TaxTMI 
TaxTMI 
1996 (7) TMI 522
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....ught to our notice the decision of a Division Bench of this Court in State of Tamil Nadu v. National Co-operative Sugar Mills Limited [1992] 86 STC 22. However, the learned Additional Government Pleader (Taxes), also relies upon the aforesaid decision to support the view that the subsidies given to the sugarcane growers such as plantation or varietal subsidy, cane seed subsidy to primary/secondary nursery and seed subsidy to the cane-growers on supplies from commercial nursery, retained by the growers are to be taken into account while determining the taxable turnover. 4.. The contention of Mr. C. Natarajan, learned counsel for the assessees, is that the amounts paid to the sugarcane growers as subsidy for planting or varietal subsidy given in a particular month and the cane seed subsidy to primary/secondary nursery and the seed subsidy to the cane-growers on supplies from commercial nursery, are all consideration for the collateral agreement arrived at to make the sugarcane growers to agree to supply sugarcane to the factory and such a collateral agreement may be said to be for the purpose of growing the sugarcane and supplying the same to the sugar factory, but nevertheless, i....
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....id tax cases and the writ petitions to a larger Bench of three Judges. Records may be placed before honourable the Chief Justice for constituting a Full Bench. C. Natarajan, for the petitioner. Mrs. Chitra Venkataraman, Additional Government Pleader (Taxes), for the respondent. JUDGMENT The judgment of the Court was delivered by JANARTHAMA, J.-Chengalvarayan Co-operative Sugar Mills Limited, Periyasevalai-607 209 (for short, "CCSM Ltd.") is the petitioner, while the State of Tamil Nadu represented by the Deputy Commercial Tax Officer, Full Additional Charge, Thirukoilur is the respondent in all these present tax cases (revisions)Tax Case Nos. 474 to 478 of 1993. All these tax cases are relatable to the assessment years 1985-86, 1986-87, 1987-88, 1988-89 and 1989-90. 2.. Certain statutory provisions governing the procurement of sugarcane, a raw material for the manufacture of sugar and matters allied thereto, besides the factual matrix-we rather feel-may be related here, in order to understand and have a fine grasp, with ease and grace, of the implications of the knotty legal questions-which we may pen down a little later-confronting us for a solution. 3.. The M....
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....pellate Tribunal (Additional Bench), Madras in Tax Appeals Nos. 1837 and 1838 of 1986 dated August 10, 1987, in the case of Vellore Co-operative Sugar Mills, upholding the levy of sales tax on subsidies, liable to be taxed at 12 per cent assessed the tax on the escaped turnover relatable to subsidies and also additional sales tax liable to be levied, besides quantifying the penalty to be levied at a prescribed percentage separately for each of the relevant assessment years. 9.. Individual notices relatable to the relevant assessment years were issued to CCSM Ltd., requiring it to show cause as to why tax as respects the escaped turnover relatable to subsidies and consequent levy of additional sales tax at a prescribed percentage as regards the turnover in excess of Rs. 10 lakhs and penalty at the minimum prescribed percentage for wilful non-disclosure, as indicated in those notices should not be levied and collected. 10.. CCSM Ltd., in its turn, filed individual objection petitions to the notices so issued. The assessing officer, however, overruled the objection petitions so filed and passed final orders individually confirming the proposals made in the individual notices rel....
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....s. 300 for all the three periods mentioned above and hence these subsidy amounts cannot be included in the purchase turnover. He further pointed out that the subsidy is treated as loan and after cane is supplied the loan amount is cancelled and the subsidy for the cost of seeds and subsidy for the rate on crop cannot be included in the taxable turnover. The seeds of the sugarcane is known as 'setts'. So he pointed out that the subsidies 'seeds and setts' are not includible in taxable turnover since the cost of seed is paid to the seed grower. For this, he relies upon the decision in [1969] 23 STC 232 (Mad.) (Sakthi Sugars Limited v. Deputy Commercial Tax Officer, Bhavani). In this decision, it is stated that: 'Though sugarcane setts beget sugarcane, that by itself does not tantamount to saying that one is equivalent of the other. Their properties and user are different and they are understood by the common man and the commercial community in different and distinct ways. Therefore sugarcane setts are not sugarcane and the sale of sugarcane setts cannot be subject to the levy of sales tax under item 62 of the First Schedule to the Madras General Sales Tax Act, 1959. Where the s....
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.... of the purchase turnover of sugarcane of the respondent. The fact that the payment was accounted for as "cane development expenses" did not change the character of the payment.' The above decision clearly states that the subsidy for early planting is includible in the purchase turnover. The planting subsidy and setts subsidy is given for the growth of the cane. The canes which are grown on the land from the setts (seeds) reached the appellants' mills. So it can be safely concluded that the payment of planting subsidy and setts subsidy which are for the growth of the cane is linked to the cane purchased by the appellants. So it cannot be stated that the payment for the seeds were paid to the seed growers only and it is not includible in the purchase turnover. The amount paid as subsidy is retained by the cane-growers and it is over and above the price fixed by the Government as the price of sugarcane. So the subsidy paid to the cane-grower relates to the supply of sugarcane. Our High Court has held in [1992] 86 STC 22 (State of Tamil Nadu v. National Co-operative Sugar Mills Limited) that the subsidy paid relates to supply of sugarcane and the subsidy forms part of the price and....
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....chase turnover. The order of the Appellate Assistant Commissioner (CT), Cuddalore, is confirmed." (d)(i). The bone of contention, which had been taken up as relatable to "transport subsidy" is penned down in paragraph 6 therein as below: "The appellants contend that the transport subsidies are not includible in the purchase turnover. The lower authorities have found that the transport subsidy is includible in the purchase turnover of the cane. The counsel for the appellant argued that transport subsidy charges up to 40 kms. are includible in the purchase turnover and beyond that limit the transport subsidy charges are paid by the mill to third party lorry owner and hence the transport subsidy charges is not includible in the purchase turnover. The Director of Sugar has issued Circular in R.C. No. 24920/85 dated September 12, 1985 stating that the transport charges up to 40 kms. will be borne by the cane-growers and above 40 kms. will be met by the mills. So the appellant contends that the transport subsidy charges incurred for the supply over and above 40 kms. cannot be treated as pre-expenses of the purchase of sugarcane and it is not includible in the purchase turnover." ....
