1980 (9) TMI 238 - SC - VAT and Sales Tax

Whether market fees paid on transactions of sale or purchase of specified agricultural produce in the market area established under the Adhiniyam can be included in the turnover of purchases for purposes of levy of tax under the Act? Held that - Appeal is allowed in part. The inclusion of the market fees in the turnover of purchases of the assessee for purposes of levy of tax under the Act is set aside. The assessing authority is directed to modify the order of assessment in accordance with this decision. In the circumstances of the case, the parties shall bear their own costs.

Issues Involved:

1. Levy of additional tax under section 3-F of the U.P. Sales Tax Act.
2. Inclusion of market fees in the turnover of purchases for sales tax purposes.
3. Inclusion of commission (dami) in the turnover of purchases.

Issue-wise Detailed Analysis:

1. Levy of Additional Tax under Section 3-F of the U.P. Sales Tax Act:

The appellant contended that the assessing authority could not demand additional tax under section 3-F of the U.P. Sales Tax Act due to the provision in sub-section (4) of section 3-D, which prohibits the levy of tax under any other section for the purchase turnover of goods notified under section 3-D(I). The court, however, held that section 3-F, introduced by U.P. Act No. 3 of 1971, expressly includes dealers liable under section 3-D. Therefore, section 3-F overrides sub-section (4) of section 3-D, allowing additional tax collection. The court concluded that the legislature retains the power to modify sub-section (4) of section 3-D through subsequent legislation, dismissing the appellant's first contention.

2. Inclusion of Market Fees in the Turnover of Purchases for Sales Tax Purposes:

The appellant argued that market fees payable under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, collected by commission agents from purchasers, should not be included in the turnover of purchases for sales tax purposes. The court examined the statutory provisions and past judgments, notably George Oakes (P.) Ltd. v. State of Madras and Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore. The court distinguished cases where statutory provisions authorized dealers to recover taxes or fees from purchasers, concluding that such recoveries do not form part of the turnover for tax purposes. Since section 17(iii)(b)(1) of the Adhiniyam authorizes commission agents to realize market fees from purchasers, the court upheld the appellant's contention, excluding market fees from the turnover of purchases.

3. Inclusion of Commission (Dami) in the Turnover of Purchases:

The appellant contended that the commission (dami) paid to commission agents should not be included in the turnover of purchases. The court rejected this argument, stating that the commission is not a tax or fee payable to a government or statutory body but is the profit of the dealer (commission agent). The commission is considered part of the consideration for the sale of goods. The court emphasized that section 10 of the Adhiniyam and related rules do not affect this conclusion, as they merely regulate the maximum commission chargeable and ensure it is collected from purchasers. Thus, the court concluded that the commission forms part of the turnover of purchases.

Conclusion:

The appeal was allowed in part. The court set aside the inclusion of market fees in the turnover of purchases for sales tax purposes, directing the assessing authority to modify the assessment order accordingly. However, the court upheld the inclusion of the commission (dami) in the turnover of purchases. Each party was directed to bear its own costs.

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