State of Punjab and Ors. v. Mis Chhabra Rice Mills and Ors.

Case Details & Bench

Court: High Court
Hon'ble Judges: Arijit Pasayat
Tarun Chatterjee
Judgment Date: 2005-11-17
Court Decision / Holding: Appeal dismissed.
Final Disposition: Appeal dismissed, without any order as to costs.

Parties to the Case

Appellants / Petitioners

State of Punjab and Ors.

Respondents

Mis Chhabra Rice Mills and Ors.

Legal Representation & Advocates

Counsels for Petitioners

• Arun K. Sinha
• Rakesh Singh
• Mukesh K. Sinha

Counsels for Respondents

• K.K. Gupta (N.P.)
• Ms. Jaspreet Gogia (N.P.)

Case Synopsis & Summary

This civil appeal challenges a High Court decision holding that purchase tax under the Punjab General Sales Tax Act, 1948 cannot be levied on the market fee collected under the Punjab Agricultural Produce Markets Act, 1961. The appellants – the State of Punjab and others – contend that turnover, defined in Section 2(i) of the Act as the aggregate of sales and purchases and related amounts, can include market-related charges and that the market fee, recoverable through the seller from the buyer, forms part of the sale consideration for taxation purposes. The writ petition filed by Mis Chhabra Rice Mills and Ors. was allowed by the High Court, which held that the market fee is paid by the buyer to the Market Committee and is not paid to the sellers; hence it cannot form part of turnover for purchase tax. The Court traces Anand Swarup Mahesh Kumar v CST (1980) 4 SCC 451 and State of Punjab v Guranditta Mal Shauti Prakash and Ors. (2004) 5 SCC 791 to examine when turnover could include such charges, but ultimately agrees that the market fee is not an obligation on the seller and cannot be regarded as sale consideration. Accordingly, the appeal is dismissed, but with no order as to costs.

Provisions of Law Cited

Punjab General Sales Tax Act, 1948 – Section 2(i)Punjab Agricultural Produce Markets Act, 1961 – Marketing RegulationsU.P. Krishi Utpadan Mandi Adhiniyam, 1964 – Section 3-D(l)

Submissions & Arguments

Contentions of Appellants / Petitioners

Appellants contend that turnover under the Punjab General Sales Tax Act includes market-related charges in certain transactions under Section 2(i) and the Marketplace Regulations; relying on Anand Swarup Mahesh Kumar v CST (1980) 4 SCC 451, they enumerate four scenarios where turnover may include market fee (through commission agents, direct purchases from producers, purchases from other traders, and other cases where the purchaser pays the fee). They argue that market fee can be taxed as part of turnover when applicable, and that the levy should be guided by the statutory text and the four-category framework.

Contentions of Respondents

Respondents contend that market fee is not part of sale consideration or turnover; it is payable by the buyer to the Market Committee, recovered by the seller only as a right to realise the fee from the purchaser, and therefore cannot form part of the turnover for purposes of purchase tax. They rely on Punjab law and the Market Regulations to argue there is no liability on sellers to pay purchase tax on market fee.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
Anand Swarup Mahesh Kumar v. CST	(1980) 4 SCC 451	Positive	Cited and relied upon to discuss the conditions under which turnover can include market fee, including four scenarios outlined in the decision.
State of Punjab and Ors. v. Guranditta Mal Shauti Prakash and Ors.	(2004) 5 SCC 791	Positive	Followed to reaffirm that there is no obligation on the seller to pay market fee; relies on Anand Swarup’s case as part of the reasoning.

Extracted Judgment Text

Exact text extracted from official judgment records.

