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TMI Blog1982 (11) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... icular basis agreed between the parties. It is relevant to state that under the agreement, the assessee had not undertaken to supply the diesel oil for the lorries, which means that the lorry contractors had to procure the requisite quantity of diesel from the usual or their own sources. It so happens that the assessee owns a private petrol bunk, which it has installed to meet the requirements of its own vehicles and lorries. Mr. P. Venkatarama Reddy tells us that the assessee has paid 12 per cent Central sales tax on the fuel which is supplied to it for the said petrol bunk, and that no C forms are also issued by the assessee, which would have enabled it to claim a lesser rate of Central sales tax. Be that as it may, the admitted fact is that the diesel was supplied from the assessee's private petrol bunk to the lorries belonging to the contractors and which were engaged by the assessee during the crushing season. (The diesel is said to have been supplied at the cost price without charging any profit). The department included the said turnover relating to diesel, in the total turnover of the assessee, which was objected to. The Tribunal held that inasmuch as the assessee was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and other production requirements, including agricultural credit and to provide technical advice on improved cultivation methods". In pursuance of these objects of the society as incorporated in the bye-laws, the assessee procured chemical fertilisers and supplied the same to its shareholders, in proportion to the shares held by them. This supply of chemical fertilisers was treated as "sales". Mr. Venkatarama Reddy's contention is that the situation here is akin to the one obtaining in the case of supply of food and other amenities by the clubs to their members, and therefore, the principle enunciated by courts in that behalf applies with equal force herein. Reliance is placed upon Joint Commercial Tax Officer v. Young Men's Indian Association [1970] 26 STC 241 (SC), a decision of the Supreme Court. The Supreme Court there pointed out, on a reference to the English decisions, that in the case of unincorporated clubs, the principle adumbrated was that all the members jointly own the property and the goods of the club, and therefore, there is no question of sale of the food or other articles supplied by the club to its members. In the case of incorporated clubs, the theory appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not know the ways of business. The general belief is that taking advantage of the ignorance and illiteracy of the farmers, businessmen exploit them. To avoid such exploitation, the Act authorised the formation of co-operative societies of the farmers through which they can sell their goods. Those societies merely function as agents for the farmers who are their members. By becoming members of those societies and subscribing to their bye-laws, they had given large powers to their agents so that their produce may be sold in the best possible manner. None of the bye-laws of the society goes to show that the society had purchased the goods entrusted to it by its members." In our opinion, the principle of these two decisions squarely applies to the facts of the present case. Here also, the shareholders of the society mostly are from a rural area, and the presumption that they may not know the ways of business and in case they individually go to purchase, the possibility of their being exploited by businessmen, is equally real. For that reason, they came together to form the assessee-co-operative society, and one of the objects for which the society was formed, was to procure chemic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Government Pleader then relied upon the decision in Deputy Commissioner of Commercial Taxes, Tiruchirapalli Division v. North Arcot District Co-operative Sugar Mills Ltd. [1974] 34 STC 543, which is also relied upon by the Tribunal in support of its view. It would be appropriate to briefly note the basic facts of that case. The assessee there was a co-operative sugar mill, and it regularly purchased fertilisers of different kinds, manufactured a new manure mixture, and supplied the same to the cane-growers, who were members of the society. The supplies made to the cane-growers were shown in the accounts of the mill as "sales" effected by the society. In those circumstances, the Tribunal found that there was a sale of manure to the cane-growers, but held that inasmuch as the mill was not a dealer in fertilisers, the sale cannot be subjected to sales tax. When the matter came up before the Madras High Court, it was contended by the assessee-sugar mill that inasmuch as under bye-law 43 the society is expected to advance moneys to its shareholders, the society made advances partly in the shape of cash and partly in kind, i.e., in the shape of fertilisers and therefore such supply c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary means of delivery and transport, and hence it cannot be held that there was an implied contract for sale of gunny bags. Now, admittedly there was no express contract for the sale of gunny bags, nor does the bill issued by the assessee show separately the value or the cost of gunny bags supplied, though it is true that sales tax is charged on the value of gunny bags (at the rate of 0.12 paise each bag). The only question is, whether in the circumstances of the case, it can be held that there was an implied contract for the sale of gunny bags. The law on the subject has been set out in Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh [1966] 17 STC 624 (SC) which has been referred to with approval in State of Madras v. Cement Allocation and Co-ordinating Organisation [1972] 29 STC 114 (at page 117) (SC). The statement of law which was approved and which is also relevant for our purposes, reads as follows: "In the instant case, it is not disputed that there were no express contracts of sale of the packing materials between the assessee and its customers. On the facts, could such contracts be inferred? The authority concerned should ask and answer the question whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Railway freight being Rs. 274.40 was added to the value of the goods and sales tax was collected by the company from the purchasers. That indicated, according to counsel for the respondent, that the true effect of the agreement between the parties was that the price was inclusive of the railway freight. But the form in which the invoice is made out is not determinative of the contract between the company and its customers. If, apprehending that it may have to pay sales tax on the freight, the company collected sales tax on the freight, the true nature of the contract between the company and the purchasers cannot on that account be altered. The company may be liable to refund the amount of excess sales tax to its purchasers. But that is a matter between the company and the purchasers and the State cannot seek to levy tax on railway freight if it is not made a part of the price........" Moreover, in this case, the benefit of such unauthorised collection ultimately goes to the members of the society only, who are very large in number. Having regard to the observations of the Supreme Court, referred to above, we hold that the Tribunal was in error in holding that the value of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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