2009 (3) TMI 951 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, the expenses incurred by the State or agencies of the Food Corporation of India after acquiring or purchasing the goods before delivery to the petitioner-dealer could form part of gross turnover and be subjected to tax? Whether the foodgrains procured by the Food Corporation of India under the levy order amounts to sale/purchase and can be subjected to tax? Whether, in the facts and circumstances of the case, the Tribunal is right in law in holding that the bardana supplied by the Food Corporation of India along with foodgrains can be subjected to tax? Whether, in the facts and circumstances of the case, the Tribunal is right in law in holding that the market fee can be subjected to tax under the provisions of the Act which had been recovered from the purchasing dealer, viz., Food Corporation of India and ratio of the law laid down in the Supreme Court (Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax 1980 (9) TMI 238 - SUPREME COURT OF INDIA was not applicable to the facts of the case? Held that - The provision is illustrative with regard to the aggregate of the amounts of purchases and parts of purchases actually made by any dealer. Therefore, it would include the price of bag, labour charges, stitching charges, price of jute thread, dammi and carriage, etc. In that regard, the contention of the learned State counsel deserves to be accepted that there is no delivery taken before weighment, which is not possible without packing the agricultural produce in a gunny bag. We also find substance in the contention of the learned counsel that even stitching and labour incurred for all these activities have to be included for effective delivery of the goods, which would include carriage also. Therefore, question No. 1 deserves to be answered in favour of the Revenue and against the dealerFCI. Both the questions 2 and 3 are covered by the judgment of the honourable Supreme Court in Food Corporation of India v. State of Kerala 1997 (1) TMI 459 - SUPREME COURT OF INDIA , thus liable to be answered in favour of the Revenue and against the dealer-FCI. Once the element of market fee is not to form part of the consideration then it cannot be included in the total turnover for the purposes of realising the tax. Therefore, the additional question of law is liable to be answered in favour of the dealer-FCI and against the Revenue

Summary

Issues Involved:
1. Incidental charges as part of gross turnover.
2. Taxability of foodgrains procured under levy order.
3. Taxability of bardana (gunny bags) supplied with foodgrains.
4. Inclusion of market fee in the total turnover.

Issue-wise Detailed Analysis:

Re: Question No. 1 - Incidental Charges as Part of Gross Turnover:

The first issue pertains to whether expenses incurred by the Food Corporation of India (FCI) after acquiring or purchasing the goods before delivery to the dealer could form part of the gross turnover and be subjected to tax. The court examined the definition of "turnover" under section 2(i) of the Punjab General Sales Tax Act, 1948, which includes any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery. The court found that incidental charges such as weighment, stitching charges, expenses on stitching jute thread, printing of gunny bags, dammi, and carriage are part of the consideration and thus form part of the turnover. The court held that these charges are essential for the effective delivery of the goods and therefore must be included in the turnover. Consequently, Question No. 1 was answered in favor of the Revenue and against the dealer-FCI.

Re: Question Nos. 2 and 3 - Taxability of Foodgrains Procured Under Levy Order and Bardana:

The second issue concerns whether foodgrains procured by the FCI under the levy order amount to sale/purchase and can be subjected to tax. The third issue pertains to whether the bardana supplied by the FCI along with foodgrains can be subjected to tax. The court noted that these questions had already been addressed by the Supreme Court in the case of Food Corporation of India v. State of Kerala [1997] 105 STC 4. The Supreme Court held that levy procurement is a sale/purchase transaction exigible to tax, even if done under statutory compulsion. Additionally, the court ruled that the price of gunny bags used as packing material in these transactions is included in the taxable turnover. Therefore, Questions Nos. 2 and 3 were answered in favor of the Revenue and against the dealer-FCI.

Re: Additional Question - Inclusion of Market Fee in Total Turnover:

The additional issue raised in some references was whether the market fee could be subjected to tax. The court referred to the Supreme Court decisions in State of Punjab v. Guranditta Mal Shauti Prakash [2004] 136 STC 12 and State of Punjab v. Chhabra Rice Mills [2006] 144 STC 1. These judgments held that the market fee is the obligation of the buyer and not the seller. Therefore, it cannot be treated as part of the sale consideration and is not liable to be included in the total turnover for tax purposes. Consequently, the additional question regarding the market fee was answered in favor of the dealer-FCI and against the Revenue.

Conclusion:

The court concluded by answering Questions Nos. 1, 2, and 3 against the dealer-FCI and in favor of the Revenue, while the additional question regarding the market fee was answered in favor of the dealer-FCI and against the Revenue.