TaxTMI 
TaxTMI 
2008 (4) TMI 484
X X X X Extracts X X X X
X X X X Extracts X X X X
....e [2005] 142 STC 543 (SC)., the matter was referred to a Larger Bench and that is how the matter was placed before us. The controversy lies within a very narrow compass and is essentially as follows: The respondent-company is a dealer registered under the provisions of the Karnataka Sales Tax Act, 1957 (in short, "the Act") and the Central Sales Tax Act, 1956 (in short, "the Central Act") and is engaged in the manufacture of sugar and is liable to pay tax on purchase of sugarcane. The price payable for purchase of sugarcane by a sugar factory is fixed by the Government of India in exercise of its powers under clause 3 of the Sugarcane (Control) Order, 1966 (in short, "the Control Order"). The price so fixed is called the statutory minimum price. In addition to statutory price so fixed, the Government of Karnataka also fixes the price payable to sugarcane-growers by the sugar factories as State Advised Price ("SAP", for short). The price paid by sugar factories to sugarcane growers also comprises harvesting subsidy, transportation subsidy, plantation subsidy and the advance payment towards these subsidies. The assessing authority for the assessment years 1990-91, 1991-92, 1992....
X X X X Extracts X X X X
X X X X Extracts X X X X
....art of the price of cane sugar. It must be proved as a fact that the higher price including the excess amount was paid as the price of the sugarcane under an agreement between the grower and purchaser irrespective of the lower amount being fixed as the aggregate of the price fixation under clauses 3 and 5A of the Control Order. Unless a clear finding to that effect is recorded, the amount paid by the purchaser in excess of the aggregate of the minimum price fixed under clause 3 and the additional price fixed under clause 5A, as a part of the amount paid as advance prior to the fixation of the additional price under clause 5A, cannot be automatically treated as a part of total price of sugarcane." So far as the decision of the Karnataka High Court in Tungabhadra Sugar Works v. State of Karnataka, this court remitted the matter for a fresh consideration in the light of certain observations and directions given. After remand by order dated July 9, 1996 in Writ Petition No. 4583 of 1993 and connected matters, the High Court remanded the matter to the assessing officer with certain observations, the relevant portion of which reads as under: "We also think that the proper course to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....espect of sugarcane; one is fixed by the Central Government which is the minimum price under the Control Order issued under the Essential Commodities Act, 1955 (in short, "the EC Act"). There is another price which is the State advised price fixed by the Executive Order. State advised price is normally higher than the price fixed under the Control Order. In U.P. Co-operative Cane Unions Federations v. West U.P. Sugar Mills Association [2004] 5 SCC 430 the controversy was competence of the State Government to fix the advised price. This court observed that the State had the authority and there was no repugnancy. The controversy lies within a very narrow compass. The purchase tax is payable under section 6 of the Act. Under clause 2(f) of the Control Order the "price" defined is the minimum price fixed by the Central Government and clause 3 defines the "minimum price". It is further submitted that purchase tax is payable on the purchase price. The consideration that is paid for making purchase is the purchase price. By way of illustration, it is stated that there may be three different rates; (i) fixed by the Central Government; (ii) the State advised price and (iii) t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the assessment of sales tax made on its turnover under the Madras General Sales Tax Act. The contention of the appellant was that it was the controller who determined the persons to whom the goods were to be supplied, the price at which they were to be supplied, the manner in which they were to be transported and the mode in which payment of price was to be made. In short, it was said that every facet of the transaction was prescribed by the controller and, therefore, it could not be considered as sales. Sub-clause (1) of clause 11B of the Control Order provided that the Controller may, by notification in the gazette, fix the maximum price at which any iron or steel may be sold and sub-clause (3) of the same clause provided that no producer or stockholder shall sell or offer for sale (and no person shall acquire) any iron or steel at a price exceeding the maximum price fixed under sub-clause (1) or (2). After review of a number of authorities, the court held as under: (AIR page 487, para 17) '17. For the reasons already stated, we are unable to accept the contention that the transactions with which we are concerned in these cases are not sales. Out of the four elements mention....
