Consolidated
Coffee Limited & Anr Vs. The Coffee Board & Anr [1994] INSC 597 (22 November 1994)
Singh
N.P. (J) Singh N.P. (J) Jeevan Reddy, B.P. (J) Majmudar S.B. (J) N.P. Singh,
J.:
CITATION:
1995 SCC (1) 312 JT 1995 (1) 1 1994 SCALE (4)1025
ACT:
HEAD NOTE:
1. The
appellants are the growers of coffee. They filed Writ Petitions for injuncting
the Coffee Board respondent No. 1 (hereinafter referred to as 'the Board') from
making any payment under the head 'Purchase Tax' out of the Pool Fund
maintained under Section 30 of the Coffee Act, 1942.
According
to the appellants, the Board cannot discharge its liability in respect of
payment of 'Purchase Tax' to the State Government, under the provisions of the
Karnataka Sales Tax Act, 1957 (hereinafter referred to as 'the Act') out of the
Pool Fund.
2. The
High Court held that growers/ producers were not liable under Section 5(3)(a)
of the Act to pay the tax in respect of the sale of coffee by them to the
Coffee Board.
It
also held that the Board was liable to pay the 'Purchase Tax' under Section 6
of the Act. But according to 'the High Court, the Board was authorised in law
to pay the tax which it is liable to pay to the State Government, out of the
Pool Fund. On that finding, the writ petitions, filed on behalf of the
appellants, were dismissed.
3.
Section 5(3)(a) of the Act provides that the tax under the Act shall be levied
in the case of sale of goods mentioned in Column No.2 of the Second Schedule to
that Act by the first or the earliest of the successive dealers in the State
who is Liable to tax under the said Section, on the taxable turnover of sale of
such dealer in each year relating to such goods. The coffee is included in
Entry 43 of the Second Schedule in the Act. The expression 'dealer' has been defined
in Section 2(k) of the Act. The relevant portion of the definition along with
exception is as follows:- "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""' It need not be pointed out that in view of
the exception aforesaid, as the growers of the coffee are statutorily required
to sell the coffee to the Board, they shall not be liable to pay the sales tax
as prescribed under Section 5(3)(a) of the Act. However, the purchasers which
in the present case, shall include the Board, arc made liable to pay the tax
under Section 6 of the Act. The relevant part of Section 6 says:- "6. Levy
of purchase tax under certain circumstances. - Subject to the provisions of
sub-section (5) of Section 5, every dealer who in the course of his business
purchases any taxable goods in circumstances in which no tax under Section 5 is
leviable on the sale price of such goods, and (i) either consumes such goods in
the manufacture of other goods for sale or otherwise (or consumes otherwise) or
disposes of such goods in any manner other than by way of sale in the State, or
(ii) despatches them to a place outside the State except as a direct result of
sale or purchase in the course of interState trade or commerce, shall be liable
to pay tax on the purchase price of such goods at the same rate at which it
would have been leviable on the sale price of such goods under Section 5."
There was a controversy as to whether the Board shall be liable 'to pay the
Purchase Tax under Section 6 of the said Act. However, that was settled by this
Court in the case of Coffee Board v. Commissioner of Commercial Taxes,
Karnataka, AIR 1988 SC 1487 = 1988(3) SCC 263 It was held by this Court that
Section 6 was applicable to the transactions entered into 4 between the Board
and the growers of the coffee and the Board was liable to pay the 'Purchase
Tax'.
4. The
controversy, with which, we are concerned is as to whether the Board was
entitled to make payment of the 'Purchase Tax' out of the Pool Fund required to
be maintained under Section 30 of the Coffee Act. The relevant part of Section
25 is as under:-
"25.
(1) All coffee produced by a, registered estate in excess of the amount
specified in the internal sale quota allotted to that estate ( or when 110
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 bee. 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 quantity of coffee as
the Chairman may think reasonable Provided further that where the Central
Government is satisfied that it is not practicable for any class of owners
producing coffee in any specified area to comply with the provisions of this
Sub-Section on account of the small quantity of coffee produced by them or on
account of their estates being situated in a remote locality, the Central
Government may, in notification in the Official Gazette exempt such class of owners
from the provisions of this Sub-Section.
(2)
Delivery shall be made to the Board in such places (at such times) and in such
manner as the Board may direct,and such directions may provide for partial
delivery to the surplus pool at any time whether or not at that time the
internal sale quota has been exceeded and the coffee delivered shall be such as
to represent fairly in kind and quality the produce of the estate. The Board
may reject any consignment offered for delivery which does not satisfy this
requirement; but shall not reject any consignment merely for a defect in
curing.
(3)
Coffee delivered for inclusion in the surplus pool shall upon delivery to the
Board remain under the control of the Board which shall be responsible for
storages, curing where necessary, and marketing of the coffee.
