Gauhati High Court
Basant Kumar Agarwal @ Mittal vs The State Of Assam And 3 Ors on 17 February, 2016
Author: Hrishikesh Roy
Bench: Hrishikesh Roy
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IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM: NAGALAND: MIZORAM & ARUNACHAL PRADESH)
REVISION PETITION No.12 of 2015
Sri Basant Kumar Agarwal @ Mittal,
Son of Late Suraj Bhan Mittal,
Proprietor of M/s Balaji Coke Industry,
15th Mile, Byrnihat, District- Kamrup, Assam.
....Petitioner
-versus-
1. The State of Assam, represented by Secretary to the
Finance Department, Government of Assam, Dispur-
781 006, Guwahati, District- Kamrup, Assam.
2. The Commissioner of Taxes, Assam, Kar
Bhawan, Dispur, Guwahati-781 006, Assam.
3. The Deputy Commissioner of Taxes,
Kar Bhawan, Dispur, Guwahati-781 006,
Assam.
4. The Assam Board of Revenue, Guwahati,
District- Kamrup (M), Assam.
....Respondents
BEFORE
HON'BLE MR. JUSTICE HRISHIKESH ROY
HON'BLE MR. JUSTICE MANOJIT BHUYAN
For the petitioner : Mr. O. P. Bhati, Advocate.
For the Respondents : Mr. S.Chetia, Advocate,
Date of hearing : 17.02.2016
& Judgment
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JUDGMENT & ORDER (Oral)
Hrishikesh R oy, J :
This is a revision application under Section 81 of the Assam Value Added Tax Act, 2003 (hereinafter referred to 'VAT Act'). The challenge here is to the order dated 8.5.2014 (Annexure-E), whereby the appeal of the dealer against the decision of the Commissioner of Taxes, Assam was dismissed by the Assam Board of Revenue.
2. The dealer contends that the component of transport subsidy should be excluded while determining the import value of coal, for the purpose of assessment of Entry Tax. But the Revenue Authorities found that the petitioner paid the transportation charge on coal and therefore this expenditure incurred by the dealer must be included in the turnover, for assessment to tax. Thus, the contention made to the contrary by the dealer for excluding the transportation cost while determining the turnover for the levy of Entry Tax was rejected.
3. We have heard Mr. O. P. Bhati, learned counsel for the petitioner and Mr. S. Chetia, learned standing counsel, representing the respondents.
4. The learned counsel for the petitioner contends that when the dealer gets re-imbursement of freight cost under the Transport Subsidy Scheme of 1971, the said component should be excluded from determining the turnover of the dealer for levying the Entry Tax. In support of his contentions the petitioner relies on Neyveli Lignite Corporation Ltd. -vs- Commercial Tax Officer, Cuddalore and another, reported in (2001) 9 SCC 648, where the Supreme Court held that amount which flows from the purchaser to the seller would alone form the part of the turnover. But in the case cited by Mr. Bhati the Assessing Officer had included the subsidy received from the Government as part of the turnover, in addition to the purchase price at which the goods were bought. In the context of the additional inclusion to purchase price, the Supreme Court opined that the sum received outside the contract of sale, cannot be regarded as part of purchase price on which tax is payable.
