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CASE NO.: Appeal (civil)  14790-14803 of 1996

PETITIONER: State of Punjab & Ors.

RESPONDENT: M/s Guranditta Mal Shauti Prakash Etc.

DATE OF JUDGMENT: 05/05/2004

BENCH: CJI & G.P. MATHUR.

JUDGMENT: JUDGMENT

(with Civil Appeals Nos. 14736/1996, 14810-14816/1996)

RAJENDRA BABU,   CJI.  :

       In this case the question raised for consideration  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 petitions filed by Respondents in the High  Court have ended in their favour.  Hence these appeals  by special leave.

       Under the Punjab General Sales Tax Act ’turnover’  is defined to include "the aggregate of the amounts of  sales and purchase and parts of sales 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 does  not include any sum charged for anything done by the  dealer in respect of the goods at the time or or before  delivery thereof".   

Interpreting this provision with reference to the  Marketing Regulations, 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 appellants are licensees within  the market area; that such market fee is not paid by  them to the sellers; that therefore such amount of the  market fee cannot be part of the sale consideration;   that the appellants were not required to show in their  turnover the amount of the market fee as part of the  purchase price of such of the agricultural produce  purchased by them locally; that such market fee is not  to form part of the turnover for assessment or payment  of purchase tax.

       This Court in Anand Swarup Mahesh Kumar   vs.  The Commissioner of Sales Tax,  1980 Vol. 46  Sales Tax Cases 477, had occasion to consider whether  additional tax on certain dealers levied on turnover of  purchases mentioned in Section 3-D(I) of the U.P.  Krishi Utpadan Mandi Adhiniyam, 1964 collected from  purchases by common agent can be included in the

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turnover of purchases.  This Court explained that there  are four circumstances in which turnover could be  included 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 from another trader,  the trader selling the  produce may realise if 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.    

       The Punjab Act, it is submitted, is different from  the Act that was considered by this Court in Anand  Swarup Mahesh Kumar case and the High Court had  not properly examined the scope of the Agricultural  Produce Market Committee Act.  

Under what circumstances the market fee is to be  paid needs to be 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.  It cannot be seriously disputed that this  was the position in law in the State of Punjab.

       If the law was not clear, it is open to the State to  amend the law either with reference to the Agricultural  Produce Market Committee Act or the Sales Tax Act  because this Court in Anand Swarup Mahesh Kumar  case has explained under what circumstances the  liability to pay market fee becomes part of the  turnover.  When the finding of the High Court is that on  examining the enactment in question, there is no  obligation on the part of the seller to pay the market  fee since it is the duty of the buyer to pay the same  and seller can realise it from the buyer,  the conclusion  thereof that there was no liability to pay sales tax on  the element of market fee is justified.                     Therefore, we find no merit in these appeals and  the same shall stand dismissed.