Statutory marketing costs can include purchase tax, and later pool fund receipts may meet earlier accrued liability.

The Coffee Board's purchase tax liability under the Karnataka Sales Tax Act was treated as an incident of its statutory marketing function and therefore as part of the cost of storing, curing and marketing recoverable from the Coffee Act pool fund. The pool fund was held to be a continuing fund, so season-wise closure of accounts did not prevent later receipts from being applied to earlier accrued tax liability. Section 18 of the Sales Tax Act was found inapplicable because the Board was not collecting tax from growers, but meeting its own liability from the fund. The Board's contrary resolution was ineffective as it conflicted with section 32(2)(b) and had been cancelled.

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Issues: Whether the Coffee Board was authorised to pay the purchase tax payable under the Karnataka Sales Tax Act out of the pool fund maintained under the Coffee Act, 1942, and whether such payment could include arrears relating to earlier years after season-wise accounts had been closed.

Analysis: The statutory scheme of the Coffee Act required all coffee produced, save the limited retention permitted, to be delivered to the Board; the Board was then bound to store, cure and market the coffee, and the pool fund under section 32 was the fund from which the expenditure of storing, curing and marketing could be met. The tax liability incurred by the Board under section 6 of the Karnataka Sales Tax Act was treated as an inevitable incident of carrying out that statutory marketing function, and therefore as part of the cost of marketing payable from the pool fund under section 32(2)(b). The Court further held that section 18 of the Sales Tax Act, which prohibits collection of tax from persons not liable to tax, was not attracted because the Board was not collecting tax from the growers but was only applying the pool fund to meet its own statutory liability. The season-wise maintenance of accounts under rule 34 did not make the pool fund annual in character; it remained a continuing fund, and therefore past tax liability could be adjusted against current pool fund realisations. The objection based on the Board's own resolution was rejected because the resolution was contrary to section 32(2)(b) and had been cancelled by the Central Government under section 42.

Conclusion: The Board was entitled to pay the tax out of the pool fund, and the objection to payment of arrears from the pool fund was rejected.

Ratio Decidendi: Where a statutory board is obliged to market goods under a regulatory scheme, the tax liability incurred as an incident of that marketing is a legitimate marketing expenditure recoverable from the dedicated statutory fund, and a season-wise accounting requirement does not prevent adjustment of later receipts against earlier accrued liability.

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