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.... (Control) Order. Under the agreement there was stipulation that the growers were to deliver the sugarcane at the factory of the mills and there was no provision that they could deliver it elsewhere and accept reduced prices. On the question whether transport charges paid by the mills to lorry owners to transport the sugarcane to the factory, in order to assist the growers was includible in the purchase turnover of the mills: Held, that since under the agreement delivery had to be effected at the doors of the factory, and no deduction was permissible under law towards transport charges incurred by the growers, transport charges paid by the mills to lorry owners to transport the cane to the factory to help the growers was liable to be included in the purchase turnover of sugarcane of the mills.' In the above decision, it is stated that under the agreement delivery had to be effected at the doors of the factory and no deduction was permissible under law towards transport charges incurred by the growers and hence transport charges paid by the mills to lorry owners to transport the cane to the factory to help the growers was liable to be included in the purchase turnover of the s....
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....evy of penalty is not warranted, on the facts and in the circumstances of the case and accordingly, the levy of penalty had been deleted. (f) On the findings, as above, recorded by the Tribunal, all the appeals were partly allowed, as indicated above. 14.. The aggrieved CCSM Ltd., resorted to file the present Tax Cases (Revisions) Nos. 474 to 478 of 1993 as respects the disallowed portions of its claims. 15. Thiru Arooran Sugars Ltd., "Eldrado", 5th floor, 112, Nungambakkam High Road, Madras-600 034 represented by its General Manager (Finance), Mr. G. Srinivasan (for short, "TAS Ltd.") is the petitioner, while the Assistant Commissioner of Commercial Taxes, Central Assessment Circle IV, Madras 600 006, the Deputy Commissioner (Commercial Taxes), Madras (South) Division, Madras and the State of Tamil Nadu represented by the Secretary to Government, Department of Commercial Taxes and Religious Endowments, Fort St. George, Madras-600 009 are respectively respondents 1 to 3 in the present writ proceedings-Writ Petitions Nos. 15530 and 15531 of 1995. 16.. Writ Petition No. 15530 of 1995 is for the issuance of a writ of mandamus to direct the respondents to forb....
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....he first respondent, appeals were preferred before the Deputy Commissioner, who, having confirmed the same further appeals have been preferred. The petitioners state that they are challenging the orders passed by the respondents herein while undertaking to withdraw the appeals pending so that the issue may once and for all get decided before this Court which is considering the issue in the revision coming up for hearing as a batch. The petitioners may have the advantage of pleading on all legal and constitutional issues in this substantial writ petition. It is submitted that the tax demands have been raised on the above incentives indiscriminately apart from imposing maximum penalty for non-payment of said taxes along with the return. Due to lack of conceptual approach or analysis of the true concept of turnover, these demands have been raised/confirmed from time to time. Even the Tribunals constituted under the Act are not consistent in their view in their orders passed under section 36 of the Act. Some of the Tribunal's orders state transport subsidy is not taxable while others say transport subsidy is taxable. The decisions of this honourable High Court in [1976] 38 STC 238 (....
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....ort concession or subsidy incurred or paid to the cane-growers by treating the same as part of the purchase turnover of sugarcane under the provisions of the TNGST Act pending disposal of Writ Petition No. 15530 of 1995. 20.. The timing of the filing of the writ petitions is of signal importance. It appears that the writ petitions had been filed exactly at the time, when the present Tax Cases (Revisions) were listed for hearing before the first Bench, consisting of two of us, namely, the honourable the Chief Justice and Raju, J., which, in turn, admitted them. Learned Additional Government Pleader (Taxes) took notice on behalf of the respondents. Both these writ petitions-Writ Petition Nos. 15530 and 15531 of 1995-were heard, along with the present tax casesTax Case Nos. 474 to 478 of 1993. 21.. The first Bench, after hearing the arguments of learned counsel for the petitioner and learned Additional Government Pleader (Taxes) representing the respondents, referred the aforesaid tax cases and the writ petitions to a larger Bench of three honourable Judges, by an order dated November 29, 1995. The rationale for the reference so made is as below (in paragraphs 2, 6 and 7):  ....
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....olative of article 14 of the Constitution of India, when especially the classification, according to the said rule, of "turnover chargeable on sale" and "turnover chargeable on purchase" cannot at all be stated to have rationale or reasonable nexus to the object to be achieved? (3) Is "planting or varietal subsidy" to be treated as consideration for the "sale" and "purchase" of sugarcane? (4) Does it make any difference, if such subsidy is disbursed later at the time or after the supply of sugarcane? (5) Are expenses incurred by the assessee-sugar mills, up to the supply to commercial nursery and cane subsidy to cane-growers on supplies from commercial nursery part of sugarcane paid/payable to cane-growers? (6) Is supply of farm inputs at subsidised rates to be treated as consideration to the grower for supply of sugarcane? (7) Are the transport charges incurred by the sugar mills excludible as not forming part and parcel of the price of the sugarcane sold by the sugarcane supplier? (8) Is transport subsidy includible as consideration for the sale of sugarcane by the grower? (9) Are development charges paid to the registering mill by the assesseessugar m....
