Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1988 Supreme(Mad) 380

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE MOHAN & THE HONOURABLE MR. JUSTICE DAVID ANNOUSSAMY
Thiru Arooran Sugars Limited - Appellant
Versus
Deputy Commercial Tax Officer, Mannargudi, and Others - Respondent
Case No : Writ Petitions Nos. 869, 497, 511 to 514, 742, 866 to 868, 1257 to 1262, 1284, 1511 to 1516 and 2291 of 1982, 2460, 3542 and 3543 of 1986, 1705, 1706, 3397 to 3400.............1329 and 1330 of 1986
Decided On : 03 October 1988

Advocates Appeared:F. S. Nariman, C. Natarajan Nalini Chidambaram, Advocates.

The excess amount paid by the petitioner to sugarcane growers was not exigible to sales tax or additional tax under the Tamil Nadu General Sales Tax Act, 1959, because it was not part of the purchase price of sugarcane and the payment was not voluntary.

Headnote:
The issue in this case is whether the excess amount paid by the petitioner sugar factory to sugarcane growers over and above the statutory minimum price fixed by the Central Government under the Sugarcane (Control) Order, 1966, is exigible to sales tax or additional tax under the Tamil Nadu General Sales Tax Act, 1959.
Fact of the Case:

The petitioner, a sugar factory, paid an amount to sugarcane growers in excess of the statutory minimum price fixed by the Central Government under the Sugarcane (Control) Order, 1966. The excess amount was paid pursuant to a directive issued by the Director of Sugar, Tamil Nadu, which stated that the additional price would be adjusted against the additional cane price payable under clause 5-A of the Sugarcane (Control) Order, 1966. The petitioner claimed that the excess amount was not exigible to sales tax or additional tax under the Tamil Nadu General Sales Tax Act, 1959, as it was not part of the purchase price of sugarcane.
Finding of the Court:

The court held that the excess amount paid by the petitioner to sugarcane growers was not exigible to sales tax or additional tax under the Tamil Nadu General Sales Tax Act, 1959. The court found that the excess amount was not part of the purchase price of sugarcane, as it was paid pursuant to a directive issued by the Director of Sugar, Tamil Nadu, which stated that the additional price would be adjusted against the additional cane price payable under clause 5-A of the Sugarcane (Control) Order, 1966. The court also found that the payment was not voluntary, as the petitioner was compelled to pay the excess amount in order to avoid the consequences of non-payment, such as the imposition of penalties or the taking over of the petitioner's management by the Central Government.
Issues: ['Whether the excess amount paid by the petitioner to sugarcane growers was exigible to sales tax or additional tax under the Tamil Nadu General Sales Tax Act, 1959.', 'Whether the excess amount was part of the purchase price of sugarcane.', 'Whether the payment was voluntary.']
Ratio Decidendi: The court held that the excess amount paid by the petitioner to sugarcane growers was not exigible to sales tax or additional tax under the Tamil Nadu General Sales Tax Act, 1959, because it was not part of the purchase price of sugarcane and the payment was not voluntary.
Final Decision: The court allowed the petitioner's writ petition and set aside the assessment orders issued by the assessing authority.

Judgment :-

MOHAN, J.

Since all these writ petitions raise one and the same question of law, they are dealt with under a common judgment. It is enough to note the facts in Writ Petition No. 869 of 1982.

2. The petitioners are a company incorporated under the Indian Companies Act of 1913. The incorporation took place on 12th July, 1964. Its registered office is at No. 109, Nungambakkam High Road, Madras 600 034. The petitioners are manufacturers of sugar and other by-products at their factory situate at Vadapathimangalam, Thanjavur district. They are assessed to sales tax. They are assessees on the files of the Deputy Commercial Tax Officer, Mannargudi, Thanjavur district (first respondent herein).

3. The sugarcane is a raw material for manufacture of sugar. It is subject to purchase tax under section 7-A read with Sl. No. 62 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959. The point of levy is "at the point of last purchase in the State". Presently, the rate of tax is 12 per cent. An additional sales tax is also levied in addition to the above, at 0.7 per cent. on the taxable turnover under the Tamil Nadu Additional Sales Tax Act, 1970.

4. The petitioners submit monthly returns in form A-2. This is in accordance with rule 18 of the Tamil Nadu General Sales Tax Rules, 1959. During the sugar season 1980-81, viz., 1st October, 1980 to 30th September, 1981, the petitioners submitted returns declaring as taxable turnover the cost of sugarcane purchased from the cane growers at Rs. 161.40 per metric tonne. This price of Rs. 151.40 is fixed by the Government of India under clause 3 of the Sugarcane (Control) Order, 1966. To that effect a notification was made under GSR 676-B (Ess. Com./Sugarcane) dated 8th October, 1980. For the sugar year 1981-82 the price of sugar was fixed by the Government of India at Rs. 152.90 by a notification dated 30th September, 1981. Accordingly the returns were filed on the basis of the notified price. They were accepted by the first respondent and taxes were remitted.

5. While the matter stood thus, the second respondent by his proceedings in Re. D1/30077/80 dated 8th January, 1981 indicated that the third respondent had in his order, directed the sugar factories in Tamil Nadu to pay minimum cane price at Rs. 176 per metric tonne linked to the sugar recovery of 8.6 per cent. for the sugar season 1980-81. On this basis the second respondent communicated that the petitioners were advised to pay Rs. 203.80 per metric tonne as sugarcane price to the cane grower. It was also stated that the amounts paid in excess of the price fixed and notified by the Government of India shall be adjusted against the additional cane price payable under clause 5A-(6) of the Sugarcane (Control) Order, 1966. A similar communication was addressed on 5th December, 1981 to the effect that the petitioners were to pay a minimum cane price at Rs. 166 per metric tonne linked to the sugar recovery of 8.6 per cent. for 1981-82 sugar season. Accordingly, the second respondent advised the petitioners to pay sugarcane price at Rs. 194.10 per metric tonne. Here again it was mentioned that the amounts paid in excess of the price fixed and notified by the Government of India shall be adjusted against the additional cane price payable under clause 5-A(6) of the Sugarcane (Control) Order, 1966.

6. Immediately representations were made to the third respondent through the South Indian Sugar Mills Association, that this requirement to pay over and above the statutory price notified by the Government of India will impose a heavy financial burden on the sugar factories. The incidence of tax on the sugarcane was the highest in the State of Tamil Nadu in comparison with any other State. Therefore, the sugar mills should be granted waiver of purchase tax, at least on the difference between the statutory price notified by the Government of India under clause 3 of the Sugarcane (Control) Order, 1966 and the additional price determined eventu

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