@JUDGMENTTAG-ORDER
F.M. Ibrahim Kalifulla J.
1. As the issue involved in these writ petitions is covered by our order passed in W.P. Nos. 50111, 50189 and 50190 of 2006 see page 236 supra, following the same, these cases also stand disposed of on merits.
2. The petitioner is common in all the writ petitions. Challenging the common order dated July 2, 2007 passed by the Tribunal in T.A. Nos. 45, 278, 47, 46 and 279 of 2002, these writ petitions have been filed. Therefore they are being disposed of by this common order. For the sake of convenience, we refer to the facts relating to the petitioner in W.P. No. 31176 of 2007.
3. The assessment order pertains to 1992-93. The assessment was completed on February 28, 2000. The petitioner is sugar mills. The petitioner procured sugarcane for crushing from sugarcane growers. It is common ground that by virtue of section 3 of the Essential Commodities Act and pursuant to the Sugarcane (Control) Order, 1966 came into being, the Central Government used to fix the price of the sugarcane to be procured apart from additional price fixed by the State Government. Under the Madras Sugar Factories Control Act (in Act 20 of 1949) and the Madras Sugar Factories Control Rules, 1949, cess also became payable on entry of sugarcane into the factory. Such cess levied on the sugar mills were to be remitted to the Director of Sugars. The question involved herein is as to whether such cess payable under Act 20 of 1949 would form part of the sugarcane price and thereby would attract payment of the sales tax under the provisions of the Tamil Nadu General Sales Tax Act, 1959.
4. To appreciate the issue involved, it is worthwhile to refer to sections 2(r) and 3(2) of the Tamil Nadu General Sales Tax Act, 1959 read along with Part E of the First Schedule as well as clauses 3 and 5A of the Sugarcane (Control) Order, 1966 and section 10(2) of Act 20 of 1949 read along with section 14 of the Madras Sugar Factories Control Act, 1949. Section 2(r), section 3(2) and entry 22 of Part E of the First Schedule read as under :
2. (r) ''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 parson of agricultural or horticultural produce, other than tea, (and rubber (natural rubber latex and all varieties and grades of raw rubber) 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.
...
3.(2) Subject to the provisions of sub-section (1), in the case of goods mentioned in the First Schedule, the tax under this Act shall be payable by a dealer, at the rate and only at the point specified therein on the turnover in each year relating to such goods :
Provided that all spare parts, components and accessories of such goods shall also be taxed at the same rate as that of the goods if such spare parts, components and accessories are not specifically enumerated in the First Schedule and made liable to tax under that Schedule :
Provided further that in the case of goods mentioned in the First Schedule which are taxable at the point of first sale, the tax under this Act shall be payable by the first or earliest of the successive dealers in the State who is liable to tax under this section.
22. Original entry from March 12, 1993
|
Sugarcane excluding sugarcane setts |
At the point of last purchase in the State |
12-03-93 |
Note:
1. This entry is as per substituted First Schedule to the TNGST Act, 1959 introduced by Act No. 24 of 1993, Tamil Nadu Government Gazette, Extraordinary, Part IV, section 2 dated May 28, 1993--Effective from March 12, 1993.
2. See item No. 62 of First Schedule existed till March 11, 1993.
3. Reduction in rate of tax payable to eleven per cent on the purchase of sugarcane by the sugar mills was notified in G.O.P. No. 88 CT & RE dated March 17, 1993--Notification No. II(1)/CTRE/ 41 (b)/93--Gazette dated March 17, 1993 effective from October 1, 1992.
5. Relevant para of clauses 3 and 5A of the Sugarcane (Control) Order, 1966 reads as under :
3. Minimum price of sugarcane payable by producer of sugar.-- (1) The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the official gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to--
(a) the cost of production of sugarcane;
(b) the return to the grower from alternative crops and the general trend of prices of agricultural commodities;
(c) the availability of sugar to the consumer at a fair price;
(d) the price at which sugar produced from sugarcane is sold by producers of sugar; and
(e) the recovery of sugar from sugarcane :
Provided that the Central Government or with the approval of the Central Government, the State Government may, in such circumstances and subject to such conditions as specified in clause 3A, allow a suitable rebate in price so fixed.
