2020 (1) TMI 512 - HC - VAT and Sales Tax

Levy of purchase tax - 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 - inclusion of the charges in purchase price or not - Sellers/Agriculturists are unregistered dealers - 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 . It was held by a Full Bench of this court in the case of CHENGALVARAYAN CO-OPERATIVE SUGAR MILLS LTD. that if subsidy-whatever name or nomenclature it may assume and whether paid or payable prior to or subsequent to the entering into contract of sale-is linked to the supply of sugarcane, such subsidy and expenses incurred for the transportation of the sugarcane to the factory site-whether incurred by the grower initially and paid by the sugar mills subsequently or incurred by the sugar mills and shown separately in the invoices-by adopting whatever procedure reflecting those amounts in the accounts-shall form part of the price includible in the purchase turnover as such transportation alone makes the passing of property in the sugarcane sold by the grower to the assessee-mills complete. 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, there are 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.

Summary

Issues Involved:
1. Inclusion of freight charges or delivery charges in the total purchase price liable for purchase tax under the TNGST Act.
2. Validity of planting subsidy and transport subsidy being part of the purchase price.
3. Legitimacy of transport charges paid to third-party lorry owners being included in the taxable turnover.
4. Levy of penalty under Section 12(3)(b) of the Act for non-payment of tax on disputed charges.

Detailed Analysis:

1. Inclusion of Freight Charges or Delivery Charges in the Total Purchase Price:
The court examined whether the freight charges or delivery charges paid by the Sugar Mills to 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. The Tribunal and the court relied on previous judgments, including the Full Bench decision in Chengalvarayan Cooperative Sugar Mills Limited v. State of Tamil Nadu and the Supreme Court rulings in E.I.D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes and Ponni Sugars (Erode) Ltd. v. Deputy Commercial Tax Officer. These cases established that such charges are part of the consideration for the purchase of sugarcane and therefore should be included in the purchase price.

2. Validity of Planting Subsidy and Transport Subsidy Being Part of the Purchase Price:
The court referred to the Supreme Court's decision in E.I.D. Parry (I) Ltd., which held that planting subsidy and transport subsidy paid by sugar mills to cane growers are part of the consideration for the purchase of sugarcane. The subsidies were given to ensure the supply of sugarcane and were linked to the sale transaction. The Tribunal's view that these subsidies should be included in the purchase price was upheld, as they were not ex gratia payments but were necessary for completing the sale.

3. Legitimacy of Transport Charges Paid to Third-Party Lorry Owners Being Included in the Taxable Turnover:
The court examined whether transport charges paid to third-party lorry owners should be included in the taxable turnover. The Tribunal noted that the sugar mills deducted these charges from the statutory cane price and claimed exemption, which was not acceptable. The court upheld the Tribunal's decision, emphasizing that these charges were part of the purchase price since the sugarcane had to be delivered at the factory gate as per the agreement with the growers. The contractual obligation for delivery at the mill gate had not been varied, making the transport charges a component of the purchase price.

4. Levy of Penalty Under Section 12(3)(b) of the Act:
The court considered the penalty levied by the Assessing Authority for the assessment year 1993-94 under Section 12(3)(b) of the Act. The Tribunal found that the dealer-appellants had a bona fide belief that the disputed charges were not includible in the purchase price and had not suppressed any turnover. Consequently, the court agreed with the Tribunal's decision to delete the penalty but allowed the Assessing Authority to levy interest under Section 24(3) of the Act for the belated payment of tax due.

Conclusion:
The court dismissed the Tax Case filed by the Assessee, finding no merit in the arguments presented. The Tribunal's decision to include the components of price for sugarcane, plantation subsidy, and transportation charges in the purchase price was upheld. The penalty was deleted, but interest could be levied for the delayed tax payment. The judgment aligns with previous rulings by the Full Bench and the Supreme Court, affirming the inclusion of such charges in the taxable turnover under the TNGST Act.