Purchase tax on seed procurement: farmer's cost-and-risk cultivation arrangement was treated as a purchase, not mere production services.

Non-application of an earlier determination order by assessing and appellate authorities did not, by itself, justify a presumption that purchase tax had been consciously withheld; the record had to show that the earlier order was actually brought to their notice and considered. The arrangement for seed procurement was treated as a sale rather than a mere cultivation-for-hire model because the farmer bore the cultivation cost and risk, used the company's foundation seed and technical inputs, and was paid only after testing and acceptance. On those facts, the company was held to have purchased seeds from farmers, attracting purchase tax, and the revisional order was restored.

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Issues: (i) Whether the Tribunal was right in holding that the tax authorities had consciously refrained from levying purchase tax merely because an earlier determination order existed and had not been applied at the assessment and appellate stages. (ii) Whether the seed-procurement arrangement fell within the line of cases where the farmer merely used the land for production on behalf of the company, or whether it was a case of purchase of seeds from farmers attracting purchase tax.

Issue (i): Whether the Tribunal was right in holding that the tax authorities had consciously refrained from levying purchase tax merely because an earlier determination order existed and had not been applied at the assessment and appellate stages.

Analysis: The existence of a prior determination order and the fact that it was not applied by the assessing or appellate authority are distinct matters. The record did not show that the earlier determination order had been brought to the notice of those authorities and consciously considered. Section 75 of the Gujarat Value Added Tax Act recognises revisionary power in the Commissioner to revise orders of subordinate authorities within the prescribed period.

Conclusion: The Tribunal was in presuming a conscious decision in favour of the assessee from mere non-application of the earlier determination order.

Issue (ii): Whether the seed-procurement arrangement fell within the line of cases where the farmer merely used the land for production on behalf of the company, or whether it was a case of purchase of seeds from farmers attracting purchase tax.

Analysis: The agreement showed that the farmer bore the cost and risk of cultivation, used the foundation seed supplied by the company, undertook cultivation with his own responsibility, transported the produce at his own cost, and was paid only after testing and acceptance. The arrangement therefore differed from a case where the farmer merely provided land and caretaking services for remuneration. On those facts, the company purchased the seeds produced by the farmer, bringing the case within the earlier determination dealing with untreated seeds purchased from farmers and not within the later determination where no purchase took place.

Conclusion: The arrangement was held to involve purchase of seeds from farmers and was liable to purchase tax.

Final Conclusion: The Tribunal's order was set aside and the revisional order imposing tax was restored, with the petitioner's challenge succeeding on the merits.

Ratio Decidendi: Where the farmer bears the cultivation cost and risk and the company only supplies foundation seed and technical inputs, the transaction is a purchase of seeds from the farmer for purchase-tax purposes, and non-application of an earlier determination order cannot by itself establish a conscious decision against levy.

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