5A. Additional price for sugarcane purchased on or after October 1, 1974.--(1) Where a producer of sugar or his agent purchases sugarcane, from a sugarcane grower during each sugar year, he shall in addition to the minimum sugarcane price, fixed under clause 3 pay to the sugarcane grower an additional price, if found due in accordance with the provisions of the Second Schedule annexed to this order.
6. Section 10(2) of Act 20 of 1949 as well as section 14(1) of the Act framed thereunder are as under;
10. (1)....
(2) The occupier of such factory shall enter into an agreement with the grower for the purchase of all sugarcane offered by him in accordance with sub-section (1); and the agreement shall be in such form shall be executed on or before such date, and shall contain such terms and conditions as may be prescribed :
Provided that the occupier may refuse to enter into such an agreement where the sugarcane is offered for delivery during a period in respect of which he has already entered into agreements with growers in the reserved area for the purchase of a quantity of sugarcane equal to the maximum consumption of the factory during such period.
...
14.(1) The Government may, after consulting the Advisory Committee, by notification, levy a cess not exceeding four annas per standard maund as defined in the Standards of Weight Act, 1939 (Central Act IX of 1939), on sugarcane brought into any local area specified in such notification, for consumption, use or sale therein.
7. Keeping the above provisions in mind, the issue involved has to be examined.
8. The assessing authority after completion of the assessment by order dated February 28, 2000, determined the taxable turnover on the cess levied under the Act 20 of 1949 at a sum of Rs. 14,85,62,041 and after giving credit to whatever tax paid, the balance tax due was determined at a sum of Rs. 18,15,834. On the said sum, the surcharge due and the additional tax was also determined apart from imposing penalty of Rs. 1,70,108.
9. Aggrieved against the said order of the assessing authority, the writ petitioner approached the Appellate Assistant Commissioner who by its order dated August 20, 2001, partly modified the appeal holding that cane cess paid by the petitioner forms part of the purchase price of sugarcane and hence the assessment made on the cane cess amount of Rs, 15,81,417 for the assessment year 1992-93 is found to be in order. As against the order of the Appellate Assistant Commissioner, the petitioner went on appeal before the Tribunal in T.A. No. 45 of 2002 and the Tribunal by the order impugned in this writ petition dated July 2, 2007, held that the cess was part of pre-purchase expenses and in the light of the decision of the honorable Supreme Court reported in State of Kerala v. Madras Rubber Factory Ltd. (1998) 108 STC 583, the assessment made by the assessing authority was justified. The Tribunal confirmed the order of the Appellate Assistant Commissioner.
10. Assailing the order of the Tribunal Mr. Prasad, learned counsel appearing for the petitioner, after referring to the clause contained in the Sugarcane (Control) Order, under which the minimum price and the additional price are fixed by the Central and State Governments, respectively, as well as the cess leviable under sections 10(2) and 14 of Act 20 of 1949 and after taking us through section 3(2) and entry 22 of Part E of the First Schedule to the Tamil Nadu General Sales Tax Act, contended that the cess levied under the provisions of Act 20 of 1949 has absolutely no nexus to the price of sugarcane procured by the petitioner either from the sugarcane growers or by its own in respect of the sugarcane harvested by itself and brought into its factory. The learned counsel would contend that as the expense of levy of cess u/s 10(2) read along with section 14 of the Act 20 of 1949, has no relation at all with the price of the sugarcane and the event of purchase alone would attract payment of tax u/s 3(2) of the Tamil Nadu General Sales Tax Act, the very demand made by the assessing authority was not valid in law and consequently the order of the assessing authority and the confirmation of the same by the Tribunal are liable to be set aside.
11. As far as the decision reported in
12. As against the above submissions, Mr. Haja Naziruddin, learned Special Government Pleader appearing for the State, contended that section 14 of the Act, being a regulatory provision and the petitioner having entered the payment of cess as part of their purchase expenses in their ledger, which finding has been made by the Appellate Assistant Commissioner, there was every justification for the respondents to have raised the demand by assessment u/s 14 of the Act and therefore the orders of the assessing authority, the Appellate Assistant Commissioner and the Tribunal do not call for interference.
