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TMI Blog1998 (8) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter called the TNGST Act ) and were accordingly assessed. Fertilisers were at the relevant point of time taxable under serial No. 21 of the First Schedule to the TNGST Act, at the point of first sale in the State at 3 per cent. Fertilisers are also classified as essential commodities under the Essential Commodities Act, 1955. The Fertiliser (Control) Orders are issued under the said enactment. Clause 3 of the Control Order fixed the maximum price at which the manufacturers can sell to their customers. The manufacturer is also bound to give a invoice for each sale displaying the price at which the goods are sold. Accordingly the petitioners had collected sales tax from their buyers at the rate of 3 per cent. The price fixed by the Government of India under clause 3 of the Control Order is generally called the ex-factory prices. Admittedly, it is the policy of the Government to encourage agriculturists, by fixing the sale price of the fertilisers at an optimum rate. At the same time, the Government of India was aware that the manufacturers will suffer detriment because the prices fixed by the Government were not relatable to the actual cost price. Therefore, the Government was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of India does not pay the subsidy on behalf of the buyers by way of extinguishment of any obligation of the purchaser. It is next pointed out that the subsidy has nothing to do with the contract of sale between the petitioner and their customers. Under the TNGST Act what is taxable is only the price paid by the buyer to the seller on a contract of sale. 4.. A counter-affidavit has been filed by the respondent. According to the respondent the manufacturers received payments both from the customers as well as from the Government of India though it is in the form of subsidy from Government of India. In other words, the goods are sold in consideration of both the amounts paid by the customers as well as the subsidy received from the Government. Says the counter-affidavit: The total consideration for the stock of fertilisers lifted from the factory received by the petitioners is the ex-factory price received from the customers plus the subsidy received from the Government of India, in respect of the same transaction effected with the customers. Since the subsidy received from the Government of India, as and when the stock of fertilisers delivered to the customers is also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd. v. Commercial Tax Officer (OFA) [1991] 83 STC 129 at page 135 the amount received by way of subsidy from the Central Government under the scheme is in the larger interest of industry as a whole. The subsidy has no relation to any single sale transaction and is determined on the basis of several factors mentioned above . We have certain reservations regarding the above observation. But before that the definition of the word turnover in the TNGST Act as it stood at the relevant time could be noticed: turnover means the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (n), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce, other than tea grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover; We can see the omission of the words the total amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed with reference to various factors. The subsidy is paid for the benefit of the public, to keep the prices at a reasonable level, and at the same time to ensure a reasonable return on investment to the units, and not as consideration for the sales effected by them. I am therefore of the view that the amount of subsidy received by the petitioners for the purpose of their units, which is not related to any particular transaction of sale, but is related to other circumstances, cannot constitute turnover in their hands assessable under the KGST Act. Lastly reference is made to [1995] 96 STC 261 (All.) [Natraj Organics Limited v. Assistant Commissioner (Assessment), Sales Tax, Muzaffarnagar]. According to the Allahabad High Court the Central subsidy received by a manufacturer of chemical fertilisers is not an amount received by him for which goods are supplied by him to customers by way of sale. They also adopted the view expressed by the Andhra Pradesh High Court. The judgment of the Kerala High Court in Writ Appeal No. 812 of 1994-A which confirmed the view of T.L. Viswanatha Iyer, J. was taken up to the Supreme Court of India and the SLP was dismissed. 7.. We have pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he retention price of a factory. Suffice it to notice that a fair return is promised to the manufacturers. The learned counsel for the petitioners also brought to our notice the pro forma for claiming the retention price and the certificates issued in support of the claim. One of the certificate is as follows: Certified that the quantity shown in column 12 of annexure 11A on which subsidy is being claimed is on net weight basis and does not include the weight of bags, etc. It is further certified that this quantity of fertilisers has been or will be sold on net weight basis and exclusively for agricultural use and not for industries or any other use. It is thus seen that the claim for payment of the retention price is linked with the actual sale of fertilisers. This in our opinion, is an essential document which supports the case of the revenue that subsidy forms part of the sale price. In fact prior to the amendment of the Control Order the certificate read as follows: Certified that the quantity for which payment has been claimed has been sold on net weight basis. Certified further that the quantity shown in column 2 has been supplied exclusively for agricultural use and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be excluded from the purchase price paid by the sugar manufacturers. The division Bench held that while calculating the profits the sugar mills took into account the payments made as early planting subsidy . The amounts paid to the cane grower were retained by them and were over and above the price fixed by the Government. It was therefore, relatable to the supply of sugarcane and there was an implicit agreement that the subsidy formed part of the price. It was accordingly, held that the subsidy was to be treated as part of the purchase turnover of sugarcane of the manufacturer. It was also held that the fact that the cane development expenses was separately accounted for, did not change the character of the payment. 13.. In Commissioner of Income-tax v. P.J. Chemicals Ltd. [1994] 210 ITR 830 (SC) the question that came up for consideration was as to whether the grant of subsidy by the Government as incentives for setting up industries in backward areas is not liable to be deducted in computing the actual cost of the assets. It was held by the apex Court that the amount of subsidy could not be deducted from the actual cost for the purpose of calculation of depreciation, etc. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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