(6)
When coffee has been delivered or is treated as having been delivered for
inclusion in the surplus pool, the registered owner whose coffee has been so
delivered shall retain no rights in respect of such coffee except his right to
receive the payments referred to in Section 34.
Section
26 says:- "26.(1) The Board shall take all practical measures to market
the coffee included in the surplus pool, and all sales thereof shall be
conducted by o: through the Board.
(2)
The Board may purchase for inclusion in the surplus pool coffee not delivered
for inclusion in it." In view of Section 25 all coffee produced by a
registered estate in excess of the amount specified in the internal sale quota
allotted. to that estate shall be delivered to the Board for inclusion in the
Surplus Pool by the owner of the Estate. After the 5 coffee is delivered, it is
to remain under the control of the Board, which shall be responsible for
storages, curing where necessary and marketing of the coffee. In view of
sub-section 6 of Section 25, when the coffee has been delivered for inclusion
in the Surplus Pool, the registered owner shall retain no rights in respect of
such coffee except his right to receive the payments referred to in Section 34.
Section 26 enjoins the Board to take all practical measure to market the coffee
included in the Surplus Pool and all sales thereafter shall be conducted by or
through the Board. Section 30 says:- "The Board shall maintain two
separate funds, General Fund and a Pool Fund Section 31 is as follows:-
"31. (1) To all General fund shall be credited:
(a)
all amount 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 provision
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 the 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; and (e) to meet the expenses for securing better
working conditions and the provision and improvement of amenities and
incentives for workers." Section 32 is as follows:- "32. (1) To the
Pool Fund shall be credited all sums realised by sales by the Board of coffee
from the surplus pool.
(2)
Subject to the provisions of SubSection (4) of 13, the Pool Fund shall be
applied only to- (a) the making to registered owners of estates of payments
proportionate to the value of the coffee delivered by them for inclusion in the
surplus pool;
(b) the
cost of storing, curing marketing coffee deposited in and of administering the
surplus pool;
(c) the
purchase of coffee not delivered for inclusion in the surplus pool;
Provided
that where, after the requirements, of the Clauses of the Sub- Section have
been met there remains any excess in the Pool Fund, the Board may, with
previous sanction of the Central Government, transfer the whole or any part of
such excess to the credit of the General Fund. ' ' 6 According to the appellants,
all sums realised from sales by the Board from the surplus pool is credited to
the Pool Fund which can be applied only for the objects mentioned in clauses
(a), (b) and (c) of sub-section 2 of Section 32. As none of the aforesaid
clauses authorises or vests power in the Board to incur or to apply any amount
out of the Pool Fund for payment of 'Purchase Tax', the action of the Board in
making payment of 'Purchase Tax' to the State Government under the Provisions
of the Act aforesaid is without any authority in law and in contravention of
the mandate of sub- section 2 of Section 32. On their behalf, it was pointed
out, that the High Court, was not justified in holding that any such payment of
'Purchase Tax' shall be part and parcel of marketing by the Board and as such
covered by Section 32(2)(b) of the Act. Reading Section 32(2)(b), in its proper
context, it obviously means marketing of coffee, which has been deposited in,
after curing. Reference was also made to sub-section 3 of Section 25 where also
it has been said in clear and unambiguous words that coffee delivered for
inclusion in the Surplus Pool shall be delivered to the' Board and shall remain
under the control of the Board, which shall be responsible for storages, curing
where necessary and marketing of the coffee. In other words, according to appellants
,the expression "marketing" used in sub-section 3 of Section 25 or in
Section 32(1)(b) refers to the process of marketing after the coffee has been
delivered by the growers for inclusion in the Surplus Pool and is stored and
cured by the Board; the expression "marketing'' shall not include the
process of purchase from the growers which precedes the delivery of coffee to
the Board for inclusion in the surplus pool.
5. On
behalf of the Board, it was pointed out that the contention of the appellants
that the payment of the 'Purchase Tax' should be made from the General Fund, as
maintained under Section 31 of the Act should not be accepted because the said
General Fund does not have capacity to pay the 'Purchase Tax' after meeting the
general expenses of the Board under different heads mentioned in sub-section 2
of Section 31.
In
this connection, Dr. Singhvi, appearing for the said Board, referred to the
different amounts received under General Fund in different years and the
amounts paid as 'Purchase Tax' during those years.
6. But
before this aspect is examined in detail, the appellants have to establish that
in the process of making payment from the Pool Fund any right or interest of
the growers like appellants were being affected. We fail to appreciate as to
how the appellants are concerned with the Pool Fund. Any balance amount left in
the Pool Fund shall not be available to the growers like appellants.