·A STATE OF PUNJAB AND ORS. _v._ _MIS_ CHHABRA RICE MILLS AND ORS .. NOVEMBER 17, 2005 B (ARIJIT PASAYAT AND TARUN CHATTERJEE, JJ.] _Punjab General Sales Tax Act, 1948:_ _Section 2(i)-Purchase Tax-If can be charged on market fee-Market_ C _fee-Paid to Market Committee-Held, cannot be treated as part of sale consideration-There was no liability to pay purchase tax on the element of market fee-Marketing Regulations framed under Punjab Agricultural Produce Markets Act, 1961-Agricultural Produce Markets._ _Anand Swarup Mahesh Kumar_ v. _CST,_ (1980) 4 SCC 451 and _State of Punjab and Ors._ v. _Guranditta Mal Shauti Prakash and Ors .._ (2004] 5 SCC 791, relied on. D -· CIVIL APPELLATE JURISDICTION : Civil Appeal No. 14817 of 1996. E From the Judgment and Order dated 8.9.1994 of the Punjab and Haryana High Court in C. W.P. No. 8806 of 1993. Arun K. Sinha, Rakesh Singh and Mukesh K. Sinha for the Appellants. F K.K. Gupta (N.P.) and Ms. Jaspreet Gogia (N.P.) for the Respondents. The Judgment of the Court was delivered by ARIJIT PASAY AT, J. The only question raised for consideration in this appeal is whether purchase tax can be charged on the element of market fee on the basis that the same does not form part of the turnover. Writ G Petition filed by the respondent was allowed by the High Court and this appeal has been filed by special leave. Under the Punjab General Sales Tax Act, 1948 (in short the "Act") "turnover" is defined in Section 2(i) to include: H 314 ST t\T~ t. • ~ OF '''\ PUNJAB v. CHHABRA RICE MILLS [PASAYAT, J.] 315 "the aggregate of the amounts of sales and purchases and parts of sale!> A and purchases actually made by any dealer during the given period, less any sum allowed as cash discount and trade discount according to ordinary trade practice, but including any sum charged for anything don by the dealer in respect of the goods at the time of, or before, delivery thereof'. Interpreting this provision with reference to the Marketing Regulations; B under Punjab Agricultural Produce Markets Act, 1961 (in short "Market~ Act") the High Court noticed that the incidence of tax in the present cases is when the turnover exceeds the taxable quantum, the buyer has to pay market fee as the writ petitioner are licensees within the market area; that sucq market fee is not paid by them to the sellers; that, therefore, such amount of C the market fee cannot be part of the sale consideration; that the writ petitioners were not required to show in their turnover the amount of the market fee ~ part of the purchase price of such of the agricultliral produce purchased by· them locally; that such market fee is not to form part of the turnover for assessment or payment of purchase tax. D This Court in _Anand Swarup Mahesh Kumar_ v. _CST._ [1980] 4 SCC 451, had occasion to consider whether additional tax on certain dealers levied on turnover of purchases mentioned in Section 3-D(l) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (in short "U .P. Act") collected from purchases by, commission agent can be included in the turnover of purchases. This Court explained that there are four circumstances in which turnover could be include· E and they are :(i) if the produce is sold through a commission agent, the , commission agent may realise the market fee from the purchaser and shall be liable to pay the same to the Committee; (ii) if the produce is purchased ' directly by a trader from a producer the trader shall be liable to pay the , market fee to the Committee; (iii) if the produce is purchased by a trader p from another trader, the trader selling the produce may realise it from the purchaser and.shall be liable to pay the market fee to the Committee, and (iv) · in any other case of sale of such produce, the purchaser shall be liable to pay the market fee to the Committee. Under what circumstances, the market fee is to be paid needs to be G considered and once it is held that the buyer has an obligation to pay the ' market fee and it is the duty of the seller to deposit the market fee on behalf , of the buyer and, therefore, to realise it from the buyer, it is not the legal obligation of the seller to pay market fee on such a transaction and thus the amount of market fee cannot be treated as part of the sale consideration. , H SUPREME COURT REPORTS [2095] SI.WP. _5_ S.C.R. 316 A Similar is the position in the present case as per law prevailing. The above position was examined by this Court in _State of Pubjab and Ors._ v. _Guranditta Mal Shauti Prakash and Ors.,_ [2004) 5 SCC 791 and relying on the decision in _Anand Swarup's case_ (supra), it was held that there was no obligation on the part of the seller to pay market fee since it is the B duty of the buyer to pay the same and the seller can realise it from the buyer. The inevitable conclusion, therefore, is that there was no liability to pay sales tax on the element of market fee. Above being the position, the appeal fails and is dismissed but without C any order as to costs. R.P. Appeal dismissed.