2005 (11) TMI 249 - 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. There was 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 the seller can realise it from the buyer. The inevitable conclusion, therefore, is that there was no liability to pay sales tax on the element of market fee.

Summary

Issues:
- Whether purchase tax can be charged on the element of market fee on the basis that it does not form part of the turnover.

Analysis:
The Supreme Court, in this judgment delivered by Arijit Pasayat J., addressed the sole issue of whether purchase tax can be imposed on the market fee element, which is argued not to be part of the turnover. The case involved interpretation of the Punjab General Sales Tax Act, 1948 and the Punjab Agricultural Produce Markets Act, 1961. The High Court had allowed the writ petition filed by the respondent, leading to this appeal. The High Court observed that the market fee is not part of the sale consideration and need not be included in the turnover for assessment or purchase tax payment.

The Court referred to a previous decision in Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax, where it was discussed that market fee could be included in turnover under specific circumstances. These circumstances included scenarios where the produce is sold through a commission agent, purchased directly by a trader from a producer, purchased by a trader from another trader, or in any other case of sale. The Court emphasized that the obligation to pay market fee lies with the buyer, and the seller is responsible for collecting it from the buyer, absolving the seller from the legal obligation to pay market fee.

Further, the Court cited the case of State of Punjab v. Guranditta Mal Shauti Prakash, where it was reiterated that the seller is not obligated to pay the market fee; instead, it is the duty of the buyer to settle this fee. Based on these precedents and legal principles, the Court concluded that there is no liability to pay sales tax on the element of market fee. Consequently, the appeal was dismissed, affirming that the market fee should not be considered as part of the turnover for purchase tax assessment. The judgment was delivered without any order as to costs.