35. But in the present case, admittedly the petitioner had paid the freight charge on import of coal and through the impugned assessment, the revenue authorities included the freight charge to the total price, to determine the turnover of the dealer for the purpose of assessment to Tax. In E.I.D. Parry (I) Ltd -vs- Assistant Commissioner of Commercial Taxes, reported in (2000) 2 SCC 321, the Supreme Court opined that transport subsidy was part of the consideration and it can be regarded as the component of the purchase price. In E.I.D. Parry (I) (supra) the Apex Court was called upon to consider as to whether the planting subsidy paid to the sugarcane-growers can be said to be a part of the price of the sugarcane purchased by them which can legitimately be included in the turnover of the appellants therein and whether the transport subsidy/ charges in excess 30 km paid by the appellants to third party lorry-owner for transporting sugarcane can be aggregated with the price of the sugarcane and included in the turnover of the appellants. In this context, the Apex Court answered at paragraphs 18 and 21 of the judgment, which are reproduced hereunder for ready reference:
"18. What transpires from the above case-law is that the amounts paid by way of consideration by the purchaser to the seller of goods in pursuance of the contract of sale can legitimately be regarded as purchase price while calculating the turnover for the purposes of sales tax legislation. What can legitimately be brought to sales tax or purchase tax is the aggregation of the consideration for the transfer of property. All the payments should have been made pursuant to the contract of sale and not dehors it. Any amount paid as ex gratia payment or as an advance cannot be the component of the purchase price and therefore can not legitimately be included in the turnover of the purchasing dealer. Whether one of the components of the purchase price goes to the coffers of the seller or not will not cease to be so if it is necessary for completing the same. Thus the total amount of consideration for the purchase of goods would include the price strictly so called and also other amounts which are payable by the purchaser or which represent the expenses required for completing the sale as the seller would ordinarily include all of them in the price at which he would sell his goods. But if the sale price is fixed statutorily then the only obligation of the purchaser under the agreement would be to pay that price only and no other amount can be included in the purchase price even if the same is paid by the purchaser to the seller. "
"21. For the same reasons we hold that the transport subsidy was a part of the consideration for which sugarcane was sold by the sugarcane- growers to the appellants. Though the agreements between the parties 4 provided for delivery by the sugarcane growers at the factory gate and though the transport charges paid by the appellants were not to the sugarcane-growers but to third party lorry-owners, they were made for securing regular supply of sugarcane as per the requirements. Though payments were made at the instance of Government of Tamil Nadu they also became a part of the implied agreement between the appellants and the sugarcane- growers. They were not post-sale expenses. Those amounts were paid to ensure scheduled delivery of sugarcane. The sale of sugarcane became complete only thereafter. Those payments can be regarded either as payments made on behalf of the sugarcane-growers or payments made in modification or variation of the earlier agreements entered into by the sugarcane growers for selling sugarcane. In either case they could legitimately be regarded as the components of the sale price as the sellers would have otherwise included those amounts in the sale price."
6. A similar view was taken in Ponni Sugars (Erode) Ltd. -vs- Dy. Commercial Tax Officer, reported in (2005) 13 SCC 102 where the Apex Court opined that transport subsidy form part of the consideration for the purchase and therefore, the same can be included in the turnover for assessment to tax. In this case the question for consideration was as to whether the transport charges are excludible from the taxable turnover for the purpose of purchase tax under the Tamil Nadu General Sales Tax Act, 1959. At paragraph-9 of the judgment reference was made to a Full Bench decision of the Madras High Court which was called upon to decide between conflicting decisions of the High Court on the aspect as to whether transport subsidies were includible in the purchase turnover of the Sugar Mills which were purchasing sugarcane under the Tamil Nadu General Sales Tax Act, 1959. The Apex Court on a final analysis found that the transport subsidy formed part of the consideration for the purchase of sugarcane from the sugarcane-growers. This view can be had from paragraph 15 of the said judgment.
7. The Entry Tax is leviable on the import value of the specified goods under Section 3 of the 2008 Act and when we look at the definition of import value under Section 2(f), it is clear that when freight charge is paid or payable, the same is to be included in the total price for determining the turnover for the purpose of levying Entry Tax.
58. In view of above and having regard to the final pronouncement on the law point by the Apex Court in E.I.D. Parry (supra) and Ponni Sugars (Erode) Ltd. (supra), we are of the considered opinion that no question of law arise for consideration in the present revision application as the law is well settled on what should be the purchase price upon which levy of Entry Tax is to be made.
9. Furthermore, the refund of transport subsidy to the petitioner is only by way of an incentive and such refund in our considered opinion will not warrant exclusion of the freight charge paid by the petitioner, to determine the purchase price for the purpose of assessment to tax.
