1979 (11) TMI 253 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the transactions of supply of sugarcane by the grower-members to the society were purchases liable to purchase tax.
2. Whether the judgment of the Gujarat High Court in the case of Bileshwar Khand Udyog Mandali has been superseded by the decision of the Supreme Court in Khedut Sahakari Ginning and Pressing Society Ltd.
3. Whether the society was purchasing sugarcane from partnership firms and was liable to pay purchase tax in respect of the said sugarcane.

Issue-Wise Detailed Analysis:

1. Transactions of Supply of Sugarcane by Grower-Members:
The Court examined the bye-laws of the co-operative societies to determine whether the transactions of supplying sugarcane by the grower-members to the society amounted to purchases by the society. The Court emphasized that the true nature of a transaction must be ascertained from the covenants and the surrounding circumstances, rather than the terminology used by the parties. The Court noted that the bye-laws of the societies indicated that the society obtained supplies of sugarcane not only from producer-members but also from others, including ordinary members and outsiders. The price to be paid to the supplier of sugarcane was fixed at the end of the season by the Board of Directors. The Court concluded that the transactions were indeed purchases by the society and thus attracted purchase tax under section 14-B of the Bombay Sales Tax Act, 1959.

2. Judgment of Gujarat High Court in Bileshwar Khand Udyog Mandali Case:
The Court addressed whether the judgment of the Gujarat High Court in the case of Bileshwar Khand Udyog Mandali had been superseded by the Supreme Court's decision in Khedut Sahakari Ginning and Pressing Society Ltd. The Court observed that the Supreme Court's decision in the Khedut Sahakari case was based on the specific facts and bye-laws of that particular society, which involved the entrustment of cotton crop by the members to the society. The Court distinguished the present case from the Khedut Sahakari case, noting that the bye-laws in the present case indicated transactions of purchase rather than agency. Therefore, the judgment in the Bileshwar Khand Udyog Mandali case had not been superseded, and the transactions were liable to purchase tax.

3. Purchase of Sugarcane from Partnership Firms:
The Court examined whether the society was purchasing sugarcane from partnership firms and was liable to pay purchase tax. The Tribunal had held that a partnership was formed between the society and the member concerned for growing sugarcane, and the partnership sold its sugarcane to the society. However, the Court found that the agreement between the society and the members did not constitute a partnership. The agreement involved the society raising its own crop on the land placed at its disposal by the members for consideration. Therefore, the conclusion of the Tribunal that the society was purchasing sugarcane from partnership firms and was liable to pay purchase tax was incorrect.

Separate Judgments:
The Court delivered separate judgments for each reference:
- Sales Tax Reference No. 4 of 1976: The Court answered question No. (1) in the affirmative, question No. (2) affirming that the transactions were purchases liable to purchase tax, and question No. (3) in the negative.
- Sales Tax Reference No. 7 of 1976: The question was answered in the affirmative, in favor of the revenue.
- Sales Tax Reference No. 24 of 1977: The Court answered that the supply of sugarcane by grower-members amounted to purchase by the society.
- Sales Tax Reference No. 10 of 1976: The question was answered in the affirmative, in favor of the revenue.
- Sales Tax Reference No. 8 of 1976: Question No. (1) was answered in the affirmative, and question No. (2) was answered that the transactions were purchases attracting purchase tax.

Conclusion:
The Court concluded that the transactions of supplying sugarcane by the grower-members to the society were purchases liable to purchase tax. The judgment of the Gujarat High Court in the Bileshwar Khand Udyog Mandali case had not been superseded by the Supreme Court's decision in the Khedut Sahakari case. The society was not purchasing sugarcane from partnership firms, and the conclusion of the Tribunal in this regard was incorrect. The references were answered accordingly, with no order as to costs.

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