1973 (7) TMI 108 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on sales of fertilisers and press-mud by a cooperative sugar mill to cane-growers for two different assessment years.

Analysis:
The judgment delivered by the Madras High Court involved two cases concerning the North Arcot District Co-operative Sugar Mills Limited (referred to as "the mills"). The first case pertained to the assessment year 1965-66, while the second case related to the assessment year 1968-69. The mills were assessed under the Madras General Sales Tax Act, 1959, for their sales of fertilisers and press-mud to cane-growers. The assessing authority and the Appellate Assistant Commissioner had upheld the levy of tax on the sales of fertilisers for the respective assessment years. However, the Tribunal considered both assessments invalid, stating that the mills were not dealers in fertilisers and press-mud, hence the sales could not be taxed. The revenue appealed to the High Court against this decision.

The Government Pleader argued that the Tribunal erred in concluding that the mills were not "dealers" in fertilisers and press-mud, contending that the sales should be taxed as they were part of the mills' main business of manufacturing sugar. The Tribunal had found that the mills purchased various fertilisers, mixed them to create a new manure mixture, and supplied it to cane-growers, treating these transactions as sales. The High Court agreed with the revenue's argument that these transactions constituted sales, as they involved the transfer of property for a price, rejecting the mills' claim that it was merely an advance in kind to the cane-growers.

Furthermore, the mills argued that the purchases and supply of manure were done on behalf of the cane-growers, asserting that the mills acted as agents of the growers. However, the High Court found this argument misconceived, stating that the mills' actions could not be considered as acting on behalf of the growers under the relevant bye-laws. The Court upheld the Tribunal's finding that the sales of fertilisers were taxable, following the principle established in a Supreme Court decision regarding the definition of "business" under the Act.

The High Court also ruled that the sales of press-mud, a by-product of sugar manufacture, by the mills were taxable, even though the mills were not dealers in that commodity. Citing the Supreme Court decision, the Court held that if the goods sold were connected with the dealer's business, the sales could be deemed to be in the course of business and subject to taxation. Consequently, the tax cases were allowed in favor of the revenue, with costs awarded to the revenue.