The main legal point established in the judgment is that purchase tax is payable on the agreed price or the aggregate of the minimum price and additional price fixed under the Control Order, whichever is higher.

R. V. RAVEENDRAN, J. - The petitioner-company owns a factory manufacturing sugar at Shimoga and is a registered dealer under the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act"). By this writ petition, the petitioner has challenged the order of assessment and demand dated September 21, 1992 (annexure B) passed by the third respondent (assessing authority) in regard to the assessment period April 1, 1990 to March 31, 1991, confirmed by the second respondent (appellate authority) by order dated January 23, 1993 (annexure A). The grievance of the petitioner is in regard to levy and collection of purchase tax under the Act on the amount paid by the petitioner in regard to the sugarcane supplied to the petitioner by the cane growers, over and above the minimum sugarcane price fixed by the Government of India under clause 3 of the Sugarcane (Control) Order, 1966 (in short "the Control Order" or "the said order").

2. Sugarcane is the principal raw material in the manufacture of sugar. Sugarcane has been declared as an essential commodity under the Essential Commodities Act, 1955. In exercise of the powers conferred under section 3 of the said Act, the Central Government has promulgated the Sugarcane (Control) Order, 1966, to regulate and control the production and distribution of sugarcane; clause (3) of the Control Order authorises the Central Government to fix the minimum price of sugarcane for each year, in respect of each sugar factory by taking into account the relevant factors enumerated in the said clause. For the sugar year 1990-91, ending September 30, 1991, the Government of India issued a notification dated December 27, 1990, fixing the minimum sugarcane price at Rs. 280.50 per quintal in respect of the petitioner's factory under clause 3, subject to the rebates provided under clause 3A of the said order. Clause 5A provides for fixation and payment of additional price for the sugarcane purchased by the sugar producer. The sugar producer has to purchase sugarcane grown in an area reserved for them, under clause 6 of the said order.

3. The State Government in its advisory capacity issued a notification dated July 28, 1990, notifying that the State advised minimum price for sugarcane for the year 1990-91 shall be Rs. 360 per M.T. net, which included the purchase tax rebate. By the said notification, the State Government also instructed the Director of Sugar to ensure that each factory may arrive at a price higher than the State advised price, depending upon the production and profitability of each factory, separately.

4. During the year 1990-91, the petitioner paid Rs. 395 per M.T. to the cane growers. The petitioner contended that the sum of Rs. 395 paid by them to the growers consisted of Rs. 289.50 being the minimum price fixed by the Central Government and Rs. 105.50 being the advance towards the additional price payable under clause 5A; that only Rs. 289.50 was liable to purchase tax and Rs. 105.50 could not be subjected to purchase tax. The petitioner relied on the decision of the Madras High Court in Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer reported in [1988] 71 STC 444, in support of their contention.

5. The assessing authority, on the other hand, following the decisions of this Court in Pandavapura Sahakara Sakkare Kharkhane (P) Limited v. State of Mysore reported in [1973] 32 STC 104 and India Sugars and Refineries Limited v. State of Karnataka reported in [1984] 56 STC 145, held that having regard to the definition of the term "turnover" occurring in the Act and having regard to the nature and description of the amount paid by the petitioner to the sugarcane growers, the entire sum of Rs. 395 per M.T. paid by the petitioner to the cane growers was liable to purchase tax. Accordingly, he passed the order of assessment dated September 21, 1992, determining the purchase tax at the rate of 8 per cent over the purchase turnover calculated at Rs. 395 per M.T. instead of the