Corporation of India Vs. State of Punjab  INSC 1468 (21 August 2009)
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5712 OF
2009 (Arising out of S.L.P. (C) No. 9713 of 2008) Food Corporation of India
.... Appellant(s) Versus State of Punjab .... Respondent(s)
This appeal by Food Corporation of India (in short
"FCI") is directed against the judgment and order of the High Court
of Punjab & Haryana at Chandigarh dated 08.02.2007 in G.S.T.R. No. 16 of
1991 by which the High Court disposed of the reference made by the Sales Tax
Tribunal. It returned the first question unanswered and answered the second
question in favour of the assessee.
The appellant, a Statutory Corporation, engaged in the purchase
and sale of foodgrains, is an assessee registered under the Punjab General
Sales Tax Act, 1948 (hereinafter referred to as "the Act") at
Amritsar. The appellant filed its quarterly returns in forms ST-XIII and
ST-VIII-A showing gross turnovers at Rs.76,26,49,211.19 and Rs.5,88,00,715.78
respectively. Deductions were claimed in respect of sales of tax free goods and
sales made to the registered dealers.
with the returns filed, the Assessing Authority issued statutory notice in form
ST-XIV under Section 11(2) of the Act requiring the appellant to produce their
accounts. In response to the said notice, the appellant appeared before the
Assessing Authority and produced the accounts. After examining the accounts,
the Assessing Authority, Amritsar, vide its order dated 20.1.1983 rejected the
same and issued an additional demand of Rs.1,84,58,291/- including the penalty.
the order of the Assessing Authority, the appellant filed an appeal before the
Deputy Excise and Taxation Commissioner. By order dated 16.11.1983, the Deputy
Excise and Taxation Commissioner partly allowed the appeal and 2 remanded the
case to the Assessing Authority for a fresh decision after affording reasonable
opportunity of being heard to the appellant. Dissatisfied with the said order,
the appellant filed an appeal before the Sales Tax Tribunal. The Sales Tax
Tribunal vide its order dated 22.11.1984 dismissed the same. The appellant
filed a further petition before the Tribunal under Section 22(1) of the Act for
referring the questions involved to the High Court for its opinion. On
4.11.1986, the Tribunal rejected the petition of the appellant on the ground
that the matter was already under consideration of the High Court and the
decision taken on this point would become applicable on all such cases. Feeling
aggrieved, the appellant filed a petition under Section 22(2) of the Act before
the High Court praying to direct the Tribunal to refer the questions to the
High Court for its opinion. Vide its order dated 27.09.1988, the High court
directed the Tribunal to send the case and refer the questions for its opinion.
In compliance of the said order, the Tribunal by order dated 15.09.1989
referred two questions of law for the opinion of the High Court which are as
"1) Whether in the facts and circumstances of the case, the expenses
incurred by the State or Agencies of the Food Corporation of India after
acquiring or purchasing the goods before delivery to the petitioner-dealer
could form part of gross turnover and be subjected to tax? 2) Whether in the
facts and circumstances of the case, could the market fee be included in the
purchase turnover in view of (1980) 46 STC 477 (Anand Swarup Mahesh Kumar vs.
Commissioner of Sales Tax)?"
Court by the impugned order dated 08.02.2007 concluded that the first question
did not emerge from the order of the Tribunal there being no factual basis
available, returned the question unanswered. In respect of the second question,
the High Court concluded that the same was covered by the judgment of this
Court in State of Punjab & Ors. vs. Guranditta Mal Shauti Prakash &
Ors., (2004) 136 STC 12 and accordingly answered the question in favour of the
assessee. Aggrieved by the said order, the appellant - FCI preferred this
appeal by way of special leave before this Court.
We heard Mr. Y. Prabhakara Rao, learned counsel appearing for the
appellant and Mr. Ajay Pal, learned counsel appearing for the respondent.
Since the second question of law referred to the High Court is
covered by the judgment of this Court and not disputed by both sides, we are
left with the first question being referred to the High Court. As said earlier,
the High Court by the impugned order, after finding that the first question
does not emerge from the order of the Tribunal there being no factual basis returned
the same unanswered. Learned counsel appearing for the appellant pointed out
that the High Court committed an error in returning the first question referred
to it by the Tribunal unanswered when the said question was referred by the
Tribunal on the specific direction of the High Court in Sales-Tax case No. 4 of
1987 dated 27.09.1988. He also pointed out that such reference was made on a
specific direction by the earlier Bench under Section 22(2) of the Act and
therefore the High Court ought not to have avoided or declined the said
question. The counsel also pointed out that enough material/factual basis was
available in the order passed by the Assessing Officer as well as the Tribunal,
hence, the High Court erred in observing that there was no factual basis for
the first question. On the other hand, learned 5 counsel appearing for the
respondent - State of Punjab supported the decision of the High Court and
prayed for dismissal of the appeal.
