Food Corporation Of India vs State Of Punjab

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

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 under:

3

"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.

4

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

5 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

6 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

7 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

8 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

9 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)

1 0 ..........................................J. (P. SATHASIVAM)

NEW DELHI;

AUGUST 21, 2009.

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