1974 (7) TMI 109 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether transportation charges paid by the dealer to growers are exempt from tax?
2. Whether turnover relating to sugarcane setts is liable to tax under section 5(1) of the Act?

Analysis:
The judgment pertains to a revision petition under section 23(1) of the Karnataka Sales Tax Act, 1957, concerning the assessment year 1963-64. The petitioner, a cooperative sugar factory, purchased sugarcane from growers and also sold sugarcane setts to them. The dispute revolved around the taxation of transportation charges paid to growers and the tax liability of the turnover related to sugarcane setts. The assessing authority had ruled against the dealer on both issues, a decision upheld by appellate authorities.

Regarding the first issue, the court relied on a prior decision and held that the additional payment made by the dealer for transportation charges to growers was not exempt from tax. The court reasoned that the payment was directly related to the quantity of sugarcane supplied, altering the original contract terms. As the price payable by the dealer to the growers included transportation charges, which were part of the contract for delivery at the factory premises, the sum was deemed taxable under section 5(3)(b) of the Act.

On the second issue, the court referenced a Madras High Court case to define sugarcane setts as sugarcane seeds. Since the term "sugarcane" was not defined in the Act, the court interpreted it in the popular or commercial sense. It was concluded that sugarcane setts did not fall within the commercial understanding of sugarcane. Therefore, the turnover related to sugarcane setts was held to be taxable under section 5(1) of the Act, contrary to the dealer's contention.

Ultimately, the revision petition was dismissed, and costs were awarded against the petitioner. The court's decision was based on the taxability of transportation charges paid to growers and the classification of turnover related to sugarcane setts, as per the provisions of the Karnataka Sales Tax Act, 1957.