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Dr. ARIJIT PASAYAT & P. SATHASIVAM & AFTAB ALAM
State of Karnataka and Ors - PETITIONER:
Versus
M/s Sri Chamundeswari Sugar Ltd - RESPONDENT:
Appeal (civil) 4934 of 2006
Decided On : 08/04/2008
1996 (101) STC 197: (1996)7 SCC 751 - Relied upon
(b) Purchase price - Authorities rightly determining purchase price after considering the minimum price fixed under the Central Act, SAP under the Control Order and the price paid to cane growers under the agreement - a (Para 11)
(c) Karnataka Sales Tax Act, 1957 - Section 6 - The respondent having paid the SAP cannot take the plea that SAP was rendered irrelevant by the agreement with the cane growers - An agreement cannot determine the question of liability to pay the purchase tax. (Para 13)
(2004)5 SCC 430 - Relied upon
(2005)13 SCC 102; (2000)2 SCC 321 - Referred
(d) Words and Phrases - Purchase - While considering a taxing statute which deals with income from business the word "purchase" will have to be seen in the commercial sense - In the commercial sense, a transaction of purchase is a part of a transaction of sale. (Para 16)
(e) Karnataka Sales Tax Act, 1957 - Section 2(t) - The term purchase has not been defined, but sale is defined - It is trite that sale of a commodity must include within its ambit the concept of sale as well as purchase - It is not possible to conceive of a sale of goods without a buyer - SAP having been paid, subject to certain adjustments - However till that is done, the SAP has to be taken into consideration - The highest amongst the three prices relatable to the purchase is the price on the basis of which the purchase tax is to be levied - Appellants were justified in determining purchase tax on the amount paid as SAP. (Paras 17 and 18)
Facts of the case:
1. Noticing that there was slight controversy on principle in the decisions of this Court in State of T.N. and Ors. v Kothari Sugars & Chemicals Ltd. and Ors. (1996 (7) SCC 751), E.I.D. Parry (I) Ltd. v. Assistant Commisioner of Commercial Taxes and Anr. (2000 (2) SCC 321) on one hand and Ponni Sugars (Erode) Ltd. v. Dy. Commercial Tax Officer (2005 (13) SCC 102) the matter was referred to a larger Bench.
2. The respondent company is a dealer registered under the provisions of the Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956 and is engaged in the manufacture of sugar and is liable to pay tax on purchase of sugarcane. The price payable for purchase of sugarcane by a sugar factory is fixed by the Government of India which is called the Statutory Minimum Price. In addition to statutory price so fixed, the Government of Karnataka also fixes the price payable to sugarcane growers by the sugar factories as State Advised Price ( SAP ). The price paid by sugar factories to sugarcane growers also comprises harvesting subsidy, transportation subsidy, plantation subsidy and the advance payment towards these subsidies.
3. The assessing authority for the assessment years 1990-1991, 1991-1992, 1992-93 and 1993-94 had passed assessment orders taking into consideration the statutory minimum price fixed by the Central Government, SAP fixed by the State of Karnataka and all other amounts paid to sugarcane growers by the respondent-company as the purchase price paid to sugarcane growers and had levied purchase tax under the Act.
4. The orders of assessment passed by the Assessing Officer were questioned by the respondent-company by filing a Writ Petition before the High Court. The High Court rejected the Writ Petition and held that the amount paid under the different nomenclatures required to be considered as purchase price paid by the purchaser of sugarcane to the cane growers.
5. The respondent-company approached the Supreme Court questioning correctness or otherwise of the order passed by the High Court. The appeal was disposed of alongwith other appeals involving similar issues by order dated 8.2.1996.
6. So far as the decision of Karnataka High Court in Tungabhadra Sugar Works and Anr. v. State of Karnataka and Ors.is concerned, Supreme Court remitted the matter for a fresh consideration in the light of certain observations and directions given. After remand the writ petition was dismissed. Supreme Court observed that the State had the authority and there was no repugnancy between the Central and the State Acts.
Findings of the Court:
The High Court judgment is unsustainable.
Result:
Appeal allowed.
JUDGMENT:
Dr. ARIJIT PASAYAT, J.
1. Noticing that there was slight controversy on principle in the decisions of this Court in State of T.N. and Ors. v Kothari Sugars & Chemicals Ltd. and Ors. (1996 (7) SCC 751), E.I.D. Parry (I) Ltd. v. Assistant Commisioner of Commercial Taxes and Anr. (2000 (2) SCC 321) on one hand and Ponni Sugars (Erode) Ltd. v. Dy. Commercial Tax Officer (2005 (13) SCC 102) the matter was referred to a larger Bench and that is how the matter was placed before us. The controversy lies within a very narrow compass and is essentially as follows:
2. The respondent company is a dealer registered under the provisions of the Karnataka Sales Tax Act, 1957 (in short the 'Act') and Central Sales Tax Act, 1956 (in short the 'Central Act') and is engaged in the manufacture of sugar and is liable to pay tax on purchase of sugarcane. The price payable for purchase of sugarcane by a sugar factory is fixed by the Government of India in exercise of its powers under clause 3 of the Sugarcane (Control) Order, 1966 (in short 'Control Order'). The price so fixed is called the Statutory Minimum Price. In addition to statutory price so fixed, the Government of Karnataka also fixes the price payable to sugarcane growers by the sugar factories as State Advised Price ('SAP' for short). The price paid by sugar factories to sugarcane growers also comprises harvesting subsidy, transportation subsidy, plantation subsidy and the advance payment towards these subsidies.
3. The assessing authority for the assessment years 1990- 1991, 1991-1992, 1992-93 and 1993-94 had passed assessment orders taking into consideration the statutory minimum price fixed by the Central Government, SAP fixed by the State of Karnataka and all other amounts paid to sugarcane growers by the respondent-company as the purchase price paid to sugarcane growers and had levied purchase tax under the Act.
4. The orders of assessment passed by the Assessing Officer were questioned by the respondent-company by filing a Writ Petition before the High Court. Grievance of the respondent- company was that the Assessing Authority was not justified in levying purchase tax on the amount paid by the factory to the sugarcane growers over and above the statutory minimum price fixed by the Central Government. The High Court rejected the Writ Petition and held that the amount paid under the different nomenclatures required to be considered as purchase price paid by the purchaser of sugarcane to the cane growers. The respondent-company approached this Court questioning correctness or otherwise of the order passed by the High Court by filing a Special Leave Petition. The appeal was disposed of alongwith other appeals involving similar issues by order dated 8.2.1996 i.e. State of Tamil Nadu and Ors. v. Kothari Sugars and Chemicals Ltd. (1996 (101) STC 197). It was inter-alia observed as follows:
"On a perusal of the Sugarcane (Control) Order, 1966, it is clear that the total price of Sugarcane fixed thereunder is the aggregate of the minimum cane price fixed under clause 3 and the additional price fixed under clause 5- A. Unless there be an agreement between the grower and purchaser for purchase of the sugarcane at a higher price, the obligation of the purchaser is to pay the grower only the aggregate of the amounts fixed under clauses 3 and 5-A. In other words, under the statute there is no liability of the purchaser to pay the grower any amount in excess of this aggregate amount. 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. It must be proved as a fact that the higher price including
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