1993 (5) TMI 164 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether purchase tax can be levied on the amount of market fee paid by the dealer.
2. Whether the market fee paid by sellers on behalf of purchasers who are not licensees should be included in the turnover for the purposes of purchase tax.

Detailed Analysis:

Issue 1: Purchase Tax on Market Fee Paid by Dealers
The petitioners, who are licensees under the Punjab Agricultural Produce Markets Act, 1961, and registered dealers under the Punjab General Sales Tax Act, 1948, argued that they should not be liable to pay purchase tax on the market fee. The court noted that the legal duty to pay market fee lies with the buyer (purchaser) when agricultural produce is purchased locally. The market fee paid by the petitioners directly to the market committee cannot be considered as part of the consideration paid for the agricultural produce.

The court referenced Section 23 of the Punjab Agricultural Produce Markets Act, 1961, which specifies the levy of fees on agricultural produce transactions. Rule 29(2) further clarifies that the responsibility of paying the market fee is on the buyer, and if the buyer is not a licensee, then the seller may realize the fee from the buyer.

The court concluded that the market fee paid by the petitioners should not be included in their turnover for the purposes of assessment or payment of purchase tax. This conclusion was supported by judicial precedents such as the Supreme Court decision in Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax [1980] 46 STC 477, which held that market fees collected from purchasers by dealers do not form part of the consideration for the purpose of sales tax.

Issue 2: Market Fee Paid by Sellers on Behalf of Non-Licensee Purchasers
In cases where the petitioners made purchases from areas where they were not registered as licensees, the sellers collected and deposited the market fee on behalf of the purchasers. The court examined whether this market fee should be included in the turnover for the purposes of purchase tax.

The court reiterated that the legal obligation to pay the market fee is on the buyer. If the buyer is not a licensee, the seller deposits the market fee on behalf of the buyer and may subsequently realize it from the buyer. The court rejected the State's contention that the market fee should be included in the purchase price and thus be subject to purchase tax.

The court distinguished the facts from cases like Commissioner of Sales Tax v. Rai Bharat Das & Bros. [1988] 71 STC 277 and Dalmia Cement (Bharat) Ltd. v. State of Tamil Nadu [1991] 81 STC 327, where additional charges (e.g., packing charges) were included in the sale price. The court found these cases inapplicable as the market fee is a statutory obligation of the buyer, not an additional service requested by the purchaser.

The court also referenced Cauvery Sugars and Chemicals Ltd. v. Joint Commercial Tax Officer [1972] 29 STC 1, where it was held that a statutory cess paid by the buyer could not be included in the purchase turnover.

Conclusion:
The court allowed all the writ petitions, holding that purchase tax cannot be charged on the amount of market fee as it does not form part of the turnover. The market fee paid by the petitioners, whether directly or through sellers, should not be included in the turnover for the purposes of assessment of purchase tax. There was no order as to costs.