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TMI Blog1994 (4) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... were reopened to include the fertiliser subsidy as part of the taxable turnover, while the other two writ petitions filed by the same assessee, the Madras Fertilisers Ltd., challenge the original orders of assessment for the years 1990-91 and 1991-92. In O.P. No. 16931 of 1992, exhibits P1 and P2 are revised assessments for the years 1988-89 and 1989-90 while exhibit P3 is the original assessment for 1990-91. In O.P. No. 3430 of 1994, the challenge is to the original orders of assessment, exhibits P1, P4 and P7 for the years 1988-89, 1989-90 and 1990-91. 2.. I shall state the facts in O.P. No. 14991 of 1992 which is typical of the controversy in all the cases. 3.. Petitioner is a manufacturer and seller of urea and other complex fertilisers, which are essential commodities within the meaning of the Essential Commodities Act, 1955. The sale and distribution of fertilisers is now, regulated by the Fertilizer (Control) Order, 1985 (which repealed and replaced a similar earlier order of 1957), made by the Central Government in exercise of the powers conferred on it by section 3 of the Essential Commodities Act, 1955. Subclause (1) of clause 3 which is in Part II relating to price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a combination of norms and actuals in regard to consumption efficiencies and maintenance and other costs, and providing for a post tax return of 12 per cent of net worth. This was to be known as "retention price". A standard ex-factory realisation, also net of excise duty and FPEC and exclusive of the dealer's margin and equated freight for the industry as a whole was also to be fixed from time to time. This was referred to as the "transfer price". The scheme was to be so operated as to ensure that all units receive the transfer price either through adjustment of the excise duty and FPEC or through alternative means. The units whose retention price as fixed under the scheme was lower than the transfer price were required to credit the difference to the Fund Account. The amount will be calculated on the quantities of fertiliser cleared through excise in any given month from November 1, 1977. At the same time, units whose retention price under the scheme was higher than the transfer price will receive the difference from the Fund Account on the monthly submission of claims supported by excise clearance certificates. It was the amount so received from the Fund Account, constituted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh High Court to the particular definition of "turnover" in the Andhra Pradesh Act as indicating the total amount set out in the bill of sale. But this submission omitted to take note of the fact that the decision was followed in the subsequent case of Coromandel Fertilisers Ltd. [1992] 85 STC 552 (AP) which arose under the Central Sales Tax Act in which the definition concerned was of "sale price" namely, the amount payable to the dealer as consideration for the sale of goods, and of "turnover" which meant the aggregate of the sale prices received. The distinction drawn by the learned Government Pleader does not therefore really affect the applicability of the decisions of the Andhra Pradesh High Court. They are directly in point and cover the cases in favour of the petitioners. I am in agreement with these decisions. I shall however consider the matter independently, having regard to the strenuous efforts which the learned Government Pleader has made to salvage the assessments. 8.. What is given to the petitioners is subsidy from out of the Fertiliser Price Fund Account constituted by the Central Government to which substantial contribution had been made from Government revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng which runs through all these definitions of subsidy is that it is a grant made by the Government to an enterprise, inter alia, for the good or benefit of the public. One of its objects is the keeping down of prices of commodities. Benefit to the public is eventually the motivating factor for the grant of the subsidy. The question is whether such a grant could be treated as part of the price paid for the sale of products and can therefore form part of the turnover of the dealer liable to be taxed as such in his hands. 11.. Sale is a bilateral transaction which stems out of a contract between the seller and the purchaser. An essential ingredient of a sale is "price". Fixation of the price is a matter of agreement between the parties. Sub-section (1) of section 9 of the Sale of Goods Act, 1932, provides that the price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties. In cases where the price is not determined in accordance with these provisions, the buyer shall pay the seller a reasonable price. Therefore, price is an essential element of a contract of sale an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o earlier. The decision in State of A.P. v. Ranka Cables Pvt. Ltd. [1990] 78 STC 111 (AP) (Jeevan Reddy and Bhaskar Rao, JJ.) also supports this view. In that case, excise duty charged in the bills, but deducted from the amount to be collected from the purchasers, in view of the reimbursement thereof under the Supplementary Cash Assistance Scheme of the Central Government, was held not part of the taxable turnover under the Central Sales Tax Act, 1956. The ratio of that decision must apply on all fours to these cases as well. 13.. The assessments in question in so far as they impose tax on the amount of subsidy are therefore illegal and unsustainable. The writ petitions have to be allowed. I do so. I quash exhibit P4 in O.P. Nos. 14991, 15020 and 15021 of 1992, exhibit P3 in O.P. Nos. 6743 and 6744 of 1993, exhibits PI to P3 in O.P. No. 16931 of 1992 and exhibits P1, P4 and P7 in O.P. No. 3430 of 1994 to the extent tax is levied on the amount of subsidy. The assessments in O.P. Nos. 16931 of 1992 and 3430 of 1994 have been taken up in appeal under section 34 of the KGST Act. Since I have dealt with the question in common with the other writ petitions, I do not think it necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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