13. Having heard the respective counsel and having perused the relevant provisions as well as the orders impugned herein, we are of the view that the stand of the petitioner merits acceptance. When we refer to sections 2(r) and 3(2) of the Tamil Nadu General Sales Tax Act, we find that u/s 2(r) of the Act, the "turnover" has been defined to mean aggregate amount of goods bought or sold whether for cash or for deferred payment or other valuable consideration. What is excluded is agricultural or horticultural purchase other than tea grown within the State by the assessee of any land in which he has interest whether as owner or as usufructuary mortgagee tenant or otherwise. Therefore, for the purpose of inclusion of an amount as turnover, it should be the aggregate amount for which the goods are bought or sold. The said provision has relevance inasmuch as the levy of tax in so far as the petitioner is concerned and the same is to be worked out by invoking section 3(2) of the Tamil Nadu General Sales Tax Act, as the taxable event in respect of sugarcane is under entry 22 of Part E of the First Schedule and the point of such levy is the last purchase in the State. u/s 3(2) of the Act, it is specifically stipulated that the tax under the Tamil Nadu General Sales Tax Act should be paid by a dealer at the rate and only at the point specified on the turnover in each year relating to such case mentioned in the First Schedule.
14. Therefore a reading of section 2(r) read along with section 3(2) and Part E of the First Schedule makes it abundantly clear that in the case of the petitioner who is dealing with the particular goods, namely, sugarcane, the point of last purchase in the State is the relevant event and in the event of such last purchase of sugarcane taking place at the instance of the petitioner, the same would attract payment of tax at the rate of 12 per cent on the turnover to be assessed as prescribed u/s 2(r) of the Act.
15. Therefore, in order to find out what is the turnover in the case of the petitioner, necessarily the price of the sugarcane at which it is bought by the petitioner has to be found out. In the said circumstances, the question arises as to whether apart from clauses 3 and 5A of the Sugarcane (Control) Order, the cess levied u/s 10(2) read along with section 14(1) of the Act 20 of 1949 would also fall within the component of price of sugarcane. In so far as the minimum price of sugarcane fixed under clause 3 by the Central Government and the additional sugarcane price fixed under clause 5A by the State Government are concerned, the petitioner has rightly disclosed the same in its return and the tax has also been duly paid.
16. When we come to the cess levied u/s 10(2) of the Act, we find that while section 10(2) of the Act stipulates that the occupier of sugar factory should enter into an agreement with the grower for production of all sugarcane offered by the grower in accordance with sub-section (1) and the agreement should be in such form where it should contain the terms and conditions as may be prescribed.
17. We are not concerned with the proviso to section 10(2) of the Act. u/s 1.4(1) of the Act 20 of 1949, it is prescribed that the Government have consulted the advisory committee and by notification levied a cess not exceeding four annas per standard maund as defined in the Standards of Weight Act, 1939, on sugarcane brought into any area specified in such notification, for consumption, use or sale therein. Therefore, the crucial words are "The levy of cess at the prescribed rate by the notification on the sugarcane brought into any area specified" in the notification. When the said prescription contained in section 14(1) of the Act is analyzed and read along with sections 3(2) and 2(r) of the Tamil Nadu General Sales Tax Act, it is plain and unambiguous that there is no element of any purchase or sale involved for the purpose of levy of cess. The mere factum of the sugarcane entering into the factory would attract the levy of cess on the occupier of factory manufacturing sugar.
18. Such entry of sugarcane brought into the notified area of notification issued u/s 14 of the Act would thus result in levy of cess. Significantly, the livability of cess is on the person who owns the sugar factory and the location of such sugar factory, in a notified area and nothing more. The only other event to be ascertained is the entry of sugarcane into an area, which is specified in the notification either for own consumption, use or even for sale.
