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2005(7) Supreme 486
Supreme Court of India
(From Madras High Court)
Mrs. Ruma Pal & H.K. Sema, JJ.
Ponni Sugars (Erode), Ltd. —Appellant
versus
The Deputy Commercial Tax Officer —Respondent
Civil Appeal Nos. 4757-4758 of 2000
Decided on 8-11-2005
Counsel for the Parties :
For the Appellant : S Ganesh, Sr. Advocate, E.R. Kumar, Sumit Goel, Ms. Meenakshi Roy and P.H. Parekh, Advocates.
For the Respondent : S. Guru Krishna Kumar and Subramonium Prasad, Advocates.
Held : The issue whether the price fixed by the Central Government under the Control Order was immutable has been decided by a Constitution Bench of this Court in U.P. Cooperative Cane Unions Federations Vs. West U.P. Sugar Mills and Anr. (2004) 5 SCC 430. In that decision the definition of “price” in Clause 2(g), as well as clauses 3 and 3(a) of the Control Order were construed to come to the conclusion that the price fixed under the Control Order was the minimum price of sugarcane to be paid by purchasers of sugar for the sugarcane purchased by them. This is the lowest permissible rate. It was contemplated under these provisions that there can be a price other than the minimum price namely, the price agreed to between the purchaser and the sugarcane growers or the sugarcane Growers Cooperative Society. It was said that:-
“A whole reading of the 1966 Order would, therefore, show that the Central Government shall fix the minimum price of sugarcane but there can be a price higher than the minimum price which may be in the nature of agreed price between the producer of sugar and the sugarcane-grower or the sugarcane-growers’ cooperative society”.
In the present case the agreement, the relevant extracts of which have been quoted earlier, clearly envisaged the incorporation of the Circular issued by the Department of Sugar on 12th September, 1985. The Circular says that unlike the previous years it was decided that all the subsidies and incentives that are proposed for 1985 to 1986 planting seasons would be given to the cane growers only when the cane is supplied to the mills. Among the subsidies and incentives which were required to be granted by the sugar mills, the purchasers of sugarcane were required to give a transport subsidy. The Circular was expressly included in the agreement entered into between the appellant and the cane growers. Therefore the transport subsidy formed part of the agreement for the sale of the cane to the appellant. Clause (6) of the agreement did not say that the sale was to take place in the field as contended by the appellant. It merely provided for the method of sale. This is also clear from the conduct of the parties. The appellant has admittedly included the transport charges up to 40 kms. from the mill within the purchase price and has admittedly paid tax thereon. If the sale took place at the field and transportation charges did not have any connection with the cane growers, there was no need either to include the transport charges from the field upto the 40 Km. mark in the purchase price or to expressly provide that the transportation charges would be payable by the vendor. Besides the very use of the word “subsidy” in the directive dated 12th September, 1985 which was payable on delivery at the factory gate would also support the view that the transport charges were otherwise bearable by the cane growers. (Para 7 to 9)
Judgment
Ruma Pal, J.—The appellant has a sugar mill and purchases sugarcane from cane growers. An agreement was entered into between the appellant and the cane growers. In terms of the agreement, the appellant arranges transport of the sugarcane from the fields to the appellant’s mill. The question is whether the transport charges are excludible from the taxable turnover of the appellant for the purpose of purchase tax under the Tamil Nadu General Sales Tax Act, 1959?
2. The assessment years in question are 1987-88 and 1988-89. During this period, the agreement for sale and purchase of sugar which was entered into between the appellant and the cane growers (where the appellant is referred as ‘the first party’ and the cane growers as ‘the second party’) provided inter alia:
1) Both the parties agree to act according to the provisions of Madras Sugar Factory Control Rules, 1949, Sugarcane (Control) Order, 1996 and the orders of Tamil Nadu Government Agricultural (Cane) Department and the Director of Sugar/Cane Commissioner of Tamil Nadu
2) The Second Party agrees to sell the entire cane planted/to be planted in the land specified in the schedule to this agreement to the first party for the control price fixed by the Government from time to time.
3) ...........
4) ...........
5) ...........
6) The second party agrees to sell and deliver the cane by loading there as per the terms of this agreement to the first party. It is the responsibility of the first party to arrange transportation of the above delivered cane to the factory. However, both the parties agree to follow the orders passed from time to time by the Director of Sugar/Commissioner of Sugar, Tamil Nadu”.
3. The other clauses of the agreement, broadly speaking, related to the appellant’s financing of the growth and harvesting of the sugarcane and its control over the cutting and disposal of the sugarcane.
4. By an order dated 29th June 1990 the Deputy Commercial Tax Officer held that the transport charges formed part of the taxable turnover of the appellant under the Act and assessed the appellant accordingly for the years in question. The appellant’s appeal was dismissed by the Appellate Assistant Commissioner. The matter ultimately reached the Taxation Special Tribunal which held in favour of the Revenue following the decision of the jurisdictional High Court in Chengalvarayan Co-operative Sugar Mills Ltd. V. State of Tamil Nadu, and Thiru Arooran Sugars Ltd. V. Assistant Commissioner of Commercial Taxes both reported in 105 STC 497 (Mad). Aggrieved, the appellant filed a writ petition challenging the order of the Tribunal before the High Court of Madras. The High Court dismissed the writ petition following its decision in Chengalvarayan Co-operatives case.
5. According to the appellant, the Sugar Cane Control Order, 1966 (hereafter referred to as ‘the Control Order’) applies and the price fixed under the Control Order was the purchase price for determining the taxable turnover of the appellant. As an alternative case it has been submitted that no amount which was incurred subsequent to the sale or delivery of the sugarcane by the cane growers to the appellant was includable in the taxable turnover. It is the appellant’s case that according to the agreement the sale/purchase had taken place on delivery of the sugarcane in the field. Therefore the transport charges which were subsequent to the sale were not includible. Secondly, it is submitted that by the direction of Sugarcane Department of the State Government the sugar mills were required to meet the transport charges for the cane which was brought from beyond 40 kms. distance from the mills. The transport charges for the registered cane would be borne by the cane growers themselves and for the distance beyond 40 kms, the transport charges for the cane would be met by the purchasing sugar mills. Therefore, it is submitted that there was no question of including the transport charges for the transportation of the sugarcane fro
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