2018 (4) TMI 650 - HC - VAT and Sales Tax

Valuation - includibility in purchase turnover - transport subsidy paid for transport of sugarcane beyond 40 Kms (cane development charges) - Whether the transport subsidy is part of the purchase price liable to be taxed? - Held that - In Ponni Sugars (Erode) Limited Vs. Deputy Commercial Tax Officer 2005 (11) TMI 247 - SUPREME COURT OF INDIA , the issue as regards transport subsidy has been considered by the Hon ble Supreme Court and it was held that As found as a matter of fact that the transport subsidy formed part of the consideration for the purchase of the sugarcane by the appellant from the sugarcane growers - tax case revision dismissed.

Issues Involved:
1. Inclusion of transport subsidy in the purchase turnover of sugarcane.
2. Taxability of planting and development subsidy.
3. Taxability of transport charges within 40 kilometers.
4. Applicability of Rule 6(c) of the Tamil Nadu General Sales Tax Rules.

Detailed Analysis:

1. Inclusion of Transport Subsidy in the Purchase Turnover of Sugarcane:
The petitioner was assessed for including transport subsidy paid for transporting sugarcane beyond 40 kilometers as part of the purchase turnover. The Sales Tax Appellate Tribunal upheld this inclusion, distinguishing the judgment in 38 STC 238 and following 60 STC 113 (Kallakurichi Co-operative Sugar Mills Ltd v. State of Tamil Nadu). The Tribunal held that under Section 2(r) of the Tamil Nadu General Sales Tax Act, freight charges form part of the turnover. The Tribunal's decision was supported by the Full Bench of the Madras High Court in Chengalvarayan Co-operative Sugar Mills Ltd. v. State of Tamil Nadu, which held that transport subsidy linked to the supply of sugarcane forms part of the purchase price and is includible in the purchase turnover.

2. Taxability of Planting and Development Subsidy:
The Appellate Assistant Commissioner had held that planting subsidy cannot be taxed. The Tribunal upheld this view, stating that planting and variety subsidies paid to cane growers as incentives do not form part of the purchase price of sugarcane and are not taxable. This was consistent with previous Tribunal decisions in MTA 554/80 & 555/80 dated 14-5-81.

3. Taxability of Transport Charges Within 40 Kilometers:
The Tribunal noted that for sugarcane transported within 40 kilometers, the appellant deducted freight charges from the purchase price and paid the balance to the growers. This practice indicated that the appellant treated freight charges as part of the purchase price. The Tribunal held that freight charges, whether paid directly to third-party lorry owners or deducted from the price, form part of the purchase price and are taxable.

4. Applicability of Rule 6(c) of the Tamil Nadu General Sales Tax Rules:
The petitioner argued that under Rule 6(c), transport charges, even if absorbed by the petitioner, should not be included in the turnover as they are post-purchase expenditures. However, the Tribunal and the Full Bench of the Madras High Court in Chengalvarayan Co-operative Sugar Mills Ltd. v. State of Tamil Nadu clarified that transport charges incurred prior to the purchase are part of the purchase turnover and cannot be excluded under Rule 6(c).

Conclusion:
The High Court dismissed the Tax Case Revisions, upholding the Tribunal's decision that transport subsidy and charges are includible in the purchase turnover of sugarcane. The planting and development subsidies were correctly excluded from the taxable turnover. The Tribunal's interpretation of Rule 6(c) was affirmed, emphasizing that pre-purchase transport charges form part of the taxable turnover.

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