2018 (9) TMI 299 - HC - VAT and Sales Tax

Levy of Purchase Tax - purchases of such seeds from various farmers - the assessee had made purchases of seeds from the farmers who are unregistered dealers - Government notification dated 29.4.2006 - Did the case of the assessee fall within the determination order in case of M/s. Green India Farm Biotech or in the later order in case of M/s. King and Queen Seeds Corporation? The Deputy Commissioner however did not accept such representation of the company. He was of the opinion that essentially the company merely purchased seeds from the farmers. At that stage, seeds were possible of human consumption. It was only after the detailed process undertaken by the company that the seeds would become marketable and were actually sold by the company. - He confirmed the demand of tax with interest and penalty. - Tribunal deleted the demand. Held that - The entire process of cultivation, cost and risk involved were on the shoulders of the farmer. The company had clearly purchased the seeds so produced by the farmer. This was therefore, clearly a case as one involved in determination order in case of M/s. Green India Farm Biotech and not akin to later determination order in case of M/s. King and Queen Seeds Corporation - the Tribunal committed a serious error. The revisional order of the Deputy Commissioner is restored.

Summary

Issues involved:
Challenge to judgment by State Government regarding levy of purchase tax on seeds purchased from farmers by a limited company engaged in agriculture produce business.

Analysis:
1. The State Government filed a petition challenging a judgment by the Gujarat Value Added Tax Tribunal regarding the levy of purchase tax on seeds purchased by a limited company from farmers.

2. The company contended that it was a producer of various seeds exempt from tax sales, as per a government notification. The company claimed that it oversaw the production process of seeds by farmers under its guidance and supervision, ensuring quality and testing before marketing the seeds. The Deputy Commissioner, however, imposed tax, interest, and penalty on the dealer, leading to the company filing a revision petition with the Tribunal.

3. The Tribunal allowed the revision petition based on various grounds, including the failure of the authorities to levy tax despite the existence of similar determination orders in other cases. The Tribunal found that the company's process of seed production by farmers did not amount to a purchase of seeds, akin to a previous determination order in a different case.

4. The High Court analyzed the facts of the case, comparing them with the determination orders in previous cases involving similar issues. The Court noted that the company's agreement with farmers indicated that the entire production process of seeds was undertaken by the farmers themselves, with the company providing only foundation seeds and technical guidance. The Court concluded that the company had indeed purchased the seeds produced by the farmers, making the case similar to the earlier determination order in a different case.

5. The Court clarified that while the determination order may bind the department, it does not bind the assessee if it was not the determination order in their case. The Court held that the Tribunal erred in its judgment and reversed the Tribunal's decision, restoring the revisional order of the Deputy Commissioner.

6. The petition was disposed of accordingly, emphasizing the importance of considering the specific facts and agreements in each case when determining tax liabilities on agricultural produce transactions involving farmers and companies.