1993 (12) TMI 218 - HC - VAT and Sales Tax

Issues Involved:
1. Levy and collection of purchase tax on the amount paid above the minimum sugarcane price fixed by the Central Government.
2. State Government's advisory minimum price and its impact on purchase tax.
3. Validity of the assessment order and appellate order.

Detailed Analysis:

1. Levy and Collection of Purchase Tax on Amount Paid Above Minimum Price:

The petitioner challenged the assessment order and demand notice issued by the assessing authority, which included purchase tax on the entire amount paid to sugarcane growers, not just the minimum price fixed by the Central Government. The petitioner argued that only the minimum price fixed under clause 3 of the Sugarcane (Control) Order, 1966, should be subject to purchase tax, and any additional amount paid should not be taxed as it was an advance towards the additional price under clause 5A.

2. State Government's Advisory Minimum Price:

The petitioner contended that the State Government's advisory minimum price was not legally binding and that any payment above the minimum price fixed by the Central Government was made under coercion due to the State Government's advisory. The petitioner argued that such payments should not be subject to purchase tax.

3. Validity of the Assessment Order and Appellate Order:

The petitioner sought to quash the assessment order and appellate order, arguing that the entire amount paid to the cane growers should not be included in the taxable turnover for purchase tax purposes.

Analysis:

Levy and Collection of Purchase Tax:

The court observed that under the Karnataka Sales Tax Act, 1957, purchase tax is levied on the dealer's taxable turnover of purchases, which includes the aggregate amount for which the goods are bought. The court referred to the definition of "price" in the Sugarcane (Control) Order, 1966, and noted that the minimum price fixed by the Central Government is only the minimum amount that should be paid by the sugar producer, not the maximum or ceiling price. The court held that the entire amount paid to the cane growers, including any additional amount above the minimum price, is subject to purchase tax.

State Government's Advisory Minimum Price:

The court found that the State Government's advisory minimum price is not legally binding and does not have the force of law. The advisory price is merely recommendatory and does not create a legal compulsion for the sugar producer to pay the advised price. The court held that purchase tax cannot be demanded based on the State advised minimum price unless the sugar producer has actually paid or agreed to pay such price.

Validity of the Assessment Order and Appellate Order:

The court upheld the assessment order and appellate order, stating that the assessing authority is entitled to levy and collect purchase tax on the entire amount paid by the petitioner to the cane growers. The court emphasized that any consideration paid to the cane growers, whether termed as an advance, incentive, or otherwise, is subject to purchase tax.

Judgment:

The court dismissed the writ petition and confirmed the validity of the assessment order and appellate order. The court issued clarifications and directions regarding the levy and collection of purchase tax on sugarcane supplied under the Sugarcane (Control) Order, 1966:

(a) Purchase tax is payable only on the minimum price fixed by the Central Government if no additional amount is paid.
(b) Purchase tax cannot be demanded based on the State advised minimum price unless it has been paid or agreed to be paid.
(c) If the sugar producer pays or agrees to pay a negotiated price higher than the minimum price, purchase tax is payable on such agreed price.
(d) Purchase tax is payable on the additional price fixed under clause 5A(1) of the Control Order when determined.
(e) Any amount paid in excess of the minimum price is subject to purchase tax, irrespective of how it is described.

The court rejected the petitioner's request for a certificate of fitness to appeal to the Supreme Court, stating that the case did not involve any substantial question of law of general importance. However, the court continued the stay regarding the payment of the additional amount of purchase tax for four weeks to allow the petitioner to approach the Supreme Court.

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