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....referred to in clause (n) by a dealer either directly or through another, or on his own account or on account of others, whether for cash or deferred payment or other valuable consideration. The words, "amount for which goods are bought or sold" in section 2(r) indicate that it concentrates, on price, being the money consideration for sale. "Sale" itself is "an agreement for the transfer of property for cash or deferred payment (money consideration). The words "aggregate amount" do not add to or enlarge the scope of section 2(r), but seek to assist in the computation of tax on the aggregate of selling prices on sales under section 2(n). When section 2(n) defines "sale" as transfer of property in goods for cash or deferred payment or other valuable consideration, the Legislature was only looking to prices under the contract of sale. Section 2(r) refers to "aggregate amount" for which goods are sold under section 2(n). In this view, section 2(r), may not be understood as enlarging beyond the aggregation of prices. 27. Explanation (2)(ii) to section 2(r) may not be read in the abstract. It has to be read in the context of section 2(r) and not de hors it. Explanation (2)(ii) ....
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.... excise duty and collected by the petitioner from the buyers outside the State on foot of separate debit notes referred to. The petitioner contended before the assessing authority that this amount of excise duty did not form part of the sale price. But this contention was overruled and the Deputy Commercial Tax Officer assessed the net turnover liable to assessment under the CST Act at Rs. 15,17,631 and the tax payable thereon at Rs. 15,176. (b) An appeal was taken to the Commercial Tax Officer, before whom also, it was claimed that the excise duty was paid on behalf of the buyer, and though it was recovered by a separate debit note, it was entered in a separate ledger and did not form part of the sale consideration. It was alleged that it was agreed between the buyer and the seller that only the value of the matches was to be paid. It was further contended that since CST Act has to be administered in the same manner at the Madras General Sales Tax Act, the excise duty paid to the Central Government being eligible for deduction from the turnover of the dealer under the Madras General Sales Tax Act, a similar relief should be granted in the assessment under the CST Act as well. T....
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.... to take possession of the goods, unless the duty was paid. In the hands of the buyer it is undeniable that the amount of the excise duty is part of the consideration which he has to pay for obtaining the property in the goods. Even assuming that the seller sold the goods in bond and authorised the buyer to take possession of the goods which he could obtain possession of only after the payment of excise duty, it does not to our minds cease to be part of the sale consideration. It is also not denied that the liability to pay excise duty is upon the person who manufactures the goods and keeps them under bond in the bonded warehouse. The Central Excise and Salt Duties Act casts this liability undoubtedly upon the manufacturer. The rules thereunder also provide that a manufacturer could keep excisable goods in bond for a maximum period of three years. Though during this period he is permitted to pay the excise duty on the occasion of the removal of the goods for the warehouse, on the expiry of the period of three years, he is bound to clear the entirety of the goods and pay the excise duty thereon. This may, no doubt, not be directly relevant to the question before us. But it is sti....
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....right (Builders) Ltd. [1944] 1 All ER 618, when Goddard, L.J., said: "Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not." We think that these observations are apposite even in the context of the provisions of the Acts we are considering now, and there is nothing in those provisions which would indicate that when the dealer collects any amount by way of tax, that cannot be part of the sale price. So far as the purchaser is concerned, he pays for the goods what the seller demands, viz., price, even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser ....
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....ecision of this Court was that whoever might have paid the excise duty, since the rule excluded the excise duty, if any, paid by the dealer to the Central Government in respect of the goods sold by him, the fact that the seller had collected it from the purchasers of coffee did not make any difference to the claim. There was the observation by the learned Judges: "Even so, there will be no case at all for including that amount in the turnover. That could not be a part of the sale price at all." Reliance has been placed upon this observation by the learned counsel for seeking to establish that the quantum of excise duty did not form part of the sale price. The question whether excise duty formed part of the sale price or not was not in issue before the learned Judges. Even apart from that, the decision of the Supreme Court which we have referred to takes the matter beyond the realm of controversy. In some of these cases, objection is taken to the inclusion of the sales tax in the taxable turnover. What the Supreme Court has laid down in the above decision has direct application to the sales tax. We may observe further that in so far as the legislative competence is concerne....
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....rges was additional to the sale price of the goods and that he had to pay those freight charges. The indication found in the bill, to our minds, is not sufficient to meet the requirement of the provision of law. In the absence, therefore, of a separate charge in respect of the cost of freight, the claim that this amount should be excluded must fail'." 31.. In Sun-N-Sand Hotel Private Ltd. v. State of Maharashtra [1969] 23 STC 507 (Bom), the assessee ran at Juhu Beach in Bombay a hotel which had both a boarding and a lodging establishment. The customers, who came to the hotel were informed of the charges they had to pay for lodging with different amenities and boarding according to their taste. They were also informed that they had to pay service charges at ten per cent of the tariff and sales tax at five paise per rupee. The assessee objected to the inclusion of the service charges in its gross turnover on the ground that they did not represent part of the sale price but were recovered from the customers for payment to the employees and for covering partly the breakages. (a) The Tribunal found that the customers had no option but to pay the service charges, which entir....
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....d consumed by the customer in the establishment. Once it is found that there is no option to the customer whether to pay or not to pay the service charges at the rate of 10 per cent over and above the tariff, we find it difficult to dissociate this part of the bill from the total contract which a customer enters into with the assessee when ordering any food. A specimen of the tariff card, which is presented to the customer as soon as he enters the hotel and which in effect is the agreement between the customer and the assessee, shows that in all cases service charges of 10 per cent on the tariff plus sales tax at 5 paise per rupee are to be paid by the customer. It is, therefore, contended on behalf of the department that really there is no difference between the liability so far as the customer is concerned to pay the amount of sales tax and the amount of service charges at 10 per cent over the tariff; in either case there is no option to the customer. It cannot be disputed that the amount which is recovered as sales tax from the customer is properly added to the tariff in determining the sale price of the goods purchased. If sales tax can be properly included in determining th....
