Govinda Bhat, C.J.
1. This revision petition under section 23(1) of the Karnataka Sales Tax Act, 1957, hereinafter called the 'Act', preferred by the dealer relates to the assessment year 1963-64.
2. The dealer is the Kampli Co-operative Sugar Factory Limited, Kampli, which carries on the business of manufacturing sugar from sugarcane purchased from growers. The dealer also sells sugarcane setts to the growers from whom it purchases sugarcane. Under section 5(3)(b) read with item 11-A of the Third Schedule to the Act, the levy on sugarcane is at the purchase point. The minimum purchase price of sugarcane had been fixed by the Central Government by its order issued under the Sugarcane (Control) Order, 1956. The dealer entered into agreements with the sugarcane-growers for purchase of sugarcane at the minimum price fixed by the Order of the Central Government. Under the said agreements, the growers agreed to supply their sugarcane f.o.r. factory premises of the dealer. As an inducement to the growers to supply more sugarcane, the dealer promised to pay, in addition to the minimum price agreed upon, transportation charges at the rate of Rs. 2.60 per ton. The additional payment made by the dealer for the relevant assessment year amounted to Rs. 4,00,541.05, which was claimed to be exempt from tax under rule 6(4)(f)(i) of the Sales Tax Rules.
3. The turnover of sales relating to sugarcane setts sold by the dealer to the growers amounted to Rs. 7,691.02. The dealer contended that sugarcane setts come within the meaning of the word 'sugarcane' and are therefore liable to tax at the purchase point under section 5(3)(b) read with item 11-A of the Third Schedule to the Act. The assessing authority overruled that contention holding that sugarcane setts do not come within the meaning of the word 'sugarcane' and, as such, they are liable to tax under section 5(1) of the Act. The contention that the transportation charges amounting to Rs. 4 lakhs and odd paid by the dealer to the growers did not form part of the purchase turnover of the dealer was also rejected by the assessing authority. The order of the assessing authority in this regard was upheld by the two appellate authorities.
4. In this revision petition, two questions have been formulated for our decision by Sri Sarangan, the learned counsel for the petitioner. They are :
'(1) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the sum of Rs. 4,00,541.05 paid by the dealer by way of transportation charges to the growers is not exempt from tax
(2) Whether the turnover relating to sugarcane setts is liable to tax under section 5(1) of the Act ?'
5. The first question is concluded by the decision of this court in Pandavapura Shakara Shakara Kharkhane (P.) Ltd. v. State of Mysore ( 32 S.T.C. 104.), wherein, on practically identical facts, this court has held that the substance of the transaction between the dealer and the cane-growers is that the original contract has been varied by the enhancement of the price for the sugarcane supplied, and that the additional payment made by the dealer cannot be regarded as ex gratia payment since it is directly related to the quantity of sugarcane supplied. It is relevant to state that the price payable by the dealer to the growers is f.o.r. factory premises, and that being so, assuming that what was paid to the growers was transportation charges, the growers being bound to deliver sugarcane at the factory premises under the contract, such transportation charges are included in the price of sugarcane as per the terms of the contract. Therefore, on the first question, the Tribunal was right in holding that the sum of Rs. 4,00,541.05 was liable to be included in the turnover and taxed under section 5(3)(b) of the Act.
6. In regard to the second question, the Madras High Court in Sakthi Sugars Limited v. Deputy Commissioner Tax Officer, Bhavani ( 32 S.T.C. 104.), has described (at page 236) what is meant by sugar-cane setts. Briefly stated, sugar-cane setts are sugarcane seeds. The word 'sugarcane' has not been defined in the Act and, therefore, one has to construe that word in the popular or commercial sense in which it is understood. If a party enters into an agreement for the supply of sugarcane and the vendor supplies sugarcane setts, can it be said that the agreement has been performed in accordance with the terms of the contract Conversely, if a party enters into an agreement for purchase of sugarcane setts and the vendor supplies sugarcane, can it be said that the agreement has been performed There can be only one answer and that is, sugarcane setts are not understood in the commercial sense as sugarcane. Therefore, we are in respectful agreement with the view taken in Sakthi Sugars Limited case ( 23 S.T.C. 232.). Following the said decision, we answer the second question against the dealer and in favour of the department.
7. In the result, for the reasons stated above, this revision petition fails and is dismissed with costs. Advocate's fee is Rs. 100.
8. Petition dismissed.