1971 (11) TMI 140 - SC - VAT and Sales Tax

Levy of sales tax - Held that - Appeal dismissed. The appellants cannot impeach the imposition or levy of sales tax on the ground that the appellants could not collect from the purchasers of sugar the purchase tax paid by the appellants on purchase of sugarcane. Another contention was raised on behalf of the appellants that the authorities had not taken into account the varying rates of tax on purchase of sugarcane levied by different States while computing the cost of production of sugar in different States and fixing different selling prices of sugar. The High Court rightly did not entertain this contention because there were no material to support the contention.

Issues Involved:
1. Whether there was a purchase and sale of sugarcane.
2. Whether the appellants are "dealers" under the Mysore Sales Tax Act.
3. Whether the levy of purchase tax on sugarcane at different rates in different states violates Article 14 of the Constitution.

Detailed Analysis:

1. Whether there was a purchase and sale of sugarcane:

The appellants contended that there was no mutual assent between them and the sugarcane growers, thus negating the existence of a purchase and sale transaction. They argued that the entire transaction was dictated by statutory orders, leaving no room for voluntary agreement. The appellants highlighted that the price, quantity, and parties involved were pre-determined by statutes, and agreements were mandated by law, not by mutual consent.

The court examined various statutory orders, including the Sugarcane Control Orders of 1955 and 1966, and the Mysore Sugarcane (Regulation of Supply) Orders of 1963 and 1965. These orders regulated the supply, price, and quantity of sugarcane, and required agreements between growers and factories. The court noted that despite statutory regulations, the agreements between growers and factories involved elements of mutual assent, such as negotiation on delivery dates, advance payments, and inspection of goods.

The court referenced several precedents, including the State of Madras v. Gannon Dunkerley & Co. and New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar, to elucidate the concept of mutual assent in sales transactions. The court concluded that the transactions in question constituted sales within the meaning of the Mysore Sales Tax Act, as there was mutual assent and consideration, despite the regulatory framework.

2. Whether the appellants are "dealers" under the Mysore Sales Tax Act:

The appellants argued that they were manufacturers of sugar, not dealers, and thus not subject to the purchase tax on sugarcane. The court referred to the definition of "dealer" under Section 2(k) of the Mysore Sales Tax Act, which includes any person engaged in the business of buying, selling, or distributing goods, whether for cash or other consideration.

The court cited State of Andhra Pradesh v. Abdul Bakshi & Bros., which held that a person engaged in buying goods for manufacturing and selling the manufactured product could still be considered a dealer. The court affirmed that the appellants, who bought sugarcane for manufacturing sugar, fell within the definition of "dealer" and were liable for the purchase tax.

3. Whether the levy of purchase tax on sugarcane at different rates in different states violates Article 14 of the Constitution:

The appellants contended that the varying rates of purchase tax on sugarcane in different states were discriminatory and violated Article 14. The court noted that all sugar factories within Mysore were treated equally under the state's tax regime. The court acknowledged that different states might have different tax rates due to varying local conditions, such as the availability of sugarcane, agricultural conditions, and the number of factories.

The court held that such variations did not constitute discrimination under Article 14, as the tax policy was rational and based on legitimate state interests. The court also dismissed the appellants' argument that they could not pass on the purchase tax to the purchasers of sugar, referencing Tata Iron and Steel Company v. State of Bihar, which clarified that the inability to pass on the tax does not alter its nature as a tax on the seller.

Conclusion:

The court dismissed the appeals, holding that the transactions constituted sales, the appellants were dealers under the Mysore Sales Tax Act, and the varying tax rates in different states did not violate Article 14. The court affirmed the imposition of purchase tax on the appellants and dismissed the appeals with costs.

← Previous Next →