1994 (9) TMI 293 - SC - VAT and Sales Tax

Whether the appellant is purchaser of sugarcane and as such liable to pay tax under the provisions of the Gujarat Sales Tax Act, 1969? Held that - Appeal dismissed. All these provisions make it clear that the bye-laws contemplate that the society will purchase sugarcane at a fixed price. The sugarcane may be purchased from the members of the society as well as from the outsiders. The argument that the society was a mere agent of its members and was effecting sales of the products of the members, cannot be upheld. Having regard to the facts of this case and also the bye-laws, we are of the view that the High Court has correctly answered the questions referred to it

Summary

Issues Involved:
1. Liability of the appellant to pay tax under the Gujarat Sales Tax Act, 1969.
2. Interpretation of the bye-laws of the appellant-society.
3. Applicability of the precedent set in Khedut Sahakari Ginning and Pressing Society Ltd. v. State of Gujarat.
4. Definition and scope of "dealer" under the Bombay Sales Tax Act, 1959 and Gujarat Sales Tax Act, 1969.
5. The nature of transactions between the appellant-society and its members.

Issue-wise Detailed Analysis:

1. Liability of the Appellant to Pay Tax Under the Gujarat Sales Tax Act, 1969:
The Supreme Court upheld the Full Bench judgment of the Gujarat High Court, holding that the appellant, a co-operative society, was liable to pay tax under the provisions of the Gujarat Sales Tax Act, 1969. The court concluded that the transactions between the appellant and its members regarding the supply of sugarcane amounted to purchases, making the appellant liable for purchase tax.

2. Interpretation of the Bye-laws of the Appellant-Society:
The court examined the bye-laws of the appellant-society, which included provisions for manufacturing sugar from sugarcane supplied by its members and others, purchasing sugarcane, and fixing the price annually. The bye-laws mandated that every member must sell their sugarcane to the society, which would purchase it at a price fixed by the board of directors. This indicated that the society was not merely an agent for its members but an independent purchaser of sugarcane.

3. Applicability of the Precedent Set in Khedut Sahakari Ginning and Pressing Society Ltd. v. State of Gujarat:
The appellant relied on the precedent set in Khedut Sahakari Ginning and Pressing Society Ltd., where it was held that the society acted as an agent and did not purchase goods from its members. However, the court found that the bye-laws in the present case were significantly different. Unlike the Khedut case, the appellant-society's bye-laws explicitly involved purchasing sugarcane from its members and non-members, thus distinguishing it from the Khedut case.

4. Definition and Scope of "Dealer" Under the Bombay Sales Tax Act, 1959 and Gujarat Sales Tax Act, 1969:
The court referred to the definition of "dealer" under both the Bombay Sales Tax Act, 1959, and the Gujarat Sales Tax Act, 1969. Both statutes included any society that buys goods from or sells goods to its members within the definition of "dealer." The court noted that while an agriculturist selling produce grown on land cultivated by him personally was exempt, no such exemption applied to a society purchasing such produce. Therefore, the appellant-society fell within the definition of a "dealer" and was liable for tax.

5. The Nature of Transactions Between the Appellant-Society and Its Members:
The court rejected the argument that the society was merely an agent for its members, emphasizing that the society ran a factory to manufacture sugar and paid for the sugarcane supplied by its members and non-members. The transactions were not merely entrustments but purchases, as evidenced by the society's obligation to buy sugarcane at a fixed price and the members' obligation to sell to the society. The court concluded that these transactions were taxable purchases under the relevant sales tax laws.

Conclusion:
The Supreme Court dismissed the appeal, affirming the Gujarat High Court's judgment that the appellant-society was liable to pay purchase tax under the Gujarat Sales Tax Act, 1969. The court held that the transactions between the appellant and its members constituted purchases, making the society a "dealer" under the applicable tax laws. The appeal and related petitions were dismissed with no order as to costs.