19. As far as the petitioner is concerned, in so far as the liability to pay the tax under the provisions of the Tamil Nadu General Sales Tax Act is concerned, as was stated earlier, the liability is by virtue of the prescription in section 3(2) of the Act and the point of levy being the purchase of sugarcane as stipulated under entry 22 of Part E of the First Schedule. Under no other circumstances, the Tamil Nadu General Sales Tax Act provides or creates any liability of payment of tax on the petitioner who owns a sugar manufacturing unit and who happens to purchase sugarcane as the basic raw material for the manufacture of sugar.
20. The various other expressions other than the expression "bought and sold" used in section 2(r) of the Act have no relations to the petitioner which is a sugar factory. Therefore, the turnover which can be ascertained in relation to the petitioner can only relate to the purchase of sugarcane as has been prescribed under entry 22 of Part E of the First Schedule read along with section 3(2) of the Act. In so far as the aggregate amount of the purchase involved in the case of the petitioner the same was duly ascertained and assessed and such assessment indisputably was completed as early as on July 31, 1997. Therefore, we are at a loss to understand as to how the cess levied u/s 14(1) of the Act 20 of 1949 read along with section 10(2) of the said Act and remitted to the Director of Sugars could be held to be even remotely relatable to the event of purchase of sugarcane which alone would make the petitioner liable for assessment being made for the purpose of payment of tax under the provisions of the Tamil Nadu General Sales Tax Act. In other words, there being no event of purchase of sugarcane in so far it related to the levy of cess as stipulated u/s 14(1) of the Act 20 of 1949, we do not find any scope at all for the respondents to seek for and make a demand for payment of tax on the cess so levied by invoking the provisions contained in the Tamil Nadu General Sales Tax Act.
21. The above legal position stated by us is also fortified by the Division Bench decision of this court reported in Cauvery Sugars and Chemicals Ltd. v. joint Commercial Tax Officer (1972) 29 STC 1. This very issue, namely, as to whether the cess will form part of transaction of purchase of sugarcane was the direct question involved in the said decision and the Division Bench after a detailed consideration has held as under (page 4) :
... The cess does not even form part of the transaction of purchase of sugarcane and is not, by any means, in any case, part of the consideration for the purchase of sugarcane. The cess paid is not taken into account in fixing the price u/s 12(1). The grower-seller has neither any liability for the cess, nor is it paid on its behalf. It is true that where a seller pays excise duty and includes it in the purchase price, such excise duty will undoubtedly form part of the consideration like sales tax or any other tax which he has included in the consideration. But that cannot be the case where cess, as in this case, is paid by the purchaser on his own liability and not on behalf of the seller. In fact the payment of cess u/s 14 read with relevant rule is unconnected with the transaction of the purchase and price fixed u/s 12(1). The view of the Department as well as the Tribunal that cess is integral part of the purchase turnover of sugarcane cannot, therefore, be accepted as correct...
22. Then again the court observed that (page 4 of 29 STC) :
In fixing the price of the sugarcane, cess was not taken into account. There was also no stipulation between the assessee and the growers-sellers that the duty should, as between them, be borne by the seller and that when a buyer, on whom the liability was, paid the cess, it should be on behalf of the seller. The cess paid by the assessee in discharge of their own statutory liability and on their own account cannot therefore form part of the purchase price and therefore of the purchase turnover chargeable to tax. The inclusion of the cess in the chargeable purchase turnover was, therefore, illegal.
23. We are therefore convinced that the question is no longer res integral inasmuch as the issue is directly covered by the above referred to decision of the Division Bench.
24. Once we are clear on the legal position and when we examine the correctness of the orders impugned, we find that the assessing officer in his order has not given any reasons except stating that the petitioner failed to include the cess payment in the taxable purchase turnover and failed to pay tax thereon and therefore the assessment was being made and for the very same reason also imposed the penalty.
