TaxTMI 
TaxTMI 
2010 (8) TMI 862
X X X X Extracts X X X X
X X X X Extracts X X X X
....common ground that by virtue of section 3 of the Essential Commodities Act and pursuant to the Sugarcane (Control) Order, 1966 came into being, the Central Government used to fix the price of the sugarcane to be procured apart from additional price fixed by the State Government. Under the Madras Sugar Factories Control Act (in Act 20 of 1949) and the Madras Sugar Factories Control Rules, 1949, cess also became payable on entry of sugarcane into the factory. Such cess levied on the sugar mills were to be remitted to the Director of Sugars. The question involved herein is as to whether such cess payable under Act 20 of 1949 would form part of the sugarcane price and thereby would attract payment of the sales tax under the provisions of the Tamil Nadu General Sales Tax Act, 1959. To appreciate the issue involved, it is worthwhile to refer to sections 2(r) and 3(2) of the Tamil Nadu General Sales Tax Act, 1959 read along with Part E of the First Schedule as well as clauses 3 and 5A of the Sugarcane (Control) Order, 1966 and section 10(2) of Act 20 of 1949 read along with section 14 of the Madras Sugar Factories Control Act, 1949. Section 2(r), section 3(2) and entry 22 of Part E of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sugarcane payable by producer of sugar. - (1) The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the official gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to- (a) the cost of production of sugarcane; (b) the return to the grower from alternative crops and the general trend of prices of agricultural commodities; (c) the availability of sugar to the consumer at a fair price; (d) the price at which sugar produced from sugarcane is sold by producers of sugar; and (e) the recovery of sugar from sugarcane: Provided that the Central Government or with the approval of the Central Government, the State Government may, in such circumstances and subject to such conditions as specified in clause 3A, allow a suitable rebate in price so fixed. 5A. Additional price for sugarcane purchased on or after October 1, 1974.-(1) Where a producer of sugar or his agent purchases sugarcane, from a sugarcane grower during each sugar year, he shall in addition to the minimum sugarcane price, fixed under c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the cess was part of pre-purchase expenses and in the light of the decision of the honourable Supreme Court reported in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583, the assessment made by the assessing authority was justified. The Tribunal confirmed the order of the Appellate Assistant Commissioner. Assailing the order of the Tribunal Mr. Prasad, learned counsel appearing for the petitioner, after referring to the clause contained in the Sugarcane (Control) Order, under which the minimum price and the additional price are fixed by the Central and State Governments, respectively, as well as the cess leviable under sections 10(2) and 14 of Act 20 of 1949 and after taking us through section 3(2) and entry 22 of Part E of the First Schedule to the Tamil Nadu General Sales Tax Act, contended that the cess levied under the provisions of Act 20 of 1949 has absolutely no nexus to the price of sugarcane procured by the petitioner either from the sugarcane growers or by its own in respect of the sugarcane harvested by itself and brought into its factory. The learned counsel would contend that as the expense of levy of cess under section 10(2) read along with secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... tea grown within the State by the assessee of any land in which he has interest whether as owner or as usufrcturary mortgagee tenant or otherwise. Therefore, for the purpose of inclusion of an amount as turnover, it should be the aggregate amount for which the goods are bought or sold. The said provision has relevance inasmuch as the levy of tax in so far as the petitioner is concerned and the same is to be worked out by invoking section 3(2) of the Tamil Nadu General Sales Tax Act, as the taxable event in respect of sugarcane is under entry 22 of Part E of the First Schedule and the point of such levy is the last purchase in the State. Under section 3(2) of the Act, it is specifically stipulated that the tax under the Tamil Nadu General Sales Tax Act should be paid by a dealer at the rate and only at the point specified on the turnover in each year relating to such case mentioned in the First Schedule. Therefore a reading of section 2(r) read along with section 3(2) and Part E of the First Schedule makes it abundantly clear that in the case of the petitioner who is dealing with the particular goods, namely, sugarcane, the point of last purchase in the State is the relevan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntry of sugarcane brought into the notified area of notification issued under section 14 of the Act would thus result in levy of cess. Significantly, the leviability of cess is on the person who owns the sugar factory and the location of such sugar factory, in a notified area and nothing more. The only other event to be ascertained is the entry of sugarcane into an area, which is specified in the notification either for own consumption, use or even for sale. As far as the petitioner is concerned, in so far as the liability to pay the tax under the provisions of the Tamil Nadu General Sales Tax Act is concerned, as was stated earlier, the liability is by virtue of the prescription in section 3(2) of the Act and the point of levy being the purchase of sugarcane as stipulated under entry 22 of Part E of the First Schedule. Under no other circumstances, the Tamil Nadu General Sales Tax Act provides or creates any liability of payment of tax on the petitioner who owns a sugar manufacturing unit and who happens to purchase sugarcane as the basic raw material for the manufacture of sugar. The various other expressions other than the expression "bought and sold" used in section 2(r) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid by the purchaser on his own liability and not on behalf of the seller. In fact the payment of cess under section 14 read with relevant rule is unconnected with the transaction of the purchase and price fixed under section 12(1). The view of the Department as well as the Tribunal that cess is integral part of the purchase turnover of sugarcane cannot, therefore, be accepted as correct. . ." Then again the court observed that (page 4 of 29 STC): "In fixing the price of the sugarcane, cess was not taken into account. There was also no stipulation between the assessee and the growers-sellers that the duty should, as between them, be borne by the seller and that when a buyer, on whom the liability was, paid the cess, it should be on behalf of the seller. The cess paid by the assessee in discharge of their own statutory liability and on their own account cannot therefore form part of the purchase price and therefore of the purchase turnover chargeable to tax. The inclusion of the cess in the chargeable purchase turnover was, therefore, illegal." We are therefore convinced that the question is no longer res integra inasmuch as the issue is directly covered by the above referred to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edger entry distinctly discloses that the payment of cess debited to the concerned account was not by way of any purchase price, it can only be held that the said factor was completely omitted to be noted both by the Tribunal as well as by the Appellate Assistant Commissioner. When we examine the decision of the honourable Supreme Court reported in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583, as rightly contended by the learned counsel for the petitioner, the said decision has to be understood in the light of the specific provision contained in section 12 of the Rubber Act, 1947 and section 5 read along with entry 71 of the Kerala General Sales Tax Act, 1963. Section 12 of the Rubber Act has been extracted in the said decision at page No. 589, which reads as under: "Imposition of new rubber cess.-(1) With effect from such date as the Central Government may, by notification in the official gazette, appoint, there shall be levied as a cess for the purposes of this Act, a duty of excise on all rubber produced in India at such rate, not exceeding fifty naye paise per kilogram of rubber so produced, as the Central Government may fix. (2) The duty of excise....