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....fail to see, therefore, what difference does it make so far as the customer is concerned, whether the addition to his bill is named as service charges or simply as 10 per cent addition to the tariff. As it is not possible or permissible to separate the two charges as charges merely for the services and when mere services are not available for payment, the Tribunal seems to be right in coming to the conclusion that service charges are inseparably mixed up with the total amount or price that is charged to the customer for the food that is supplied to him. In this connection reference was made to a decision of the Supreme Court in State of Orissa v. Utkal Distributors (P.) Ltd. [1966] 17 STC 320. In that case arising under the Orissa Sales Tax Act, 1947, the assessee was a controlled stock-holder of iron and steel under the Iron and Steel Control Order, 1956. As such controlled stock-holder, the assessee in that case was not entitled to charge a price higher than that fixed by the Government of India. In fact under condition No. 4(ii) of the Notification dated 18th October, 1958, it was provided that the customer shall pay to the controlled stock-holder the Central sales tax inc....
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....At pages 284 and 285 their Lordships deal with this question, which was point No. 5, and observe as follows: 'Re: point No. 5.-The argument on this point is that sales tax is an indirect tax on the consumer. The idea is that the seller will pass it on to his purchasers and collect it from them. If that is the nature of the sales tax then, urges the learned Attorney-General, it cannot be imposed retrospectively after the sale transaction has been concluded by the passing of title from the seller to the buyer, for it cannot, at that stage, be passed on to the purchaser. According to him, the seller collects the sales tax from the purchaser on the occasion of the sale. Once that time goes past, the seller loses the chance of realising it from the purchaser and if it cannot be realised from the purchaser, it cannot be called sales tax. In our judgment this argument is not sound. From the point of view of the economist and as an economic theory, sales tax may be an indirect tax on the consumers, but legally it need not be so. Under the 1947 Act the primary liability to pay the sales tax, so far as the State is concerned, is on the seller. Indeed before the amendment of the 1947....
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....r agrees to pay is the totality of these charges and which must enter in determining what the sale price paid by the customer is. So far as the customer is concerned, it makes no difference to him that he has in fact to make payment of sales tax payable by the dealer or that 10 per cent by way of service charges or that the service charges will ultimately be destined for payment to servants or for the benefit of the employees of the caterer. The fact that part of the amount is utilised towards meeting the obligations of the employer in providing amenities to the employees, in our opinion, is hardly relevant in determining whether that charge or that extra payment demanded of the customer is or is not properly liable to be included in determining the sale price. In fact, that is the obligation of the employer vis-a-vis the employees under the contract or the settlement. Even if nothing were to be paid to the employees, the customer will still be required to pay 10 per cent over and above by way of service charges. Thus the fact that part of the amount goes for the benefit of the employees under the agreement between the employer and the employees can hardly be of any relevance in de....
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.... of "sale price" in section 2(29) of the Bombay Sales Tax Act, 1959, that it is the amount payable to a dealer as consideration for the sale of goods. The test is what is the consideration passing from the purchaser to the dealer for the sale of goods. It is immaterial to enquire as to how the amount of consideration is made up. The question what is the net consideration which according to the seller is attributable to the real price of the goods is not relevant. Undisputedly the amount paid by the customer for food and drinks was the price stated in the menu card for supply of such food and drinks. How and why the price was fixed was not the look out of the customer. So far as he was concerned, he had to pay the price specified in the menu card if he wanted to take the food or drink. No option was given to him to buy it at half the price if he intended to carry it home. The applicant was not entitled to claim that half of the sale price or a part of it should only be regarded as sale price for the purposes of section 2(29) of the Act and that the balance amount should be regarded as payment for the comfort and luxury of a five star hotel. The Tribunal was justified in rejecting th....
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.... amount payable by the purchaser to the dealer as consideration for the sale.........' " 34. In D.C. Johar & Sons (P.) Ltd. v. Sales Tax Officer, Ernakulam [1971] 27 STC 120 (SC), the appellant-company purchased goods in other States and transported them to its place of business at Ernakulam in the State of Kerala. It claimed exemption under rule 9(1) of the Kerala General Sales Tax Rules, 1963, of "freight and packing and delivery charges" in respect of which separate bills were made out when selling the goods at Ernakulam. (a) Counsel for the appellant relied upon a decision of the Supreme Court in support of his contention that freight and packing and delivery charges were an admissible deduction [vide: Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool [1960] 11 STC 827 (SC)]. But in that case the apex Court did not decide the question as to the true effect of rule 5(1)(g) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, of which the terms are the same as rule 9(1) of the Kerala Rules. The case was decided against the taxpayer on the ground that no separate bills were made out by the tax-payer and one of the conditions for the clai....
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....r the transport charges, which is directly or statutorily laid on the purchaser, it will not be part of the consideration due to the seller. The liability for tax on the turnover of purchase corresponds to the price paid or payable to the cane grower, which can be consideration for sale. The freight borne by the seller or incurred by purchaser on behalf of seller is part of sale price. In this view, the freight borne by the assessees-mills (purchasers), as required by the direction of the Sugarcane Commissioner being an expenditure laid on the assessees-mills (purchasers) may not be construed as price under the contract of sale. This will be, on the plain submission, that freight borne by the assessees-mills (purchasers) is not turnover; nor price at all and is paid by the purchaser direct to its transport contractor. (a) Assuming, but without conceding that freight required to be borne by the sugar mills under the directions of the Sugarcane Commissioner is part of turnover, nevertheless rule 6(c) may provide for exclusion of the price, rule 6 operates as deduction from the total turnover to arrive at taxable turnover. It provides for deduction of freight charges charged ....
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....imate purposes. Every classification is in some degree likely to produce some inequality, and mere production of inequality is not enough. Differential treatment does not "per se" constitute violation of article 14. It denies equal protection only when there is no reasonable basis for the differentiation. If a law deals equally with members of a well-defined class, it is not obnoxious and it is not open to the charge of denial of equal protection on the ground that it has no application to other persons. Legislation enacted for the achievement of a particular object or purpose need not be all-embracing. It is for the Legislature to determine what categories it would embrace within the scope of legislation and merely because certain categories, which would stand on the same footing, as those, which are covered by legislation are left out, would not render the legislation, which has been enacted in any manner discriminatory and violative of article 14. Further, article 14 does not insist that legislative classification should be scientifically perfect or logically complete. The court would not interfere unless the classification results in pronounced inequality. On the other hand,....
