2008 (4) TMI 484 - SC - VAT and Sales Tax

Whether the advance towards State advised price cannot be subjected to tax even though the other incentive subsidies were to be treated as part of purchase price? - Held that - Appeal allowed. Appellants were justified in demanding purchase tax on the amount paid as SAP and the High Court s view is clearly unsustainable and is set aside. The observations relating to the agreed price which is above the lowest permissible rate cannot be read to mean that any ceiling is fixed by the agreed price. In the price fixed under the Control Order was the minimum price and it was the lowest permissible rate. The highest amongst the three prices relatable to the purchase is the price on the basis of which the purchase tax is to be levied.

Issues Involved:
1. Whether the State Advised Price (SAP) forms part of the purchase price for the purpose of levying purchase tax.
2. Whether the agreed price between the purchaser and the grower can be considered as the purchase price.
3. The interpretation of the Sugarcane (Control) Order, 1966, and its implications on the purchase tax.

Issue-wise Detailed Analysis:

1. State Advised Price (SAP) as Part of Purchase Price:

The respondent-company, a dealer under the Karnataka Sales Tax Act, 1957, and the Central Sales Tax Act, 1956, argued against the inclusion of SAP in the purchase price for levying purchase tax. The assessing authority included the SAP along with the statutory minimum price and other subsidies as the purchase price, which was upheld by the High Court. The Supreme Court clarified that the SAP paid by the respondent forms part of the purchase price and must be included in the turnover for tax computation. The Court emphasized that the SAP, being higher than the statutory minimum price, is a valid consideration for the purchase of sugarcane, thus subject to purchase tax.

2. Agreed Price Between Purchaser and Grower:

The respondent contended that the purchase tax should be based on the agreed price between the purchaser and the grower, not the SAP. The Supreme Court rejected this argument, stating that the agreed price cannot override the statutory provisions. The Court referred to its earlier decisions, highlighting that the purchase price includes any amount paid over the statutory minimum price, including SAP. The Court reiterated that the highest price paid, whether it be the statutory minimum price, SAP, or an agreed higher price, forms the basis for levying purchase tax.

3. Interpretation of the Sugarcane (Control) Order, 1966:

The Court examined the Sugarcane (Control) Order, 1966, particularly clauses 3 and 5A, which define the statutory minimum price and additional price. The Court noted that the statutory minimum price is the lowest permissible rate, and any higher price paid, including SAP, must be considered in the purchase price. The Court referred to its previous judgments, such as in the U.P. Co-operative Cane Unions Federations case, to assert that the SAP, being a higher price fixed by the State, does not conflict with the minimum price fixed by the Central Government. The Court concluded that the SAP, being part of the consideration for the purchase, must be included in the purchase price for tax purposes.

Conclusion:

The Supreme Court allowed the appeal, setting aside the High Court's view that excluded SAP from the purchase price for levying purchase tax. The Court held that the SAP, being part of the consideration paid for sugarcane, must be included in the purchase price. The Court emphasized that the highest price paid, whether it be the statutory minimum price, SAP, or an agreed higher price, forms the basis for levying purchase tax. The appeal was allowed with no order as to costs.

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