paid only under compulsion on the direction contained in the "State advice", which has no statutory basis, the excess amount paid cannot be treated as part of the turnover. In the said decision, the Supreme Court has considered the decisions of this Court in the case of Pandavapura Sahakara Sakkare Karkhane [1973] 32 STC 104 (Mys) and Tungabhadra Sugar Works Ltd. [1994] 93 STC 561 (Kar). At page 202 of the judgment, the Supreme Court has observed thus: "In the connected matters arising out of the judgment of the Karnataka High Court, similar writ petitions filed by the purchasers of sugarcane were dismissed. The two decisions of the Karnataka High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transport and harvesting charges paid by the purchaser to a third party should be treated as a part of the purchase price or not, depends upon the facts and circumstances of each case and it depends upon the question as to whether the parties intended the said amount to be treated as part of purchase price; or it should be treated as a liability to be incurred by the purchaser on its or his own account and not as part of the purchase price paid to the grower of the sugarcane. The decision of the Kerala High Court in the case of Co-operative Sugars Ltd. [1993] 88 STC 84 would indicate that in the said case a finding was recorded by the appellate authority that the transport charges were paid by the society to the lorry owners directly and therefore, the said charges cannot be included in the turnover of the assessee. It is useful to refer to the observation made at paragraph 4 of the judgment, which reads as follows: "4. Now we shall deal with the common question. The assessing authority no doubt has found that the transport charges paid by the assessee to the transport agency was payment made on behalf of the grower. The assessing authority accordingly held that the transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of post-sale expenditure, to which benefit of rule 6(4)(f) will be available. Cost of freight incurred for the inward journey of the goods to the dealer is not deductible, but freight outwards is deductible." 10.. Further, in the case of Central Wines v. Special Commercial Tax Officer reported in [1987] 65 8TC 48, the Supreme Court took the view that the amount of money which goes from the pocket of the purchaser to the pocket of the seller as a condition or consideration for the passing of the property in the goods is the sale price; in other words, it is the amount, but for the payment of which, the seller would not transmit his title to the goods in favour of the purchaser and the consideration obtained by the seller from the purchaser would, in the eye of the law, be the sale price regardless of the nomenclature is given to any part of the price charged. Therefore, what follows from the decision of the Supreme Court in the said case is that the entire consideration that passed on from the purchaser to the cane grower with reference to the purchase of cane by whatever name it is called or in whatever manner it is paid, is liable to be taxed. Therefore, in each case, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The price fixed is for the delivery at the factory site. There is no provision in the contract for payment of any reduced amount other than the one provided under the statutory provisions. No deduction is permissible underlying towards the transport charges incurred by the growers. The purchase price payable for the supplies is inclusive of transport charges. The transport charges paid by the assessee to the third party to transport sugarcane from the field of the sugarcane growers to the assessee's factory premises in order to assist the cane growers should be included in the taxable turnover of the assessee. As per the Sugarcane Control Order, 1966, it is stipulated that under the provisions of abovesaid order (section 3 of this order) provides for minimum price of sugarcane payable by the purchaser of sugar. The minimum price is fixed on the basis of the cost of production of sugar, the returns of the growers from the alternative crop, the availability of sugar to the consumer at a fair price, the price at which sugar produced from sugarcane is sold by the purchaser and the recovery of sugar from sugarcane. As could be seen the above said Sugarcane Control Order, it provides fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transportation charges paid by the assessee to the third party to transport sugarcane from the field of the sugarcane growers to the assessee's factory to assist the cane growers, should be included in the taxable turnover of the assessee. The Tribunal proceeds on the assumption that the assessee has taken the transport of sugarcane to assist the grower. Therefore, in the light of what is stated above, we are of the view, it is just and necessary to set aside the order dated February 6, 1998 made in S.T.A. No. 587 of 1995 passed by the Tribunal and remit the matter for fresh consideration by the Tribunal in the light of the observation made by us in the course of this order and more particularly, while answering question No.1, referred to above, however, with the liberty reserved to the parties to place such material, as they may deem fit, in support of their respective claim before the Tribunal. 15.. In the light of the discussion made above, we make the following: ORDER (1) Order dated February 6, 1998 made in S.T.A. No. 587 of 1995 by the Tribunal is hereby set aside and the matter is remitted to the Tribunal for fresh consideration, in accordance with law, and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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