2004 (5) TMI 293 - SC - VAT and Sales Tax

Whether purchase tax can be charged on the element of market fee on the basis that the same does not form part of the turnover? Held that - Appeal dismissed. When the finding of the High Court is that on examining the enactment in question, there is no obligation on the part of the seller to pay the market fee since it is the duty of the buyer to pay the same and seller can realise it from the buyer the conclusion thereof that there was no liability to pay sales tax on the element of market fee is justified.

Summary

Issues:
1. Whether purchase tax can be charged on the element of market fee not forming part of the turnover.

Analysis:
The Supreme Court considered the question of whether purchase tax can be imposed on the market fee element not constituting the turnover. The High Court had ruled in favor of the respondents in writ petitions, leading to these appeals. The Punjab General Sales Tax Act defines "turnover" to include sales, purchases, and parts thereof made by a dealer, excluding cash and trade discounts but including charges for services related to goods. The High Court, interpreting this provision with Marketing Regulations, found that market fee, paid by buyers when turnover exceeds a certain limit, should not be part of the turnover for purchase tax assessment. The Court referred to a previous case to explain circumstances where market fee could be included in turnover, emphasizing the buyer's liability to pay market fee. The appellants argued the Punjab Act differed and the High Court did not fully analyze the Agricultural Produce Market Committee Act.

The Court held that under Punjab law, the buyer is obligated to pay the market fee, not the seller, who can recover it from the buyer. The Court stated the law could be amended if unclear, as explained in the previous case regarding market fee liability in turnover. Since the High Court found no obligation for sellers to pay market fee and buyers were liable, the conclusion that sales tax cannot be imposed on the market fee element was justified. Consequently, the appeals were dismissed by the Supreme Court.