Payments made to sugarcane growers were held to form part of the purchase turnover as defined under the Karnataka Sales Tax Act, 1957.

JAGANNATHA SHETTY, J.

( 1 ) THESE two revision petitions by the common dealer are directed against the orders made by the karnataka Appellate Tribunal, Bangalore, made in S. T. A. Nos. 52 of 1977 and 1026 of 1977 respectively on 25th October, 1979.

( 2 ) THE common question raised in these petitions is, whether the amount paid by the dealer to growers of sugarcane, in terms of bonus, freight or lorry charges, would form part of the purchase turnover liable to tax under the Karnataka Sales Tax Act, 1957 ("the Act" ).

( 3 ) THE dealer is a company engaged in the manufacture of sugar. For the years 1969-70 and 1971-72 the company entered into agreements with the growers for purchase of sugarcane at the minimum purchase price fixed by the Central Government under the Sugarcane (Control) Order. Subsequently, there was some dispute between the company and the sugarcane growers as to the price payable for sugarcane. The dispute relating to the year 1969-70 was referred to an arbitrator, who made the award dated 30th October, 1970, directing that the company must pay rs. 3 per metric ton as bonus and out of that Rs. 1. 50 per metric ton should be paid before december, 1970, and the remaining Rs. 1. 50 per metric ton should be paid before September, 1971. The award was accepted by the company with a view to have good relations with the sugarcane growers. Payment was accordingly made to the respective sugarcane growers.

( 4 ) FOR the year 1971-72 the company itself agreed to pay Rs. 3. 74 per metric ton as freight or lorry charges to the suppliers. That payment was made somewhere in August, 1972. The company took up the contention before the assessing authority that the said extra payment made could not form part of the purchase turnover liable to be taxed. But the assessing authority rejected that claim and so too by the Deputy Commissioner of Commercial Taxes (Appeals) and also by the Appellate Tribunal.

( 5 ) SECTION 2 (1) (v) of the Act defines "turnover" to mean the aggregate amount for which goods are bought or sold or supplied or distributed by a dealer, either directly or through another, on his own account or on account of others, whether for cash or deferred payment or other valuable consideration. Sri S. P. Bhat, the counsel for the petitioner, contended that the payments made by the company either as bonus, freight or lorry charges were not under the contract for sale entered into by the company with the sugarcane growers. According to him, subsequent payments made have no relation to the purchases made and they were independent of the contract for sale, since they were more or less ex gratia payments for the purchase of maintaining good relationship with the sugarcane growers.

( 6 ) WE do not think that any date of payment under a contract of sale would be relevant for the purpose of considering whether that payment should form part of the turnover or not. In a transaction of sale or purchase delivery of goods may be made on one day and the price may be paid on another day. The real question to be examined is whether the payments made subsequent to the purchases were in the nature of ex gratia payments or towards the price of sugarcane purchase. On the facts found the payments made for both the years in question were directly connected with the sugarcane purchased. They were not lump sum payments to each sugarcane grower. For the year 1969-70 the payment required to be made was described as bonus, but it was directly related to per metric ton of sugarcane supplied. Similar was the nature of payments made for the year 1971-72 although they were described as freight and lorry charges.

( 7 ) SIMILAR question came up for consideration before this Court in Pandavapura Sahakara sakkare Kharkhane Pvt. Ltd. v. State of Mysore [1973] 32 STC 104. There also originally the assessee agreed to pay the minimum sugarcane price payable to the sugarcane growers. Subsequently at the instance of the latter, the original agreement was v

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