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TMI Blog1988 (9) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... e produced in the country. Section 22 of the Act, however, provides for allotment of internal sale quota to each registered estate by the Board with the previous sanction of the Central Government. It is common ground that except for a few years after the commencement of the Act, no internal sale quota of coffee is being allotted to any estate. The resultant position is the entire coffee grown by the petitioners and other planters has got to be delivered to the Coffee Board. The relevant section of the Act, which compel such surrender is section 25 of the Act. It reads: "25. (1) All coffee produced by a registered estate in excess of the amount specified in the internal sale quota allotted to the estate or when no internal sale quotas have been allotted to estates, all coffee produced by the estate shall be delivered to the Board for inclusion in the surplus pool by the owner of the estate or by the curing establishment receiving the coffee from the estate: Provided that where no internal sale quotas have been allotted to estates, the Chairman may allow the owner of any estate to retain with himself for purposes of consumption by his family and for purposes of seed, such quanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes for which the amount from each of the funds could be expended are prescribed in sections 31 and 32 of the Act. The three sections read: "30. The Board shall maintain two separate funds, a general fund and a pool fund. 31.. (1) To the general fund shall be credited- (a) all amounts paid to the Board by the Central Government under sub-section (1) of section 13; and (b) any sums transferred to the general fund under the proviso to sub-section (2) of section 32; and (c) all fees levied and collected by the Board under this Act. (2) The general fund shall be applied- (a) to meet the expenses of the Board; (b) to meet the cost of such measures as the Board may consider advisable to undertake for promoting agricultural and technological research in the interest of the coffee industry in India; (c) for making such grants to coffee estates or for meeting the cost of such other assistance to coffee estates as the Board may think necessary for the development of such estates; (d) to meet the cost of such measures as the Board considers advisable to undertake for promoting the sale and increasing the consumption in India and elsewhere of coffee produced in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en per cent. However, there is an exception incorporated to the word "dealer" which is defined in section 2(k) of the Sales Tax Act. The relevant portion of the definition and the exception read: "2. (k) 'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and includes Exception: An agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally shall not be deemed to be a dealer within the meaning of this clause." In view of the exception, the growers who are under the Act compelled to sell coffee to the Coffee Board, are not liable to pay the sales tax as prescribed under section 5(3)(a) of the Sales Tax Act. 5.. Though a producer-seller is exempt in view of the above provision from paying the sales tax, the purchaser is made liable to pay the tax under section 6 of the Sales Tax Act. The relevant provisions of that section reads: "6. Levy of purchase tax under certain circumstances.-Subject to the provisions of sub-section (5) of section 5, every dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment subjecting the purchase turnover of the Coffee Board during the aforesaid years to purchase tax. Thereafter, the Coffee Board presented writ petitions before this Court questioning the legality of the show cause notice issued by the Commissioner as also the orders passed by the authorities, contending that section 6 of the Sales Tax Act was not at all attracted. The main contention of the Board was that the delivery of coffee by the growers to the Coffee Board was not sale at all and the Coffee Board was only acting as an agent of the producer and, therefore, in view of the exception to the definition of the word "dealer" in section 2(k) of the Sales Tax Act, neither growers nor the Board were liable to pay tax under the Sales Tax Act. The contention of the Board was repelled and the writ petitions were dismissed. The judgment of this Court is Coffee Board v. Commissioner of Commercial Taxes [1985] 60 STC 142; [1985] 2 Kar LJ 397. 7.. The above judgment was taken up in appeal by the Coffee Board before the Supreme Court. The Supreme Court has affirmed the judgment of this Court. The decision is Coffee Board v. Commissioner of Commercial Taxes [1988] 70 STC 162 (SC); AIR 1988 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e States. The learned counsel for the Board has produced a consolidated statement of the amount of tax paid by the Board for the assessment year 1974-75 onwards. It reads: CONSOLIDATED TABLE OF PURCHASE TAX PAID FROM 1974 ONWARDS ----------------------------------------------------------------------------- State Assessment Amt. levied on finalisaAmount Date/ year tion of asst./provisional paid (in period of asst./monthly payment. crores) payment (in crores) ----------------------------------------------------------------------------- Karnataka 74-75 to 60.55 10.38 In 1985 82-83 25.09 5-7-88 4.15 16-8-88 83-84 8.22 8.22 17-8-88 84-85 10.50 10.50 21-8-88 April, 88 ... 0.34 May, 88 May, 88 ... 2.52 June, 88 June, 88 ... 0.55 July, 88 July, 88 ... 0.69 August, 88 Kerala 84-85 2.50 2.50} 85-86 3.00 3.00} April, 84 86-87 4.70 4.70} to 87-88 3.20 3.20} March, 88 April, 88 0.50 0.50} During May, 88 0.16 0.16} April, 88 June, 88 0.58 0.58} to July, 88 July, 88 0.15 0.15} Tamil Nadu May, 88 0.08 0.08 August, 88 -------- Total 77.31 -------- ----------------------------------------------------------------------------- The above payments have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act. They read: "18. Collection of tax by dealers.