1968 (9) TMI 109 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether sugar-cane setts are equatable to sugar-cane and therefore exigible to tax under item 62 in the First Schedule to the Madras General Sales Tax Act, 1959.
2. Whether the petitioners are dealers in sugar-cane setts and whether there was a sale or purchase of such sugar-cane setts attracting sales tax.
3. Whether the writs of prohibition and certiorari filed by the petitioners are premature and whether the Court should exercise its jurisdiction under Article 226 of the Constitution.

Detailed Analysis:

1. Equatability of Sugar-Cane Setts to Sugar-Cane:
The primary issue is whether sugar-cane setts can be classified as sugar-cane under item 62 of the First Schedule to the Madras General Sales Tax Act, 1959. The Court examined the botanical and commercial differences between sugar-cane setts and sugar-cane. It was noted that sugar-cane setts are portions of cane stalks used for planting and propagation, whereas sugar-cane is harvested for its sucrose content. The Court concluded that "sugar-cane setts are not sugar-cane as is understood in commerce and trade." The physical and chemical properties, as well as the commercial uses of sugar-cane setts and sugar-cane, are entirely different. Therefore, the Court held that sugar-cane setts cannot be equated to sugar-cane for the purposes of taxation under the specified item.

2. Dealer Status and Sale/Purchase of Sugar-Cane Setts:
The Court also considered whether the petitioners could be classified as dealers in sugar-cane setts and whether their transactions involving sugar-cane setts were subject to sales tax. The modus operandi revealed that the petitioners acted primarily as financiers, advancing money to ryots (farmers) to purchase sugar-cane setts from specified farm owners. The Court noted that "the part played by the mills is that of a financier, who advances money to the ryot," and not as a purchaser of sugar-cane setts. The transaction involved the ryot purchasing the sugar-cane setts directly from the farm owner, with the mills merely facilitating this process. Therefore, the Court held that the petitioners were not dealers in sugar-cane setts and that the transactions did not constitute sales by the mills, making them non-exigible to sales tax.

3. Prematurity of Writs and Jurisdiction under Article 226:
The Assistant Government Pleader argued that the writs of prohibition and certiorari were premature and that the petitioners should first exhaust the hierarchy of tribunals provided under the Act. However, the Court observed that if the determination of a factual question involves a jurisdictional fact, it is within the Court's purview to investigate and adjudicate upon it. The Court stated, "No doubt the main point urged is one of fact. But if a factual determination on a question tantamounts to the investigation of a jurisdictional fact, then this Court will not refrain from investigating the same and adjudicating upon it." Consequently, the Court decided to exercise its jurisdiction under Article 226 to determine whether the respondent had the jurisdiction to assess the petitioners as proposed.

Conclusion:
The Court concluded that sugar-cane setts are not equatable to sugar-cane and therefore are not subject to tax under item 62 of the First Schedule to the Madras General Sales Tax Act, 1959. Additionally, the petitioners were not dealers in sugar-cane setts, and their transactions did not constitute sales subject to sales tax. The writs of prohibition and certiorari were not premature, and the Court had the jurisdiction to adjudicate on the matter. Consequently, the petitions were allowed, and the impugned notices and assessment orders were quashed.