Sub-section 6 of Section 25 specifically says that after the coffee has been
delivered for inclusion in the Surplus Pool, the registered owner whose coffee
has been so delivered shall have no right in respect of such coffee except his
right to receive the payments referred to in Section 34. Proviso to sub-section
2 of Section 32 also says that if after the requirements of Clauses of that
sub-section have been met and there remains any excess in the Pool Fund, the
Board may with previous sanction of the Central Government, transfer the whole
or any part of such excess to the credit of the General Fund. Inspite of
repeated queries, the learned counsel appearing for the appellants, could not
pointed out as to how the 7 growers have any say in the matter of application
of the Pool Fund including for payment of the 'Purchase Tax' by the Board,
except that in this process the interest of the growers to receive the payment
in accordance with Section 34 of the Act is not affected. Section 34 says:-
"34. (1) The Board shall at such times as it thinks fit make to registered
owners who have delivered coffee for inclusion in the surplus pool such
payments out of the Pool Fund as it may think proper.
(2)
The sum of all payments made under Sub-Section (1) to any one registered owner
shall bear to the sum of the payments made to all registered owners the same
proportion as the value of coffee delivered by him out of the years's' crop to
the surplus pool bears to the value of all coffee delivered to the surplus pool
out of that year's crop.
Provided
that in calculating the sum of all payments made under Sub-Section (1) and the
value of coffee delivered to the surplus pool out of the years's crop,
respectively, any payment accepted by a registered owner as final payment in
immediate settlement for coffee delivered by him for inclusion in the surplus
pool and the value of any such coffee shall be excluded." In view of
Section 34, the Board has to make payment to the registered owners who have
delivered coffee for inclusion in the Surplus Pool. The expression 'as it may
think proper' obviously means that the payment is made on reasonable basis to
the growers in respect of coffee delivered by them for inclusion in the Surplus
Pool. We are informed that a procedure has been prescribed' to determine the
rate of payment to the registered owners who have delivered coffee for
inclusion in the Surplus Pool. The appellants have not questioned that
procedure. On behalf of the Board, our attention was drawn to the stand taken
on behalf of the Board, in para 47 of the Counter Affidavit, filed on behalf of
the Board, in the connected Writ Petition (Civil) No. 899 of 1990. It says:-
"47. The payments made to the growers for their coffees is always above
the cost of production with a reasonable margin of profit as determined by Cost
Studies regularly carried-out by the Cost Accounts Branch of the Ministry of
Finance and/or by the Board. The reserve price fixed for the "Pool Open
Auction" is based on this Minimum Release Price. For the Export Auctions
the reserve price is based upon the prevailing international price as the
export of coffee from the country has to be competitive in the international
market and it cannot be made to depend only on the domestic cost of production.
For over 20 years, the international price of coffee has been very much above
the domestic cost of production although for the last about a year and half the
price of several varieties of coffee in the international market have been less
than the domestic cost of production. Pool payments declared by the Board is on
the basis of per point (100 points = 50 kgs. of Fair Average Quality plantation
'A" coffee). The value per point so declared has always been above the
cost of production - in many years almost twice the cost of production."
7.
During the hearing of the appeals an apprehension was expressed on behalf of
the appellants that the Board while discharging its liability towards payment
of 'Purchase Tax' may first deduct the amount for payment of the 'Purchase Tax'
out of the Pool Fund and the, Board shall then make payment to the registered
own- 8 ers as required by Section 34 of' the Coffee Act and in any particular
year sufficient funds may not be left in the Pool Fund, to enable the Board to
make payment of reasonable amount to the registered owners which shall affect
and jeopardize the interest of the appellants and other growers of the coffee.
It need not be impressed that the registered owners who grow coffee and deliver
the same for inclusion in the surplus pool are entitled to the payment on some
reasonable basis and their interest cannot be defeated or put in jeopardy by
any act or omission on the part of the Board. But in view of the stand taken by
the Board itself in the para 47 of the counter affidavit filed in the connected
writ petition before this Court, the appellants, need not be apprehensive about
their payments-
8.
Accordingly, the appeals are disposed of with a direction to the
respondent-Board to perform its statutory duty. in respect of payment for the
coffee delivered to them by the registered owners in accordance with the
provisions of the Act and to make payment to the growers at a rate which in the
facts and circumstances prevailing in any particular year can be held to be
just and reasonable and which should cover cost of production of the concerned
coffee and reasonable percentage of profit thereon. In the facts and
circumstances of the case, there shall be no orders as to cost.
WRIT
PETITION N0S. 899 OF 1990 AND 66
9. Dr.
Devi Pal, senior Advocate, after some arguments sought permission to withdraw
the Writ Petitions.
Accordingly,
the Writ Petitions', arc permitted to be withdrawn. There shall be no orders as
to cost.
Back