10. In view of the above conclusion, we find no merit in this revision petition and accordingly, the same stands dismissed. No costs.
JUDGE JUDGE
Nandi
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Therefore, what is now required to be considered is whether the planting subsidy and the freight subsidy given by the appellants to the sugarcane growers were given by way of consideration for sale of the sugarcane. The answer to this question also calls for the examination of the true nature of the transaction between the appellants and the sugarcane growers and the object of the payments made as planting subsidy and freight subsidy. We have earlier pointed out that in the State of Tamil Nadu, because of Madras Sugar Factories (Control) Act there are certain restrictions on the transactions of sugarcane in reserved areas. A grower of sugarcane in the reserved area cannot sell any sugarcane grown in that area except to the specified sugar manufacturer. He is required to enter into an agreement by making an offer to the specified sugar mill for sale of the sugarcane grown by him. Pursuant to this offer the sugar mill has to enter into an agreement with him for purchasing of the sugarcane offered by him. The Sugarcane (Control) Order, 1966 controls distribution and movement and also the purchase price of sugarcane. As neither the Madras Sugar Factories (Control) Act nor the Sugarcane (Control) Order provide for any agreement between the sugarcane grower and the purchaser i.e. the sugar mill for giving planting subsidy or freight subsidy it was contended by the learned counsel for the appellants that the agreements which the appellants have entered into with the cane growers in respect of planting subsidy are independent though collateral contracts and, therefore, they have nothing to do with the sale or purchase of sugarcane. It was submitted that the invitation to cane grower to plant a particular variety and claim the amount of subsidy per acre if planted in the stipulated month precedes the planting and growing of sugarcane. Acceptance of that offer by the grower also precedes growing of sugarcane and the statutory offer which the grower is required to make under Section 10 (1) of the Madras Sugar Factories (Control) Act. It was also submitted that even after taking planting subsidy the cane grower may or may not plant that specified variety and even if he plants and grows sugarcane as per the said agreement he may not sell the whole or part of the sugarcane grown by him to the sugar factory as he is entitled to consume the sugarcane or process it into jaggery if its holding is small in area.
In support of this last submission not only the relevant provisions under the Act but the decision of this Court in Andhra Sugars Ltd. v. A.P. State, [1968] 1 SCR 705, was also relied upon. Apparently, the two agreements-one agreement in respect of planting subsidy and the other agreement for the sale of sugarcane appear to be independent but on a close scrutiny it can be noticed that they constitute one single transaction. In their petitions filed before the High Court the appellants have stated that the planting or varietal subsidy is by way of incentive to the cane grower. It is given to motivate the cane grower to grow sugarcane and subsequently sell the same to the sugar factory. Thus the reason why the appellants had given planting subsidy was to see that the cane grower plant the desired and improved variety of sugarcane and that too in the months suggested 7 by the appellants so as to ensure stagger supply of sugarcane as per the crushing schedule. The object of the planting subsidy was to obtain the desired variety and quality of sugarcane at the time required by the appellants. It is also significant to note that as a matter of fact the planting subsidy was given by the appellants to the cane growers at the time of delivery of sugarcane by them. Though the appellants had described the payments by way of planting subsidy as deferred payments that cannot conceal the real nature of the transaction between the appellants and the cane growers. The planting subsidy was given by the appellants to the cane growers not by way of agrarian reform or a social welfare measure. The appellants had given planting subsidy as purchasers of sugarcane and as a part of the consideration for which the sugarcane was ultimately purchased by them. As rightly pointed out by the Madras High Court in State of Tamil Nadu v. National Co-operative Sugar Mills Ltd., (1992) 86 STC 22 giving of planting subsidy earlier and supply of sugarcane later were closely linked. The planting subsidy was relatable to the supply of sugarcane. If die whole deal between the appellants and the cane growers is examined they really constitute one contract of sale. Therefore, the sums paid by the appellant as planting subsidy to the cane grower were rightly treated as a part of the sale price and included in the taxable turnover of the appellants for the purpose of assessing the purchase tax liability.