REPORTABLE     

IN THE 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)

J U D G M E N T

P. Sathasivam, J.

1) Leave granted.

2) 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.

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3) 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.  

Dissatisfied  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.  

Against  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  

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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 under:

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“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)?”

The  High  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.

4) We  heard  Mr.  Y.  Prabhakara  Rao,  learned  counsel  

appearing for the appellant and Mr. Ajay Pal, learned counsel  

appearing for the respondent.

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5) 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  

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counsel  appearing  for  the  respondent  –  State  of  Punjab  

supported  the  decision  of  the  High  Court  and  prayed  for  

dismissal of the appeal.  

6) 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.  

Pursuant 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 its opinion:-

1. Whether  in  the  facts  and  circumstances  of  the  case, the expenses incurred by the State Agencies of the  

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Food Corporation of India after acquiring or purchasing  the goods before delivery to the petitioner-dealer could  form part of gross turn over 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 46-STC-477?

Sd/- V. Ramaswami.

Chief Justice

Sd/-  G.R. Majithia

Judge.       September 27, 1988”

It is 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  

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Court could not have held that there was no material available  

in the order of the Tribunal for considering the same.  

7) 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.  

8) 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:

“The 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  

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consideration,  so  the  plea  of  the  representatives  of  the  Corporation is not taxable.”

9) 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.  

10) 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  

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time specified in the demand notice.   In the same manner,  

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.  

11) 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 costs.       

…….…….………………………J.  (R.V. RAVEENDRAN)

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...…………………………………J.                 (P. SATHASIVAM)  

NEW DELHI; AUGUST 21, 2009.     

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