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....e his onus. In such a case, the presumption of constitutionality is of no avail and the court is bound to invalidate the statute as violating the guarantee of equal protection. 43.. In the backdrop and setting of the axiomatic principles, as evolved by the courts of superior jurisdiction, we may now endeavour to decide the constitutional vires or otherwise of rule 6(c) of the TNGST Rules. 44.. Since the definition of "turnover" in section 2(r) of the TNGST Act takes in the aggregate amount for which goods are bought or sold, "freight" and "charges for delivery" will have to be necessarily taken into consideration for ascertaining the "total turnover". However, in determining the "taxable turnover", by virtue of operation of rule 6(c), "freight" and "charges for delivery", will have to be excluded. The primordial requisite for such exclusion, as prescribed by the said rule, is that "freight " and "charges for delivery" have to be specified and charged for by the dealer separately without including them in the price of goods sold. It is of paramount importance to note that rule 6 speaks of a "dealer" entitled to certain deductions from the total turnover in the process of deter....
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....ted to tax at purchase point. The manufacturers sugar mills can, by no stretch of imagination, be equated with purchasers-consumers of goods of dayto-day use. The manufacturers-sugar mills, taking into consideration the market fluctuations due to stiff competition, may or may not add the cost of tax paid on the purchase of sugarcane in the end produce, namely, sugar and in such eventuality, their profit margin in the sale of sugar may get reduced, while the consumers of sugar may have the benefit of the reduction of cost in the sale price of sugar. Both of them, as such, stand apart and there is nothing common between them, in the sense of having been placed at similar situation. Such being the case, it cannot at all be stated that if the benefit of rule 6(c) is denied, when the assessment is done at the hands of the purchasers-sugar mills, the construction advanced to that effect suffers from the vice of unreasonableness and irrationality and is to be avoided. To put it positively, there is some difference, which bears a just and reasonable relation to the object of legislation in making such a classification giving differential treatment as respects exclusion to be made from the ....
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.... or disposed of otherwise or used or consumed in the manufacture or processing of other goods or used or consumed otherwise. Sugarcane is included in Schedule II. The petitioner, a registered dealer, purchased sugarcane from cultivators who were not required to pay sales tax on the sale price of sugarcane. The petitioner consumed sugarcane in the manufacture of sugar. The petitioner was liable to pay purchase tax on the purchase price of the sugarcane so purchased. (d) Section 2(c) of the MPGST Act defines "sale price" as meaning the amount payable to a dealer as valuable consideration for the sale of any goods less any sum allowed as cash discount according to ordinary trade practice, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof other than the cost of freight or delivery or the cost of installation when such cost is separately charged. (e) "Purchase price" is defined in section 2(kk) as follows: "(kk) 'Purchase price' shall comprise of- (i) the amount payable by a dealer as valuable consideration for the purchase of goods 'simpliciter': Provided that where goods are p....
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....y expressed that clauses (ii) and (iv) of section 2(kk) of the MPGST Act were not beyond the legislative competency of the State and the scintillating discussion for arriving at such a conclusion is penned down in paragraphs 11 to 15 (pages 18 to 21), which read as under: "11. 'Purchase price' as defined in section 2(kk) of the Act includes not merely the consideration of the purchase, but also certain costs or expenses. They are transport costs, trade commission, forwarding and handling charges, insurance charges, local taxes, excise duty, cost of packing, etc. An analysis of these clauses would indicate that these are elements which would be added to the consideration paid for the purchase to arrive at the cost price in the hands of the purchaser. The parties may enter into contract distributing burden of costs, either adding it to the consideration or refraining from so doing; the Legislature has attempted to cut the Gordian knot by stipulating that such costs should be added to the consideration of the purchase in order to arrive at the 'purchase price'. There is nothing in legislative entry 54 of List II which creates specific restriction on the power of the State....
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....s for the amount of freight may be allowed only when it is related to the sales of dealers, i.e., if it is freight outward. No deduction is allowed in respect of freight inward or in respect of bringing the purchased goods. The State Legislature is competent to provide for inclusion of a particular item as part of purchase price with a view to tax turnover, that is to say, the definition being inclusive, it will form part of the purchase price. The Supreme Court had occasion to decide legislative competence in respect of definition of 'sale price' in D.C. Johar & Sons (P) Ltd. v. Sales Tax Officer, Ernakulam [1971] 27 STC 120, wherein it was stated thus: 'There is no substance in the contention raised by counsel for the appellant that in authorising the levy of sales tax on transport charges which formed a component of the price for which the goods were sold, the State Legislature had trespassed upon the legislative field reserved to the Centre by List I, entry 89the power to levy taxes on railway fares and freights. The tax levied is not a tax on railway freight; it is a tax on turnover, that is, on the aggregate of sale price received by the dealer in respect of sale of goods.....
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.... after the sale when the dealer undertakes to transport the goods and to deliver the same or where the expenditure is incurred as an incident of sale. It is not intended to exclude from the taxable turnover any component of the price, expenditure incurred by the dealer which he had to incur before sale and to make the goods available to the intending customer at the place of sale. 14.. Similarly in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 the Supreme Court held as under: 'Under the first part of the definition of "sale price" in section 2(p) of the Rajasthan Act, the expression meant the amount payable to a dealer as consideration for the sale of any goods and, therefore, the concept of real price or actual price retainable by the dealer is irrelevant. The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to be considered is as to what is the amount payable by the purchaser to the dealer as consideration for the sale and not as to what is t....