25. The Appellate Assistant Commissioner by his order dated August 21, 2001 confirmed the order of the assessing authority holding that cane cess paid by the petitioner forms part of the purchase price of sugarcane, but deleted the penalty imposed by him. The Appellate Assistant Commissioner also followed the earlier Division Bench decision reported in
26. The Tribunal, unfortunately without examining the issue with reference to the relevant provisions, has taken the view that the cess payment made by the petitioner under the provisions of the Act 20 of 1949 came to be disclosed in the ledger as purchase expenses and consequently it should be held to be part of the sales turnover as prescribed u/s 2(r) of the Tamil Nadu General Sales Tax Act, apart from relying upon
27. As far as the reasoning that the petitioner disclosed the payment of cess as part of purchase price is concerned, the learned counsel brought to our notice the relevant entry made by the petitioner in its ledger, a copy of which was stated to have also been placed before the Tribunal by filing necessary application. From the records, we find that the account head noted therein is "canecess". The entry made therein discloses the cane cess paid for the relevant month based on the total quantity in metric tonnes subtracted by the quantity of sugarcane which were brought into the factory from within the local area itself and for arriving at the total quantity of sugarcane brought within the factory premises from outside the local areas, the value was made and the cess payable was debited to the concerned accounts for different months. Therefore when the ledger entry distinctly discloses that the payment of cess debited to the concerned account was not by way of any purchase price, it can only be held that the said factor was completely omitted to be noted both by the Tribunal as well as by the Appellate Assistant Commissioner.
28. When we examine the decision of the honorable Supreme Court reported in State of Kerala v. Madras Rubber Factory Ltd. (1998) 108 STC 583, as rightly contended by the learned counsel for the petitioner, the said decision has to be understood in the light of the specific provision contained in section 12 of the Rubber Act, 1947 and section 5 read along with entry 71 of the Kerala General Sales Tax Act, 1963. Section 12 of the Rubber Act has been extracted in the said decision at page No. 589, which reads as under :
Imposition of new rubber cess. (1) With effect from such date as the Central Government may, by notification in the official gazette, appoint, there shall be levied as a cess for the purposes of this Act, a duty of excise on all rubber produced in India at such rate, not exceeding fifty naye paise per kilogram of rubber so produced, as the Central Government may fix.
(2) The duty of excise levied under sub-section (1) shall be collected by the Board in accordance with rules made in this behalf either from the owner of the estate on which the rubber is produced or from the manufacturer by whom such rubber is used.
29. A reading of section 12 of the Rubber Act discloses that though the levy of cess was on the rubber produced at a particular rate, as provided u/s 12(1) of the Rubber Act, the collection of the said cess is made obligatory both on the manufacturer by whom such rubber is used as well as the owner of the estate concerned. In the event of there being a manufacturer intervening in the production of rubber as provided under sub-section (2) of section 12 then and there alone by virtue of the specific stipulation contained in section 12(2), it will be mandatory either for the owner or the manufacturer to pay the cess on the quantum of rubber produced. Thus, there is a statutory liability of inclusion of cess also in the price of the rubber payable by the manufacturer to the person concerned who is involved in the production of rubber for the purpose of levy of excise duly and collection of such levy either from the owner of the estate or from the manufacturer if there is one who uses such rubber. The honorable Supreme Court has dealt with the said consequence in paragraph Nos. 17 and 18 and therefore, it was held that the liability of tax as prescribed under the Kerala General Sales Tax Act as per section 5 read along with entry 71 would include the cess payable u/s 12 of the Act.
30. Therefore the said decision having been based on the specific provisions contained in section 12 of the Rubber Act as well as section 5 of the Kerala General Sales Tax Act, which is clearly distinguishable as compared to the provisions contained in section 14(1) of the Act 20 of 1949, there is absolutely no scope for applying the said decision to the facts of this case. The case on hand is directly covered by the earlier Division Bench decision of this court in Cauvery Sugars and Chemicals Ltd. v. Joint Commercial Tax Officer (1972) 29 STC 1 and therefore, there is absolutely no scope for including the payment of cess for the purpose of assessing the liability of tax under the provisions of the Tamil Nadu General Sales Tax Act.
31. Having regard to our above conclusion, we do not find any need to refer to other decisions placed before us. Therefore the order of the Tribunal impugned in these writ petitions is set aside. The writ petitions stand allowed. No costs. Consequently, connected miscellaneous petitions are closed.
