Inclusion of Delivery Charges in Purchase Tax Upheld | Penalty Appeal Dismissed | Interest on Belated Payment

The Tax Case involved the inclusion of freight and delivery charges in the total purchase price for purchase tax under the TNGST Act. The court upheld the inclusion of these charges as part of the purchase price based on previous decisions. Additionally, the court dismissed the appeal regarding the levy of penalty under Section 12(3)(b) of the Act, finding that the dealer acted in good faith and no penalty could be imposed. The court directed the Assessing Authority to impose interest for belated payment of tax on specific turnovers. Ultimately, the court aligned with previous decisions and upheld the imposition of purchase tax on the entire purchase price.

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Issues Involved:
1. Inclusion of freight charges or delivery charges in the total purchase price for purchase tax under the TNGST Act.
2. Levy of penalty under Section 12(3)(b) of the Act.

Issue-Wise Detailed Analysis:

1. Inclusion of Freight Charges or Delivery Charges in the Total Purchase Price:

This Tax Case was filed by the Assessee, aggrieved by the order of the Sales Tax Appellate Tribunal, which held that freight charges or delivery charges paid by the Sugar Mills to the Lorry Owners for transporting sugarcane from the fields to the factory gate should be included in the total purchase price liable for purchase tax under the TNGST Act because the Sellers/Agriculturists are unregistered dealers under the said Act.

The controversy is no longer res integra as it has been decided by a Full Bench of this court in Chengalvarayan Co-operative Sugar Mills Limited v. State of Tamil Nadu, affirmed by the Hon'ble Supreme Court in E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes, and later followed in Ponni Sugars (Erode) Ltd. v. Deputy Commercial Tax Officer.

In EID Parry (I) Limited, the court noted that the planting subsidy paid to cane growers was part of the consideration for the sale of sugarcane and thus included in the taxable turnover. The transport subsidy was similarly deemed a part of the consideration for the sale of sugarcane. The agreements between the parties provided for delivery by the sugarcane growers at the factory gate, and the transport charges paid by the appellants to third-party lorry owners were made to secure regular supply of sugarcane as per requirements. These payments were not post-sale expenses but were necessary for completing the sale.

In Ponni Sugars, the court held that transport charges were part of the purchase price as they were necessary for the delivery of sugarcane to the factory gate, as per the contractual obligation. The court affirmed that any subsidy or expense linked to the supply of sugarcane should be included in the purchase turnover.

The Tribunal, in the impugned order, observed that the sugar mills were governed by the Madras Sugar Factories Control Act, 1949, and the Sugar Cane (Control) Order, 1966, which required sugarcane to be delivered at the factory gate. The Tribunal concluded that transport charges paid to third-party lorry owners were to be included in the purchase price of sugarcane as they were deducted from the statutory cane price.

Thus, the Tribunal's view was in consonance with the decisions of the Full Bench of this Court and the Hon'ble Supreme Court. The mere bifurcation of prices in invoices to the extent of transport charges or plantation subsidy does not materially affect the prevailing legal position. Therefore, the Tribunal was justified in imposing the purchase tax on the entire purchase price, including the components of price for sugarcane, plantation subsidy, and transportation charges.

2. Levy of Penalty under Section 12(3)(b) of the Act:

The next issue involved was the levy of penalty by the Assessing Authority for the assessment year 1993-94 under Section 12(3)(b) of the Act, amounting to Rs. 63,34,292/-, which was sustained by the Appellate Joint Commissioner. The Assessing Authority levied 50% of the balance of the tax assessed and tax paid as per the assessment order. The Appellate Joint Commissioner sustained the penalty, noting that the dealer-appellants were aware of the decisions in E.I.D. Parry (I) Limited and Chengalvarayan Co-operative Sugar Mills Limited cases, which declared that transport charges and subsidies were part of the purchase price and liable to tax.

The dealer-appellants contended that they had acted bonafide and their conduct was not contumacious of guilt, maintaining a bonafide belief that the facts were distinguishable from the case decided by the Supreme Court.

Considering the order of the Appellate Joint Commissioner and the dealer-appellants' contention, it was found that the dealer-appellants were in bonafide belief, as evidenced by their continuous dispute of the levy of tax on the above payments. There was no suppression of turnover out of accounts, only a claim of exemption later denied by the Assessing Authority. Therefore, no penalty could be levied for the difference in tax due to the non-payment of tax on which exemption was claimed. However, the Assessing Authority was at liberty to levy interest under Section 24(3) of the Act from the due date.

In the result, the appeals in CTA Nos.138/02, 140/02, 141/02, 194/02, 195/02, 315/02, 316/02, and 332/02 were dismissed, and the appeal in CTA 58/09 was modified with a direction to the Assessing Authority to impose interest under Section 24(3) of the Act from the due date for belated payment of tax due on the turnovers of Rs. 59,11,518/-, Rs. 1,86,97,256/-, and Rs. 3,25,88,998/-.

Conclusion:

Since the view of the learned Sales Tax Appellate Tribunal aligns with the decision of the Full Bench of this Court and the Hon'ble Supreme Court, there is no reason to take a different view. The purchase of sugarcane by the Assessee Sugar Mill during the period in question happened similarly, and the bifurcation of prices in invoices does not affect the legal position. Therefore, the Tribunal was justified in imposing the purchase tax on the entire purchase price, including the components of price for sugarcane, plantation subsidy, and transportation charges. Accordingly, the Tax Case filed by the Assessee is dismissed, and no costs are awarded.

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