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....rt charges from the field of the growers by the assessees-mills. The revenue treated all the subsidies as consideration for the contract of sale. This sort of a treatment by the Revenue found favour with the taxing authorities up to the level of the Sales Tax Appellate Tribunal. This, learned Senior Counsel for the assessees-mills would say, is a clear misconception, both on facts as well as on law. According to him, sugarcane planting incentive is offered and accepted in order to persuade the grower to go in for sugarcane cultivation, besides particular variety of cane to be planted in a month. The provisions of the TNGST Act do not require the grower in the command area to pay sales tax on the sale of sugarcane. The law does not oblige him to plant in a particular month or a particular variety. Therefore, the incentives, when offered and accepted constitute an independent, though collateral, agreement with its own promises and consideration. The promisor is the sugar mill and the promisee is the cane-grower. The consideration furnished by the grower is the planting of a particular variety of sugarcane in a month in return for the promises of the sugar mill to pay the incentive. T....
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....venth Edition). (b) "Contractual promises separate from the main contract (collateral contracts). Sometimes it may seem appropriate to treat a statement as containing -------------------------------------------------------------------------------------------------------------------------- 14. Helibuty, Symons & Co. v. Buckleton [1913] AC 30 at 47. See Greig 87 LQR 179 at 185-190. 15. Londley v. Lacey (1864) 17 CBNS 578: and Erskine v. Adeane (1873) 8 Ch. App. 756 See Wedderburn (1959) CLJ 58. It may be added that the case of Collen v. Wright (1857) 8 E & B 647, seems to offer an early example of a 'collateral contract'; pages 484-485, below. Carlill v. Carbolic Smoke Ball Co. [1892] 2 QB 484; on appeal [1893] 1 QB 256, page 29, above is another example of a collateral contract between manufacturer and consumer where the consumer bought the goods from a retailer relying upon the manufacturer's advertisements. In that area such a finding is unusual; Lamber v. Lewis [1982] AC 225, [1980] 1 All. ER 978. See also Esso Petroleu, Ltd. v. Customs and Excise Comrs. [1976] 1 All. ER 117, [1976] 1 WLR 1, discussed more fully at pages 113-114 below. a promise; but there may still b....
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.... [19621 QSR 466 (car: Prior warranty inconsistent with later 30-day warranty); Donovan v. Northelea v. Farms Ltd. [1976] 1 NZLR 180. See Mclauchian the Parol Evidence Rule (1 976) Chap 6; esp. at pp. 70 et seq. 74. [1913] AC 30, 47, see in general Wedderburn (1959) CU 58. 75. J. Evans & Son (Portsmouth) Ltd. v. Andrea Merzario Ltd. [1976] 1 WLR 1078, 1081, see also Esso Petroleum Co. Ltd. v. Mardon [1978] QB 801, 817, 818, 823-827; Howard Marine and Dredging Co. Ltd. v. A. Ogden & Sons (Excavations) Ltd. [1978] QB 574, 590. The judgment of Lord Moulton is plainly influenced by the importance that the 'House should maintain in its full integrity the principle that a person is not liable in damages for an innocent misrepresentation no matter in what way or under what form the attack is made". See page 51. Such a principle is no longer valid. Dicta from it were however cited with approval by Lord Dilhorne in Independent Broadcasting Authority v. Emi Electronics Ltd. (1980) 14 Build LR 1. that contractual, as well as tortious liability on statements has of recent years been much more readily accepted. This manifests itself in two principal ways. First, promises are more readily i....
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....terature). 77. Cf Wells (Merstham) Ltd. v. Buckland Sand and Silica Ltd. [1965] 2 QB 170 (warranty of analysis of sand absolute). 78. As in J Evans & Sons (Portsmouth) Ltd. v. Andrea Merzario Ltd. supra per Roskill, L.J Quickmaid Rental Services Ltd. v. Reece (1970) 114 S.J. 372; A.M. Bisley & Co. Ltd. v. Thompson [19821 2 NZLIZ 696. See also Esso Petroleum Co. Ltd. v. Mardon supra. See McLauchian, 3. Dalhousie L. Rev. 136 (1976). The Parol Evidence Rule (Wellington, 1976), Chap. 8; Law Corn. No. 154 Comnd. 9700 (1986). and another pertaining to co-operative sugar mills, like CCSM Ltd., in a circular from the Sugarcane Commissioner specifying certain subsidies. The question to be considered is not one of whether subsidy agreement is collateral one or the other. The question is, is subsidy, part of the sale consideration to fall within the definition of "turnover" under section 2(r) of the TNGST Act. The question of consideration has to be approached, not from the point of view of common law principles, which are aimed at defining and regulating the rights of the parties inter se; but from fiscal concept; for the purpose of arriving at the basis of chargeability. Whatever be t....
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....e appellant was one of the three executants, including a company, of a promissory note for Rs. 4 lakhs issued for obtaining financial accommodation for the company, the executants holding themselves liable thereon jointly and severally. This note was sent to the respondent-bank, along with a letter, styled letter of continuity, of the same date, stating that the promissory note was given to the bank as security for repayment of the ultimate balance or sum remaining unpaid on the overdraft. This letter was also signed by the appellant. On the same day, the company as "borrower" executed in favour of the bank, a deed of hypothecation of its stock of goods for securing a demand cash credit. On the basis of these three documents the bank opened an overdraft account in the name of the company. A suit was brought by the bank for recovery of the sum of Rs. 2,86,292 being the amount due on the overdraft account. (i) The Supreme Court in such a situation, held that there was one integrated transaction constituted by the three documents and the legal effect was to confer on the appellant the status of a surety and not of a co-obligant and that if a transaction is contained in more than on....
