2020 (2) TMI 474 - HC - VAT and Sales Tax

Levy of purchase tax - Valuation - freight charges or delivery charges paid by the Sugar Mills, Assessee to the Lorry Owners for getting the sugar cane from the fields of the sugar cane growers to the factory gate - TNGST Act - HELD THAT - The controversy is no longer res integra as this very controversy came to be decided by a Full Bench of this court in the case of CHENGALVARAYAN CO-OPERATIVE SUGAR MILLS LTD. OTHER VERSUS STATE OF TAMIL NADU OTHER 1996 (7) TMI 522 - MADRAS HIGH COURT which came to be affirmed by the Hon'ble Supreme Court in the case of EID. PARRY (I) LTD. OTHERS VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES AND ANOTHER 1999 (12) TMI 708 - SUPREME COURT and later on followed by the Hon'ble Supreme Court in the case of PONNI SUGARS (ERODE) LTD. VERSUS DEPUTY COMMERCIAL TAX OFFICER 2005 (11) TMI 247 - SUPREME COURT where it was held that transport subsidy was a part of the consideration for which sugarcane was sold by the sugarcane growers to the appellants. Though the agreements between the parties provided for delivery by the sugarcane growers at the factory gate and though the transport charges paid by the appellants were not to the sugarcane growers but to third party lorry owners , they were made for securing regular supply of sugarcane as per the requirements. Since the view of the learned Sales Tax Appellate Tribunal is in consonance with the decision of the Full Bench of this Court and that of the Hon'ble Supreme Court, we have no reason to take a different view as there is no distinction on facts in the present case and the purchase of sugar cane by the Assessee Sugar Mill during the period in question also happened in a similar way and therefore, the mere bifurcation of prices in the invoices to the extent of transport charges or plantation subsidy will not materially affect the aforesaid prevailing legal position. The Tribunal is justified in imposing the purchase tax on the Assessee Sugar Mill on the entire purchase price including the components of price for the sugar cane, plantation subsidy and transportation charges paid by the Assessee for transportation of sugar cane from the sugarcane fields to the factory premises of the Petitioner - Appeal dismissed - decided against assessee.

Issues Involved:
1. Inclusion of freight charges or delivery charges in the total purchase price for purchase tax under the TNGST Act.
2. Levy of penalty under Section 12(3)(b) of the Act.

Issue-Wise Detailed Analysis:

1. Inclusion of Freight Charges or Delivery Charges in the Total Purchase Price:

This Tax Case was filed by the Assessee, aggrieved by the order of the Sales Tax Appellate Tribunal, which held that freight charges or delivery charges paid by the Sugar Mills to the Lorry Owners for transporting sugarcane from the fields to the factory gate should be included in the total purchase price liable for purchase tax under the TNGST Act because the Sellers/Agriculturists are unregistered dealers under the said Act.

The controversy is no longer res integra as it has been decided by a Full Bench of this court in Chengalvarayan Co-operative Sugar Mills Limited v. State of Tamil Nadu, affirmed by the Hon'ble Supreme Court in E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes, and later followed in Ponni Sugars (Erode) Ltd. v. Deputy Commercial Tax Officer.

In EID Parry (I) Limited, the court noted that the planting subsidy paid to cane growers was part of the consideration for the sale of sugarcane and thus included in the taxable turnover. The transport subsidy was similarly deemed a part of the consideration for the sale of sugarcane. The agreements between the parties provided for delivery by the sugarcane growers at the factory gate, and the transport charges paid by the appellants to third-party lorry owners were made to secure regular supply of sugarcane as per requirements. These payments were not post-sale expenses but were necessary for completing the sale.

In Ponni Sugars, the court held that transport charges were part of the purchase price as they were necessary for the delivery of sugarcane to the factory gate, as per the contractual obligation. The court affirmed that any subsidy or expense linked to the supply of sugarcane should be included in the purchase turnover.

The Tribunal, in the impugned order, observed that the sugar mills were governed by the Madras Sugar Factories Control Act, 1949, and the Sugar Cane (Control) Order, 1966, which required sugarcane to be delivered at the factory gate. The Tribunal concluded that transport charges paid to third-party lorry owners were to be included in the purchase price of sugarcane as they were deducted from the statutory cane price.

Thus, the Tribunal's view was in consonance with the decisions of the Full Bench of this Court and the Hon'ble Supreme Court. The mere bifurcation of prices in invoices to the extent of transport charges or plantation subsidy does not materially affect the prevailing legal position. Therefore, the Tribunal was justified in imposing the purchase tax on the entire purchase price, including the components of price for sugarcane, plantation subsidy, and transportation charges.

2. Levy of Penalty under Section 12(3)(b) of the Act:

The next issue involved was the levy of penalty by the Assessing Authority for the assessment year 1993-94 under Section 12(3)(b) of the Act, amounting to ?63,34,292/-, which was sustained by the Appellate Joint Commissioner. The Assessing Authority levied 50% of the balance of the tax assessed and tax paid as per the assessment order. The Appellate Joint Commissioner sustained the penalty, noting that the dealer-appellants were aware of the decisions in E.I.D. Parry (I) Limited and Chengalvarayan Co-operative Sugar Mills Limited cases, which declared that transport charges and subsidies were part of the purchase price and liable to tax.

The dealer-appellants contended that they had acted bonafide and their conduct was not contumacious of guilt, maintaining a bonafide belief that the facts were distinguishable from the case decided by the Supreme Court.

Considering the order of the Appellate Joint Commissioner and the dealer-appellants' contention, it was found that the dealer-appellants were in bonafide belief, as evidenced by their continuous dispute of the levy of tax on the above payments. There was no suppression of turnover out of accounts, only a claim of exemption later denied by the Assessing Authority. Therefore, no penalty could be levied for the difference in tax due to the non-payment of tax on which exemption was claimed. However, the Assessing Authority was at liberty to levy interest under Section 24(3) of the Act from the due date.

In the result, the appeals in CTA Nos.138/02, 140/02, 141/02, 194/02, 195/02, 315/02, 316/02, and 332/02 were dismissed, and the appeal in CTA 58/09 was modified with a direction to the Assessing Authority to impose interest under Section 24(3) of the Act from the due date for belated payment of tax due on the turnovers of ?59,11,518/-, ?1,86,97,256/-, and ?3,25,88,998/-.

Conclusion:

Since the view of the learned Sales Tax Appellate Tribunal aligns with the decision of the Full Bench of this Court and the Hon'ble Supreme Court, there is no reason to take a different view. The purchase of sugarcane by the Assessee Sugar Mill during the period in question happened similarly, and the bifurcation of prices in invoices does not affect the legal position. Therefore, the Tribunal was justified in imposing the purchase tax on the entire purchase price, including the components of price for sugarcane, plantation subsidy, and transportation charges. Accordingly, the Tax Case filed by the Assessee is dismissed, and no costs are awarded.

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