2005 (11) TMI 247 - SC - VAT and Sales Tax

Whether the transport charges are excludible from the taxable turnover of the appellant for the purpose of purchase tax under the Tamil Nadu General Sales Tax Act, 1959? Held that - Appeal dismissed. As found as a matter of fact that the transport subsidy formed part of the consideration for the purchase of the sugarcane by the appellant from the sugarcane growers.

Issues Involved:
1. Whether transport charges are excludible from the taxable turnover of the appellant for the purpose of purchase tax under the Tamil Nadu General Sales Tax Act, 1959.
2. Whether the price fixed under the Sugar Cane Control Order, 1966, constitutes the purchase price for determining the taxable turnover.
3. Whether the transport charges incurred subsequent to the sale or delivery of sugarcane are includible in the taxable turnover.
4. The binding nature of the Circulars issued by the Board of Revenue on the Department.

Detailed Analysis:

1. Excludibility of Transport Charges from Taxable Turnover:
The primary issue was whether the transport charges for sugarcane, arranged by the appellant, are excludible from the taxable turnover under the Tamil Nadu General Sales Tax Act, 1959. The appellant argued that transport charges incurred after the sale should not be included in the taxable turnover. However, the agreement between the appellant and the cane growers incorporated a directive from the Sugarcane Department, which required the appellant to bear transport charges for distances beyond 40 km. The court concluded that transport charges formed part of the purchase price and were thus includible in the taxable turnover.

2. Price Fixed Under the Control Order:
The appellant contended that the price fixed under the Sugar Cane Control Order, 1966, should be the purchase price for determining the taxable turnover. However, the court referred to the Constitution Bench decision in U.P. Co-operative Cane Unions Federations v. West U.P. Sugar Mills, which clarified that the price fixed under the Control Order is the minimum price, and there can be a higher price agreed upon between the purchaser and the sugarcane growers. Thus, the fixed price under the Control Order was not immutable, and additional charges, such as transport subsidies, could be included.

3. Inclusion of Transport Charges Incurred Post-Sale:
The appellant argued that any amount incurred after the sale or delivery of sugarcane should not be included in the taxable turnover. However, the court found that the transport charges were part of the consideration for the sale and were necessary for completing the sale. The Full Bench of the Madras High Court in Chengalvarayan Co-operative Sugar Mills Ltd. v. State of Tamil Nadu and the Supreme Court in E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes affirmed that transport subsidies linked to the supply of sugarcane form part of the purchase turnover.

4. Binding Nature of Circulars:
The appellant relied on previous assessment orders and a Circular issued by the Board of Revenue, which excluded transport subsidies from the taxable turnover. However, the court noted that these orders were based on a decision that was later overruled by the Full Bench in Chengalvarayan's case. The court emphasized that the binding nature of the Circulars does not override judicial decisions that have clarified the inclusion of transport charges in the purchase price.

Conclusion:
The Supreme Court dismissed the appeals, holding that transport charges form part of the purchase price and are includible in the taxable turnover. The court affirmed that the price fixed under the Control Order is the minimum price and additional charges agreed upon between the parties are includible. The decision in E.I.D. Parry was upheld, confirming that transport subsidies linked to the supply of sugarcane are part of the consideration for the sale. The appeals were dismissed with costs.

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