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....te to something done by the dealer in respect of the goods which involves transfer of property in the goods and for consideration. The further condition is that something should have been done in respect of the goods at the time of or before the delivery of the goods. So what is chargeable to tax is not any sum charged at the time of or before the delivery of, the goods, but any sum charged for transfer of property in the goods, involved in anything done by the dealer in respect of the goods at the time specified by the explanation. The explanation read in the abstract is, of course, of wide scope and may possibly take in any sum charged for anything done by the dealer in respect of the goods whether or not it involved also transfer of property in the goods. But, as we said, the fact that it is an explanation to the definition of 'turnover' and the 'turnover' is but the aggregate amount of the consideration of sales shows that it has to be read in the context and not de hors it. (c) In State of Madras v. Srinivasa Timber Depot [1974] 33 STC 423 (Mad.) (latter case), the Revenue urged that the former case (Srinivasa Timber Depot [1966] 23 STC 158 (Mad.) requires reconsideration i....
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....of logs. (iv) The assessing authority did not accept the contention of the assessee that sawing charges should not be included in the turnover. Of course, the plea of the assessee that sawing work was done under contracts entered into subsequent to the sales was not discredited by the assessing authority nor was the truth of such a case disputed. On the other hand, the assessing authority seems to think that even if that be so, since the work of sawing had necessarily to be done before delivery, going by explanation (2) to the definition of "turnover" in the Kerala General Sales Tax Act such charges also would fall within the scope of "turnover". On the question of turnover taxable under section 5A the assessing authority took the view that the entire turnover of purchases was assessable. (v) The appellate authority accepted the case of the assessee. He found that the sawing of timber had nothing to do with the turnover of the assessee and thus the whole of the sawing charges had to be excluded. He also accepted the statement of the assessee as to the quantum of timber used for converting into scantlings and sawn timber sold as such and on that basis reduced the turnover l....
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.... been subjected to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading, sorting, drying or dehusking; (ii) tea, coffee, rubber, cardamom or timber. Explanation (2).-Subject to such conditions and restrictions, if any, as may be prescribed in this behalf,- (i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or before, the delivery thereof; (ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and (iii) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said customer, the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former.' Turnover is evidently the aggregate amount for which goods are either bought or sold. This aggregate amount would include anything done by a dealer in respect of the goods sold, at the time of or before the delivery thereo....
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....rpose of keeping the land on which sugarcane had been planted in good condition. It was held that the "khodki charges" had been in fact paid as part of the consideration for the sugarcane supplied to the assessees by the growers. It was therefore included in the taxable turnover of the assessee. The Kerala High Court went on to say that the point of time at which such payment was made or the purpose for which the amount had been used by the grower would be immaterial as long as the payment was made in lieu of the sugarcane supplied by grower to the assessee. A similar view was taken in respect of transport charges and harvesting charges in Pandavapura Sahakara Sakkare Kharkhane (P.) Ltd. v. State of Mysore [1973] 32 STC 104 (Kar). (f) In State of Tamil Nadu v. National Co-operative Sugar Mills Limited [1992] 86 STC 22 (Mad.), the respondent, a sugar manufacturer, paid certain sums to cane-growers on an acreage basis, as subsidy for early planting, and accounted for the payment under the head "cane development expenses". The Tribunal held that the sums were independently paid, to encourage early cultivation of sugarcane, and were therefore not related to nor includible as part....
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.... other sum charged by the dealer whatever be the description, name or object thereof", occurring in the definition of section 2(s) of the Andhra Pradesh General Sales Tax Act, 1957 (for short, "APGST Act"). (i) In the former case, it is shown expressly as sales tax and in the latter case, it is shown in the form of debit notes. But, in both the cases, it is collected by the seller from the buyer at the time of sale or rather as a condition of sale. (ii) The apex Court in answering the question said: "Sales tax charged by a dealer as 'tax' in his bill to the purchaser but shown separately is part of the 'turnover' within the meaning of the definition of 'turnover' in section 2(s) of the A.P. General Sales Tax Act, 1957. The sales tax component of the sale price charged by the dealer to the purchaser is not collected by him as an agent of the State. Even if, therefore, the bill or the voucher issued to the purchaser indicates the amount of sales tax separately what is collected by the dealer from the purchaser is not tax but is merely a part of the sale price charged by the dealer to be purchaser. So far as the statute is concerned it does not cast any obligation on the purchaser ....
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....e, any rebate which formed an integral part of the agreement or contract and is allowed in accordance with the regular business practice has to be adjusted in the sales tax assessment when it varies the price payable in respect of the goods. Under the Central Sales Tax Act, 1956, it is the sale price which ultimately enters into the computation of the turnover which has to be taken as the consideration for which the goods are sold by the assessee. This being the position, it becomes obvious that an assessee is entitled to have the rebate excluded from the taxable turnover under the Central Sales Tax Act, 1956, even where the case does not strictly fall under section 2(h) in the sense that the rebate was not given as cash discount but was otherwise allowed in accordance with the regular business practice and formed an integral part of the agreement or contract between the assessee and the buyer and did not vary the price payable by the buyer to the extent thereof." (j) In Cauvery Sugars and Chemicals Ltd. v. Joint Commercial Tax Officer [1972] 29 STC 1 (Mad.), the cess on sugarcane levied on an assessee-a sugar manufacturer, under section 14(1) of the MSFC Act, 1949, is in discha....
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....to have been specified and charged for by him separately and the amount paid by him could not also be said to be the price of the goods sold. Thus, the manner in which the purchaser had shown the amount in his accounts or vouchers were given by him to the seller is immaterial. Vouchers are only receipts. But, it is the manner in which the seller has prepared the invoice or charged for the price that is relevant for the applicability of rule 6(c). The mere fact that there is evidence to show that the purchaser and the seller agreed for a particular price and it was the responsibility of the purchaser to take the goods at the place of the seller does not by itself enable the purchaser to deduct the transport charges from the taxable turnover. Normally the freight paid to the seller forms part of the price itself. The agreement between the seller and the purchaser might contemplate a price for the goods and a particular amount for transporting charges, for delivery of the goods at the purchaser's destination. Even when such an agreement is there, unless the seller shows the freight charges separately, he would have to include the transport charges as part of the price in the taxabl....
