2019 (12) TMI 885 - HC - VAT / Sales Tax

Freight and Subsidies Included in Sugarcane Purchase Price Subject to Tax; Penalties Removed, Interest Allowed.

Tvl. Sakthi Sugars Limited Versus The State of Tamil Nadu, rep. by the Deputy Commissioner (CT) Coimbatore.

The Tribunal upheld the inclusion of freight charges, planting subsidies, and transport subsidies in the purchase price for sugarcane, making them subject ... Liability of purchase tax - inclusion of freight charges or delivery charges paid by the Sugar Mills, Assessee to the Lorry Owners for getting the sugar cane from the fields of the sugar cane growers to the factory gate in assessable value - TNGST Act - HELD THAT:- The controversy is no longer res integra as this very controversy came to be decided by a Full Bench of this court in the case of Chengalvarayan Co-operative Sugar Mills Limited v. State of Tamil Nadu [1996 (7) TMI 522 - MADRAS HIGH COURT] which came to be affirmed by the Hon'ble Supreme Court in the case of E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes [1999 (12) TMI 708 - SUPREME COURT] and later on followed by the Hon'ble Supreme Court in the case of Ponni Sugars (Erode) Ltd. v. Deputy Commercial Tax Officer [2005 (11) TMI 247 - SUPREME COURT] where it was held that the transport subsidy formed part of the consideration for the purchase of the sugarcane by the appellant from the sugarcane growers. There are no reason to take a different view as there is no distinction on facts in the present case and the purchase of sugar cane by the Assessee Sugar Mill during the period in question also happened in a similar way and therefore, the mere bifurcation of prices in the invoices to the extent of transport charges or plantation subsidy will not materially affect the aforesaid prevailing legal position. The Tribunal is justified in imposing the purchase tax on the Assessee Sugar Mill on the entire purchase price including the components of price for the sugar cane, plantation subsidy and transportation charges paid by the Assessee for transportation of sugar cane from the sugarcane fields to the factory premises of the Petitioner. The Tax Cases filed by Assessee fail and they are devoid of merits and they are liable to be dismissed - Appeal dismissed. Issues Involved:1. Inclusion of freight charges or delivery charges in the total purchase price liable for purchase tax.2. Legitimacy of planting subsidy and transport subsidy as part of the purchase price.3. Applicability of penalties for non-payment of tax on the disputed amounts.Detailed Analysis:Issue 1: Inclusion of Freight Charges or Delivery Charges in the Total Purchase Price Liable for Purchase TaxThe core issue in this case was whether the freight charges or delivery charges paid by the sugar mills to lorry owners for transporting sugarcane from the fields to the factory should be included in the total purchase price liable for purchase tax under the TNGST Act. The Tribunal held that these charges should be included in the purchase price because the sellers/agriculturists are unregistered dealers under the Act. This view is consistent with the Full Bench decision in Chengalvarayan Co-operative Sugar Mills Limited v. State of Tamil Nadu ((1997) 105 STC 497 (Mad)), which was affirmed by the Supreme Court in E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes ((2000) 2 SCC 321) and Ponni Sugars (Erode) Ltd. v. Deputy Commercial Tax Officer ((2005) 13 SCC 102).Issue 2: Legitimacy of Planting Subsidy and Transport Subsidy as Part of the Purchase PriceThe Tribunal also addressed whether planting subsidy and transport subsidy should be included in the purchase turnover. The Tribunal referenced the Supreme Court's decision in E.I.D. Parry, which held that planting subsidies and transport subsidies are part of the consideration for the sale of sugarcane and therefore should be included in the purchase price. The rationale was that these subsidies were given as part of the contractual agreement to ensure the supply of sugarcane and were closely linked to the sale transaction. The Tribunal found that the agreements between the sugar mills and the cane growers required delivery at the factory gate, making the transport charges an integral part of the sale price.Issue 3: Applicability of Penalties for Non-Payment of Tax on the Disputed AmountsThe Tribunal also considered the imposition of penalties for non-payment of tax on the disputed amounts. The Assessing Authority had levied a penalty under Section 12(3)(b) of the TNGST Act for the assessment year 1993-94. The Tribunal noted that the dealer-appellants had acted in good faith and there was no suppression of turnover. The Tribunal found that the appellants were under a bona fide belief that the disputed amounts were not includible in the purchase price. Consequently, the Tribunal deleted the penalty but allowed the Assessing Authority to levy interest under Section 24(3) of the Act from the due date for the belated payment of tax.ConclusionThe Tribunal's decision was in line with the Supreme Court's rulings, affirming that freight charges, planting subsidies, and transport subsidies are part of the purchase price for sugarcane and thus subject to purchase tax. The Tribunal dismissed the appeals filed by the Assessee, holding that the entire purchase price, including these components, is taxable. The penalty for non-payment of tax was deleted due to the appellants' bona fide belief, but interest was allowed to be levied on the overdue tax amounts.