1994 (10) TMI 259 - SC - VAT and Sales Tax

Sugar mills must pay purchase tax on sugarcane under Punjab Sales Tax Act.

The Court dismissed the writ petitions, ruling that the petitioner-sugar mills are obligated to pay purchase tax on sugarcane under section 4(1) of the ... Whether the petitioner - sugar mills is liable to pay the purchase tax on the sugarcane purchased by it from the growers of sugarcane? Held that:- Appeal dismissed. To determine what precisely is exempted under section 6, one must have regard to the language of section 6. Section 6, as pointed out hereinbefore, only exempts the sale of the goods in Schedule B from tax thereon. There are no words in section 6 which serve to exempt the purchase of such goods also from tax. It, therefore, follows that when section 4 speaks of 'every dealer except one who is dealing exclusively in goods declared tax-free under section 6', the exception refers to a dealer who is engaged exclusively in the sale of goods mentioned in section 6 read with Schedule B and not to any other dealer. Issues Involved:1. Whether the petitioner-sugar mills is liable to pay purchase tax on the sugarcane purchased from the growers.2. Interpretation of relevant provisions of the Punjab General Sales Tax Act, 1948, specifically sections 4, 4-B, and 6, and their application to the case.3. The applicability and impact of previous judicial decisions on the current case.Issue-wise Detailed Analysis:1. Liability to Pay Purchase Tax on Sugarcane:The primary issue is whether the petitioner-sugar mills must pay purchase tax on sugarcane purchased from growers. The petitioner argued that sugarcane, being an agricultural produce, is exempt from tax under item 39 of Schedule B of the Punjab General Sales Tax Act, 1948. The petitioner relied on previous judicial decisions, particularly Malwa Sugar Mills Co. Ltd. v. Assessing Authority, where it was held that no sales or purchase tax is leviable on sugarcane sold by growers. The State of Punjab, however, maintained that purchase tax is leviable under the Act and that the notice issued for failure to pay the tax was justified.2. Interpretation of Relevant Provisions:To address the issue, the Court examined several provisions of the Punjab General Sales Tax Act, 1948:- Section 2 defines key terms such as 'dealer,' 'goods,' 'purchase,' 'sale,' and 'turnover.' Notably, 'purchase' includes acquisition of goods specified in Schedule C or goods on which tax is payable under any provision of the Act.- Section 4(1) is the main charging section, imposing tax on all sales and purchases, except for dealers dealing exclusively in tax-free goods under section 6.- Section 4-B specifies conditions under which purchase tax is levied, excluding goods in Schedule B.- Section 6 exempts the sale of goods specified in Schedule B from tax, including agricultural produce sold by the grower.The Court clarified that while section 6 exempts the sale of agricultural produce like sugarcane from tax, it does not exempt its purchase from tax. Section 4(1) levies tax on purchases, and since sugarcane is exempt from sales tax under section 6, its purchase is taxable under section 4(1).3. Applicability and Impact of Previous Judicial Decisions:The Court reviewed previous judicial decisions, including:- Malwa Sugar Mills Co. Ltd. v. Assessing Authority: This decision, which exempted sugarcane from purchase tax, was overruled by subsequent decisions.- Desh Raj Parshotam Lal v. State of Punjab: A Full Bench decision that held the Division Bench decision in Babu Ram Jagdish Kumar & Co. v. State of Punjab had the effect of overruling Malwa Sugar Mills.- Devi Dass Gopal Krishan Pvt. Ltd. v. State of Punjab: This Supreme Court decision interpreted section 4-B and confirmed that it does not impose purchase tax but rather affirms or exempts certain purchases from tax.The Court concluded that section 4(1) imposes purchase tax on sugarcane, and section 4-B does not apply to Schedule B goods like sugarcane. The petitioner's reliance on Malwa Sugar Mills was misplaced, as subsequent decisions and the interpretation of section 4(1) clarified the tax liability.Conclusion:The Court dismissed the writ petitions, holding that the petitioner-sugar mills are liable to pay purchase tax on sugarcane under section 4(1) of the Punjab General Sales Tax Act, 1948. The interim orders were vacated, and the State was allowed to collect the tax, with costs awarded to the respondent.