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TMI Blog1994 (9) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... nd petitioner. -------------------------------------------------- The judgment of the Court was delivered by SUHAS C. SEN, J.- This is an appeal against the Full Bench judgment of the Gujarat High Court, holding the appellant purchaser of sugarcane and as such liable to pay tax under the provisions of the Gujarat Sales Tax Act, 1969. The appellant, is a co-operative society registered under the Bombay Co-operative Societies Act, 1925. Its main object is to encourage development of agricultural industries amongst its members by introducing modern methods of agriculture and by promotion of principles of co-operation and joint farming methods, so that members can take maximum advantage of their modern large- scale agricultural production. The appellant-society supplies to its members seeds, manure, agricultural implements and expert advice and assistance, for production of sugarcane. Sugarcane supplied by the members are utilised by the society at its factory for manufacturing sugar. The society grants loans to the producer- members against sugarcane entrusted by them to the society. The society crushes the sugarcane and manufactures sugar and sells the same in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crops and development of agriculture." (Underlining* provided.) Therefore, it will appear that the bye-laws which were taken into account in the case of Khedut Sahakari Ginning and Pressing Society Ltd. [1972] 29 STC 105 (SC); [1971] 3 SCC 480 were quite different from the bye-laws of the society in the case before us. This society cannot be treated as an agent of the producers of sugarcane for selling their product. The society manufactures sugar out of sugarcane grown and supplied by its members and others. The sugarcane required by the society is purchased from members as well as non-members. It is true that the society has been formed for the benefit of the members and the sale proceeds from the sugar manufactured and sold, are to be distributed as far as possible amongst its members, but the society cannot be described as an agent of the members to sell sugarcane grown by them. The position is made clear by the following bye-laws: "8. Every member shall be bound to sell sugarcane grown on all his lands in factory area to the factory. The factory will, however, be bound to buy sugarcane only up to the total acreage covered by the shares held by a member. 27.. The dutie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety. (iii) There was an obligation on the part of the society to take certain quantity of sugarcane and obligation on the part of the member to supply such quantity. (iv) The society supplied the seeds, the manure and technical advice and staff for harvesting. (v) The members were given loans on interest not exceeding 70 per cent of the market value of the sugarcane supplied. (vi) Sugarcane crop was brought to the factory. (vii) The directors at the end of the year decide the amount to be paid to the members in respect of the sugarcane supplied and the price was determined as per bye-law No. 32. The proceeds of the sale of sugar go to the members by way of price of sugarcane as the price of sugarcane is linked with the price of sugar under bye-law No. 32. (viii) Distribution by way of price of sugarcane supplied had no relation to the quality of sugarcane supplied by each member. It depended upon the quantity alone. The Tribunal was of the view that the question involved in the aforesaid appeals were covered by the judgment of the Gujarat High Court in Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat, being Sales Tax Reference No. 7 of 1966, dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been reversed by this Court, the reference should be heard by the Full Bench. Accordingly, the Full Bench of the Gujarat High Court heard this case as also the cases of all other similar societies. The Full Bench came to the conclusion, after referring to the bye-laws of the society, that the transactions between the appellants and its members regarding the supply of sugarcane amounted to purchase of sugarcane by the society from its members. By a common judgment all the references, made at the instance of the sugar societies, were disposed of on the ground that the facts of all these cases were similar and the bye-laws of the various societies were also more or less identical. In this appeal, it has been contended that the Full Bench of the High Court had failed to recognise the overriding effect and scope of co-operative principles in interpreting the bye-laws of the society. The co-operative society was primarily formed with the object of encouraging better production of sugarcane crop of its members and to fetch the best available return for the said produce by converting sugarcane into sugar and marketing the same in the country. The real object of the society was to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons which buys goods from or sells goods to its members". Although the Act has specifically exempted an agriculturist, who sells agricultural produce grown on land cultivated by him personally, no exemption has been granted to a person or a society who buys agricultural produce from such an agriculturist. The incidence of tax in section 3 is on sales or purchases made by the dealer. Section 2(10) of the Gujarat Sales Tax Act, 1969, has also defined a "dealer ", to include any society, club or other association of persons which buys goods from or sells goods to its members or to other persons. An agriculturist, who sells agricultural produce has been exempted from this definition. Therefore, it is clear from the provisions of the Bombay Sales Tax Act as well as the Gujarat Sales Tax Act that a society, which purchases goods from its members, is a "dealer". If that be so, the only way the society could get out of the net of taxation was by showing that it did not purchase sugarcane from its members. In the case of Khedut Sahakari Ginning and Pressing Society Ltd. [1972] 29 STC 105 (SC); [1971] 3 SCC 480, this Court went into the bye-laws of the society and came to the conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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