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....nal were dismissed. The assessees thereafter preferred revisions. (i) The argument of learned counsel for the assessees-petitioners is getting reflected in paragraph 3 (at page 116) as below: "Before this Court, the learned counsel for the petitioners maintained the same stand taken up by the sugar mills or factories before the authorities below and contended that instead of delivery of sugarcane being effected by the growers at the sugar mill or factory, they agreed to deliver the sugarcane in their fields in modification of the contract earlier entered into and on such delivery the property in the sugarcane passed to the petitioners and the transport charges incurred by the petitioners would readily be in the nature of post-purchase expenses and therefore, such amounts will not form part of the purchase price. In support of this, reliance was placed by the learned counsel for the petitioners on the decisions in State of Tamil Nadu v. Madurantakam Co-operative Sugar Mills [1976] 38 STC 238 (Mad.), Gwalior Rayon Silk Manufacturing and Weaving Co. Ltd. v. State of Tamil Nadu [1982] 49 STC 73 (Mad.), Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 S....
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....ould be treated as the purchase turnover liable to tax. How far such a claim is justified has to be seen. 5.. The specimen forms of application for registration of the grower of sugarcane with the mills or factories and the agreement entered into between the mills and the sugarcane grower have been made available in this case and referred to by the Tribunal in the course of its order. Even in the application for registration of the sugarcane grower with the mills or factories, the sugarcane grower had specifically agreed to deliver sugarcane in the mill or factory premises. In the case of the petitioner in T.C. Nos. 579 to 581 of 1978, an alternative is also provided that the sugarcane grower will bring the sugarcane in his own lorry or he will send the sugarcane in lorries engaged by the sugar mills with the further undertaking that the sugarcane grower will deliver the sugarcane in the mill and get paid the minimum statutory price fixed by the Government. In the agreements also, the sugarcane grower had agreed to bring the sugarcane and deliver it at the mill or factory premises in accordance with a date schedule fixed by the mills. There is no clause either in the appli....
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....charges from the sugarcane growers at the time of the payment of purchase price for the sugarcane. It has earlier been pointed out that there is no provision in the contract for the payment of any reduced amount other than the statutory price. The billing practice also accords with the contract and the actual practice regarding transport. It is seen that in respect of supplies effected by a sugarcane grower, the bill is prepared for the gross amount of the purchase price in accordance with the statutory price fixed by the Government. Any additional sugarcane price allowed to the sugarcane grower is subsequently given credit to separately. From the price of sugarcane so arrived at, lorry charges, share money, recovery of loan (principal and interest, etc.) are deducted and the net amount payable is arrived at. The bill is passed for the gross amount and the net amount. This also indicates that at all times, the mills or the factories recognised only the statutory price as the purchase price of sugarcane and the transport or other charges have been regarded as amounts payable by the sugarcane grower, but initially paid by the mill and later recovered from the price payable to the ....
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....Though the decision in Madurantakam Co-operative Sugar Mills Ltd. [1976] 38 STC 238 (Mad.) had been explained in the later decision in Perambalur Sugar Mills Ltd. [1992] 86 STC 17 (Mad.) while following the decision in Kallakurichi Co-operative Sugar Mills Ltd. [1985] 60 STC 113 (Mad.) yet, there seems to be an apparent conflict as respects the deduction relatable to transport charges paid by the mills to lorry owners to transport the cane to the factory to help the growers. Such a conflict of opinion requires to be resolved so as to relieve the confounding confusions prevailing among the assessing authorities as to which of these two decisions they have to take into consideration in deciding the question relatable to transport charges paid to third party contractors-lorry owners by the mills for transporting the cane from the field of the grower to the factory site. We are of the view that the rationale or reasonings given in the decision in Kallakurichi Co-operative Sugar Mills Ltd. [1985] 60 STC 113 (Mad.), to which we find none to add-in arriving at the conclusion reached therein, reflects the real legal position and therefore, we hold that the view expressed in Madurantakam Co....
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....paid by an agreement between the grower and the purchaser and, therefore, the entire amount would be the price of sugarcane, their Lordships of the Supreme Court held therein that, "This is a question of fact in each case. It is true that if in a given case it is found as a fact on the basis of evidence that the purchaser had agreed with the grower to pay the higher price described as 'advance' including the amount in excess of the additional price fixed under clause 5A then in that case the entire amount would be the price of sugarcane". While adverting to the decisions of the Karnataka High Court reported in [1973] 32 STC 104 (Pandavapura Sahakara Sakkare Kharkhane (P.) Limited v. State of Mysore) and [1994] 93 STC 561 (Tungabhadra Sugar Works Ltd. v. State of Karnataka) the apex Court approved the view taken by the Karnataka High Court on the basis of the nature of the contract in those cases as necessitating and justifying the entire amount paid being treated as price of the sugarcane supplied since the statute does not prohibit any agreement between the grower and the purchaser for the payment of a higher price for the sugarcane by the purchaser. Dealing with the decision in T....
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....he accounts-shall form part of the price includible in the purchase turnover as such transportation alone makes the passing of property in the sugarcane sold by the grower to the assessee-mills complete. For the reasons as above, point Nos. 3 to 9 are answered in favour of the Revenue and against the assessees-sugar mills. 59.. Pertinent it is to recapitulate at this juncture that the Tribunal in the present Tax Case Nos. 474 to 478 of 1993, following the ratio in Madurantakam Co-operative Sugar Mills [1976] 38 STC 238 (Mad.) recorded a finding that the transport subsidy charges paid by the assessees-sugar mills to third party lorry owners do not form part of purchase turnover, since they are not connected with pre-purchase expenses and consequently, the claim, as respects the transport subsidy made by the assessees-sugar mills was allowed. It cannot be said that the Revenue is not aggrieved by such an order. But, nonetheless, it did not opt to file any revision. The fact that the revenue filed no such revision is of no consequence, on the facts and in the circumstances of the case. Pertinent further it is to mention at this juncture that Mr. C. Natarajan, learned Senior Counsel....