-(1)(a) A person who is not a registered dealer liable to pay tax shall not collect any amount by way of tax or purporting to be by way of tax under this Act; nor shall a registered dealer collect any amount by way of tax or purporting to be by way of tax at a rate or rates exceeding the rate or rates specified under section 5. (b) No person shall collect any amount by way of tax or purporting to be by way of tax in respect of sales of any goods on which no tax is payable by him under the provisions of this Act. (2) Notwithstanding anything contained in sub-section (1), a dealer who has been permitted to pay any amount by way of composition under section 17 or a dealer who is exempted from sales tax by virtue of recognition granted under the provisions of this Act, shall not collect any amount by way of tax or purporting to be by way of tax on the sales or purchases of goods made during the period to which such composition or recognition applies. (3) Notwithstanding anything contained in sub-sections (1) and (2), no dealer who is liable to pay turnover tax under section 6B shall collect any amount by way of such turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities intimately connected with the sale of goods produced as also purchase and sale of all marketable commodities. It certainly includes buying and selling. Therefore, every expenditure which the Coffee Board has to incur in the course of buying coffee from the producers as well as in the course of selling coffee in the internal or export market, which is its statutory obligation, is an expenditure which is expressly authorised to be incurred from out of pool fund by section 32(2)(b) of the Act. The tax which the Board is liable to pay under section 6 of the Sales Tax Act, is an inevitable expenditure which the Board has to incur in discharging its obligation of selling coffee. Therefore, there can be no doubt that the Board is empowered to meet this liability out of the pool fund. 10.. The learned counsel for the petitioners, however, contended that meeting the liability of the Board to pay the tax under section 6 of the Sales Tax Act out of the pool fund amounts to a clear circumvention of the provisions of section 2(k) of the Act, which grants exemption to the growers and also amounts to an unauthorised collection of tax which is prohibited under section 18 of the Sales Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners, (c) the expenditure on account of curing coffee received in the surplus pool, (d) the amount spent in purchasing coffee from registered owners, (e) amount of the duty of excise paid on coffee that may be realised by the Board from the surplus pool for sale in the Indian market, (f) expenditure on account of the administration of the surplus pool for which budget estimates are prepared and got approved by the Board, and (g) expenditure on account of the marketing of coffee deposited in the surplus pool. (ii) The audit report on the accounts of the pool fund together with the explanatory notes shall be put up to the Board for approval." The above rule requires that the accounts of the pool fund shall be maintained separately for each coffee season. The Board has maintained the account of the pool fund for each coffee season separately and once all the legitimate expenditure which the Board can incur in terms of section 32(2) of the Act read with rule 34(2) of the Rules have been met out of the pool fund and final payments have been made, there is no provision which authorises the Board to reopen the account or to charge the expenditure incurred by way of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f during the relevant assessment years, the Coffee Board had realised that it was liable to pay the tax under section 6 of the Sales Tax Act and had paid it, neither the Board nor the growers would have been in the present predicament. Whatever that may be, once it is held that the Coffee Board was liable to pay tax under section 6 of the Sales Tax Act, right from the year 1974-75 onwards, such payment constitutes a valid expenditure incurred by the Board in respect of marketing the coffee and, therefore, there is no alternative than to hold that the payment of the arrears of tax also out of the pool fund is valid and authorised. As far as the plea of the petitioners that in respect of the coffee planters who have purchased them cannot be made liable for the expenditure incurred by the Board during the period when their vendors were the owners, the Coffee Board has made it clear that no such liability will be foisted on them. 16.. The only question which remains for consideration is about the resolution passed by the Coffee Board on which reliance was placed by the petitioners. In the 123rd meeting held on 24th June, 1988 the following Resolution was passed by the Coffee Board. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee out of the pool fund in view of section 32(2)(b) of the Act. As the resolution of the Board was contrary to the above provision, the Central Government has cancelled the said resolution. 18. We do, however, understand the great hardship to the growers resulting from the heavy payments from out of the pool fund during this year towards the arrears of tax payable under the Sales Tax Act by the Board consequent on the judgment of this Court and the Supreme Court. But all that we can do is to observe that this is a genuine case in which the Central Government should come to the rescue of the coffee growers by making special grants or subsidies to cover whole or part of the said liability as requested in the second part of the resolution of the Board. 19.. In the result, we answer the question set out first as follows: The respondent-Coffee Board is authorised in law to pay the tax which it is liable to pay to the Karnataka Government under the provisions of the Karnataka Sales Tax Act, out of the pool fund which it is required to maintain, under section 30 of the Coffee Act, 1942, and make the following order: The writ petitions are dismissed without order as to costs. Wr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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