X X X X Extracts X X X X
X X X X Extracts X X X X
....person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. Every promise and every set of promises forming the consideration for each other is an agreement. There is mutual assent to the proposal when the proposal is accepted and in the result an agreement is formed. Under section 10, all agreements are contracts if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object and are not by the Act expressly declared to be void. Section 13 defines consent. Two or more persons are said to consent when they agree upon the same thing in the same sense. Section 14 defines free consent. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake as defined in sections 15 to 22. Now, under Act 45 of 1961 and the Rules framed under it, the cane grower in the factory zone is free to make or not to make an offer of sale of cane to the occupier of the factory. But if he makes an offer, the occupier of the factory is bound to accept it. The resulting agreement is recorded in writing and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... See [1972] 29 STC 246 (SC).. The contention was that there was no mutual assent by and between the sugar mills and the growers of the sugarcane and, therefore, there was no purchase or sale of sugarcane and consequently no tax under the Mysore Sales Tax Act could be levied. It was held that statutory orders regulating the supply and distribution of goods by and between the parties under the Control Orders in a State do not absolutely impinge on the freedom to enter into contract. Legislative measures or statutory provisions fixing the price, delivery, supply, restricting areas for transactions are all within the realm of planning economic needs, ensuring production and distribution of essential commodities and basic necessities of community. The individual freedom is to be reconciled with adequate performance by the Govern- ment of its functions in a highly organised society. In para 44 of the report it was held as under: (SCC pages 38 and 39) 'The parties choose the term of delivery. They have choice of obtaining a supply exceeding 95 per cent of the yield. They can stipulate for a price higher than the minimum. They can have terms for payment in advance as well as in cash. A ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition slips issued by it so that there may not be any problem in getting optimum quantity of raw material throughout the crushing season. In absence of the agreements the sugar factory will also be a loser as it may face great problem in getting the supply of sugarcane according to its requirement. The occupiers of the factory are themselves keen on execution of the agreements but their only objection is to the mention of State advised price. The agreement is one composite transaction and it is not open to them to contend that the terms thereof which are to their advantage should be enforced but the term relating to price notified by the State Government should not be enforced as their consent in that regard was not a voluntary act. In our opinion, having regard to the advantages derived by the sugar factories, they are fully bound by the agreement wherein the State advised price may be mentioned and it is not open to them to assail the clause relating to price of the sugarcane on the ground that their consent was not voluntary or was obtained under some kind of duress. 34.. The learned Senior Counsel for the respondents has strenuously urged that the Central Government havin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idered by a Constitution Bench. In pursuance of an FIR lodged against Shri M. Karunanidhi, CBI after investigation had submitted charge-sheet against him under sections 161, 468 and 471 IPC and section 5(2) read with section 5(1)(d) of the Prevention of Corruption Act. The Madras Legislature had passed an Act known as the Tamil Nadu Public Men (Criminal Misconduct) Act, 1973 which had received the assent of the President. It was contended that by virtue of article 254(2) of the Constitution, the provisions of the Indian Penal Code, Prevention of Corruption Act and Criminal Law Amendment Act stood repealed. After review of all the earlier authorities the court laid down the following tests: (SCC pages 448 and 449, para 35) '35. 1. That in order to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provisions, so that they cannot stand together or operate in the same field. 2.. That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes. 3.. That where the two statutes occupy a particular field, but there is room or possibility of both the statutes operating in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at no person shall sell or agree to sell sugarcane to a producer of sugar and no such producer shall purchase or agree to purchase sugarcane at a price lower than that fixed under sub-clause (1). The inconsistency or repugnancy will arise if the State Government fixed a price which is lower than that fixed by the Central Government. But, if the price fixed by the State Government is higher than that fixed by the Central Government, there will be no occasion for any inconsistency or repugnancy as it is possible for both the orders to operate simultaneously and to comply with both of them. A higher price fixed by the State Government would automatically comply with the provisions of sub-clause (2) of clause 3 of the 1966 Order. Therefore, any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy. 38.. The decisions of this court touching the controversy in hand may now be examined. In Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd. v. State of Maharashtra [1995] Supp. 3 SCC 475 (SCC paras 11, 12 and 21), R.M. Sahai, J. speaking for a three-judge Bench held that the entire process of price fixatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no power with the State Government de hors the order to fix any agreed price. The concept of agreed price came into force on September 19, 1976 by virtue of clause 3-A of the said order and until then there was no power to fix an agreed price. It was also urged that the State Government has, therefore, no power under the Act to fix any price as the field was occupied by the 1966 Order. The contention was, however, not accepted and after noticing the provisions of clauses 3(2) and 3(3), it was held as under in para 8 of the report (SCC page 211): '8. This would clearly indicate that despite the fixation of minimum price under clause 3(1), by agreement between the sugarcane grower and the purchaser of the sugarcane, they would be at liberty to agree to sell or purchase the sugarcane at a higher price than that fixed by the Central Government under clause 3(1). Only for postponement of payment beyond 14 days, there should be an agreement in writing between the parties obviously with the concurrence of the Central Government or authorised authority in that behalf. Thus, there is no statutory prohibition in that behalf to pay higher price. That would be further clear by clause 3(2) w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n rendered in State of M.P. v. Jaora Sugar Mills Ltd. [1997] 9 SCC 207 it was held as under in para 6 of the report: (SCC page 367) '6. It is not in dispute that under section 31 of the Supply Act, the State Government has power to fix the reserved area. In other words, zone was carved out for the appellant for the supply of sugarcane to the factory. All the farmers who are cultivating sugarcane within that zone are bound by the State action to supply sugarcane to the factories within that reserved area. Consequently, the factory also is bound by the actions of the State Government. Obviously, pursuant to the obligation had by the State under the Supply Act, the meeting was convened by the State Government where at the Factory Owners' Association and farmers participated and agreed to fix the price at Rs. 20.50 per quintal of sugarcane. As a consequence, both the cane growers as well as the owners of the factory are bound by the decision. This having been agreed upon, the price fixed by the State Government in excess of the minimum price fixed by the Central Government under clause 3 of the Order would be the price fixed for supply of sugarcane and the Government would be entitl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssion in commercial transactions. Every purchase involves a corresponding sale. The purchase money or purchase price for property is the price to be paid for it. Speaking technically, acquires by "words of purchase" and is a "purchaser" when he obtains title in any other mode than by descent or devolution of law. It was noted in Commissioner of Income-tax, Andhra Pradesh v. T.N. Aravinda Reddy [1979] 4 SCC 721 See [1979] 120 ITR 46 (SC). as follows: "The legal meaning of the word 'purchase' in section 54, clause (i) of the Income-tax Act, 1961 is not different from its plain meaning which connotes buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration. Each release in the circumstances of the given case is a transfer of the releaser's share for consideration to the releasee. In plain english, the transferee purchases the share of each of his brothers. Thus section 54, clause (i) is attracted." Normal meaning of the word 'purchase' is acquisition for money or for any consideration. That is the primary meaning. In Concise Oxford Dictionary, apart from the two meanings "buy, acquire", another meaning giv....