2020 (4) TMI 192 - HC - VAT and Sales Tax

Inter-state transaction or not - providing of foundation seeds to the farmers, supervision of its growing and dispatch from U.P. to Kota in the State of Rajasthan - whether the transaction cannot be treated as purchase within the State of U.P., since the process of purchase was completed in Kota in the State of Rajasthan when the processing and testing of the seeds was complete in Kota and thereafter it was accepted by the applicant company? - HELD THAT - Undoubtedly, from a perusal of the record as well as various documents annexed by the revisionist it is clear that procurement of such seeds is taxable within the State of U.P. It has been admitted that the farmers are paid 90 percent of the price at the stage when the said transaction takes place and the remaining amount is paid depending upon the quality of certificate issued by the unit at Kota - The Tribunal has rightly held that this aspect of the transaction culminated in the State of U.P. wherein the procurement of the said seeds takes place from the farmers by the assessee/through their contractor is an intra-State sale which is totally covered by the provisions of Trade Tax Act. There is no infirmity with the order of the Tribunal which has delved into all the aspects including various contracts and determined that sale of seeds by farmers is taxable in Uttar Pradesh - No other fact or argument was placed before this Court which could persuade this Court for interfering with the order passed by the Tribunal. Revision dismissed.

Summary

Issues:
1. Assessment of tax on procurement and transmission of seeds by a company under U.P. Trade Tax Act.
2. Interpretation of agreements between the company and contractors for procurement of seeds.
3. Determination of taxable transactions within the State of U.P. and inter-State transfers.

Analysis:
1. The revisionist, a public limited company, challenged the order of the Commercial Tax Tribunal regarding the taxation of transactions involving procurement and transmission of seeds. The company argued that the transaction, involving the purchase of seeds from farmers in U.P. and sending them to Kota for processing, should not be taxed by U.P. as it constitutes an inter-State transfer. The assessing authority had taxed the transaction under the U.P. Trade Tax Act, which was upheld by the first appellate authority and the Tribunal.

2. The key contention revolved around the nature of the agreements between the company and contractors engaged for seed procurement. The Tribunal observed two distinct transactions: procurement of seeds from farmers within U.P. and subsequent transfer to Kota, Rajasthan. The first transaction was deemed taxable within U.P., while the second, involving inter-State transfer, was not subject to U.P. Trade Tax. The agreements specified the responsibilities of contractors in seed procurement, disbursement of payments to growers, and quality certification processes.

3. The Court analyzed the agreements and transactions in detail, emphasizing that the procurement of seeds from farmers in U.P. constituted an intra-State sale taxable under U.P. Trade Tax Act. The Tribunal's decision to tax this aspect of the transaction within U.P. was deemed appropriate. The Court found no reason to interfere with the concurrent findings of the assessing authority, first appellate authority, and the Tribunal. The revision was dismissed, affirming the taxability of seed procurement within the State of U.P. The judgment highlighted the importance of contractual terms, payment disbursement, and quality certification in determining the tax liability of the company.

This detailed analysis of the judgment addresses the issues involved, the arguments presented by the parties, and the Court's reasoning in determining the taxability of the transactions under the U.P. Trade Tax Act.