It is relevant to mention that when the FCI filed an application
for reference, pointing out certain questions of law for adjudication to the
High Court arising out of the order of the Sales Tax Tribunal dated 22.11.1984,
by order dated 04.11.1996, the Sales Tax Tribunal dismissed the said
application holding that these questions need not be referred to the High
Court. Aggrieved by such decision, the FCI moved the High Court in STC Case No.
4 of 1987 praying to direct the Sales Tax Tribunal to refer to the High Court
the questions of law which arose out of the aforesaid order of the Tribunal.
to the said petition, the High Court, by order dated 27.09.1988, passed the
following order:- "V. Ramaswami, C.J. (Oral) We are satisfied that the
following questions of law do arise out of the order of the Tribunal and
accordingly we direct the Tribunal to state a case and refer the questions for
Whether in the facts and circumstances of the case, the expenses incurred by
the State Agencies of the Food Corporation of India after acquiring or purchasing
6 the goods before delivery to the petitioner-dealer could form part of gross
turn over and be subjected to tax?
whether in the facts and circumstances of the case, could the Market fee be
included in the purchase turnover in view of 46-STC-477? Sd/- V. Ramaswami.
Justice Sd/- G.R. Majithia Judge.
clear from the above order that the Division Bench of the High Court, after
satisfying itself, with reference to the questions of law to be determined
directed the Tribunal to state the relevant case and refer the questions for
the opinion of the High Court. In view of the specific order/direction of the
High Court, the Sales Tax Tribunal, Punjab has no other option but to refer the
same to the High Court and by order dated 15.09.1989 rightly referred it. In
those circumstances, as rightly pointed out by counsel for the appellant, we
are of the view that unless there were very clear reasons, the High 7 Court
could not have held that there was no material available in the order of the
Tribunal for considering the same.
Now let us see whether any factual basis/materials were available
in the order of the Tribunal for determining the question posed before the High
Court. The counsel for the appellant took us through the order of the Assessing
Authority as well as Sales Tax Tribunal. A perusal of the orders of the
Assessing Authority, Amritsar, (Annexure-P1) and of Sales Tax Tribunal clearly
show that all the factual details pertaining to the first question of law were
highlighted and placed for appropriate orders.
The Assessing Authority on 20.01.1983 assessed the
Appellant-Corporation and made an additional demand of Rs. 1,84,58,291/-
including the penalty. In its judgment, the Authority made it clear that it
considered the question whether the incidental expenses would be included in
the assessment of the tax. The order states as under:
representative of the dealer argued that the expenses so incurred are purely
service charges and these do not formed [sic.] a part of consideration and
hence the same should not be taxed. I am of the view that these expenses
includes market fees, dami and labour charges, which form the part and parcel
of the bill and hence are the part of 8 consideration, so the plea of the
representatives of the Corporation is not taxable."
Subsequently, the appellant filed an appeal before the Deputy
Excise and Taxation Commissioner (Appeals) Jalandhar, wherein it specifically
contended that market fee and dami were not part of the turnover. Insofar as
market fee was concerned, reliance was placed on the decision of this Court in
Anand Swarup Mahesh Kumar (supra). In regard to dami (commission paid), it was
contended that such expenses should not be included in the taxable turnover.
The Appellate authority noticed the said contention, but rejected the same vide
order dated 16.11.1983.
We are satisfied that the question of law that arose for decision
of the High Court was whether in the facts and circumstances of the case, the
incidental charges could be treated as a part of taxable turnover and if that
is so, as to what should be the correct rate at which the said incidental
charges should be calculated. Further, it was brought to our notice that the
appellant-Corporation had paid the required tax for the Assessment Year 1975-76
as demanded within the time specified in the demand notice. In the same manner,
9 when on 28.03.2001, the Excise and Taxation Officer had asked the
appellant-Corporation to deposit an amount of Rs. 29,52,874.15 before
30.03.2001, the Corporation had deposited the said amount on 28.03.2001. As by
this order, we propose to request the High Court to decide the first question
afresh, there is no need to elaborate upon the same except holding that
adequate materials as well as factual details are available for determination
of the first question of law referred to the High Court.
In the light of the above discussion, we set aside the order of
the High Court insofar as it relates to the first question of law and remit the
same to it with a request to answer the same referred to by the Sales Tax
Tribunal, after affording opportunity to both parties, and pass fresh order in
accordance with law as expeditiously as possible. To this extent, the impugned
order of the High Court is modified. The Civil Appeal is partly allowed. No
.........................................J. (R.V. RAVEENDRAN)
..........................................J. (P. SATHASIVAM)
AUGUST 21, 2009.
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