2024 (9) TMI 611 - HC - VAT / Sales Tax

Taxability - State Advisory Price (SAP) voluntarily paid by the petitioner mills to cane growers - HELD THAT - In the present case, there is nothing to show that the advance payments are irrecoverable or that the petitioner does not intend to recover the same. However, and admittedly, the payment of SAP by the petitioner is voluntarily, though under compulsion, and not under a condition imposed either by contract or statute. It is agreed that the payment of SAP is voluntary, traceable solely to maintaining goodwill and a congenial relationship with the cane growers. Such payments cannot be taken to be part of purchase price for the purpose determining turnover under the Act as the payments to be taken into account for that purpose can only be the payments mandated to be paid under the statute. Incidentally, the petitioner is under a statutory obligation to pay tax in respect of SAP from the year 2018 onwards and the petitioner confirms that such payments are being made. The impugned order is set aside - petition allowed.

Issues:
1. Taxability of State Advisory Price (SAP) paid voluntarily by petitioner mills to cane growers.
2. Legal basis for payment of SAP before the enactment of Tamil Nadu Sugarcane (Regulation of Purchase Price) Act, 2018.
3. Tripartite meeting requirement for fixation of SAP.
4. Interpretation of the nature of SAP payments under the Tamil Nadu General Sales Tax Act 1959.

Analysis:
1. The judgment dealt with the taxability of the State Advisory Price (SAP) voluntarily paid by the petitioner mills to cane growers. The petitioner contested that the SAP payments were voluntary and not contractual or statutory. The court noted that till 2018, the payment of SAP was based on negotiations between the State, mills, and cane growers in a tripartite meeting, without statutory compulsion. The court analyzed the nature of SAP payments and their impact on tax liability under the Act.

2. The court discussed the legal basis for the payment of SAP before the enactment of the Tamil Nadu Sugarcane (Regulation of Purchase Price) Act, 2018. It highlighted the collaborative procedure followed in Tamil Nadu for fixing SAP, emphasizing the negotiations among the State, cane growers, and sugar mills. The absence of a statutory compulsion for SAP payments before 2018 was a crucial aspect in determining the taxability of such payments.

3. The judgment addressed the requirement of a tripartite meeting for the fixation of SAP. It noted that the petitioner had not participated in the tripartite meeting for price fixation in 1995, indicating a lack of consensus among stakeholders. The court considered the absence of a formal tripartite meeting and its implications on the voluntary nature of SAP payments made by the petitioner, emphasizing the importance of stakeholder collaboration in such matters.

4. The court interpreted the nature of SAP payments under the Tamil Nadu General Sales Tax Act 1959. It referred to previous judgments and legal provisions to determine that SAP payments made voluntarily by the petitioner, without contractual or statutory compulsion, could not be considered part of the purchase price for tax calculation purposes. The court concluded that only payments mandated by statute could be included in turnover calculations, highlighting the distinction between voluntary SAP payments and statutory obligations.

In conclusion, the court set aside the impugned orders, allowing the writ petitions related to the taxability of SAP payments. The judgment clarified the voluntary nature of SAP payments, the absence of statutory compulsion before 2018, and the significance of stakeholder consensus in fixing SAP. It emphasized the legal basis for tax calculations under the Act and the distinction between voluntary payments and statutory obligations.

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