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Sakthi Sugars Limited and ors. Vs. Deputy Commercial Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case Number Writ Petition Nos. 588, 589, 1043, 1044, 1802, 1803 and 1804 of 1968 and Tax Case No. 2 of 1968 (Ap
Judge
Reported in[1969]23STC232(Mad)
AppellantSakthi Sugars Limited and ors.
RespondentDeputy Commercial Tax Officer and ors.
Appellant Advocate C. Venkataraman and ; V.K. Thiruvenkatachari, Advs. ;for King and Partrdige
Respondent Advocate The Assistant Government Pleader
DispositionPetition allowed
Excerpt:
- - he has taken us through the correspondence that passed between the ryot, the sugar-cane sett grower and the petitioner and tried to establish that in so far as the petitioner is concerned, there was no purchase of sugar-cane setts as such by the petitioner from the sugar-cane sett grower or the ryot and if at all the part played by the petitioner in such transactions was that of a financier to advance moneys to the ryot to purchase good quality sugar-cane setts so that ultimately the mills of the petitioner could secure the best raw material for the manufacture and production of sugar. apparently this formula is adopted more in the interests of the mills so that they could secure the best raw material.ramaprasada rao, j.1. in this batch of cases the only question is whether sugar-cane setts are equatable to sugar-cane and therefore exigible to tax under item 62 in the first schedule to the madras general sales tax act, 1959. one other common question was raised by the assessees claiming that there can be no levy of sales tax under the act on the sale of denatured spirit as, according to them, such sales ought to be exempt from sales tax because of the levy of excise duty on such goods under the madras prohibition act, 1937. regarding the latter common question, the learned assistant government pleader representing the state of madras, conceded that no sales tax will be levied on the sale of denatured spirit and therefore it has become unnecessary for us to consider the elaborate.....
Judgment:

Ramaprasada Rao, J.

1. In this batch of cases the only question is whether sugar-cane setts are equatable to sugar-cane and therefore exigible to tax under item 62 in the First Schedule to the Madras General Sales Tax Act, 1959. One other common question was raised by the assessees claiming that there can be no levy of sales tax under the Act on the sale of denatured spirit as, according to them, such sales ought to be exempt from sales tax because of the levy of excise duty on such goods under the Madras Prohibition Act, 1937. Regarding the latter common question, the learned Assistant Government Pleader representing the State of Madras, conceded that no sales tax will be levied on the sale of denatured spirit and therefore it has become unnecessary for us to consider the elaborate arguments addressed at the Bar on this question. The only surviving point, therefore, is whether sugar-cane setts are to be characterised as sugar-cane and whether sale of sugar-cane setts as such can be subject to the levy of sales tax under item 62 of the First Schedule to the Act.

2. In W.Ps. Nos. 1043 and 1044 of 1968 the petitioner is seeking a rule for the issue of a writ of prohibition under Article 226 of the Constitution of India restraining the respondent from proceeding with the revision and assessment of the petitioner under the Act as proposed by him in his notices Nos. M.G.S.T. 432/62-63 and 432/66-67 dated 27th February, 1968, and 23rd February, 1968, respectively.

3. In W.Ps. Nos. 1802 to 1804 of 1968, the petitioner prays for the issuance of a writ of certiorari to quash the orders of the respondent dated 28th March, 1968, 30th March, 1968, and 22nd March, 1968 in M.G.S.T. 389/62-63, 410/62-63 and 432/62-63 respectively.

4. In W.P. No. 588 of 1968 the petitioner is seeking for a writ of prohibition prohibiting the respondent from proceeding with the assessment as contemplated by him in his notice No. A2 4158/65-66 dated 31st January, 1968.

5. In W.P. No. 589 of 1968 the petitioner is asking for a writ of certiorari to quash the order of assessment of the respondent in his proceedings No. 3974/66-67 dated 30th December, 1967.

6. T.C. No. 2 of 1968 is an appeal by the appellant to revise the order of the Board of Revenue dated 22nd November, 1967, and passed in B.P.Rt. No. 3986/67.

7. As already stated, the only point which was fully argued and which remains to be considered by us in this batch of cases is whether sugarcane setts are sugar-cane. Incidentally the question has been raised alternatively that even if sugar-cane setts could be deemed to be sugarcane, whether the petitioners are dealers in sugar-cane setts and in any event whether there was a sale or purchase of such sugar-cane setts by the petitioners attracting sales tax over such transactions effected by them in the course of the manufacture of sugar by each of these petitioners in their manufactories.

8. It is sufficient if we note the facts in W.P. No. 1043 of 1968 as the modus oferandi and the events appertinent to the transactions in question are similar and it has been conceded to be so by the learned counsel appearing for all the petitioners in this batch of cases.

9. In W.P. No. 1043 of 1968 the petitioner was assessed to tax under the Madras General Sales Tax Act, 1959, for the year 1962-63 on 4th September, 1964. The respondent, however, in exercise of his powers of revision under the Act, purported to revise the completed assessment for the year 1962-63 arid desired to include in the taxable turnover a sum of Rs. 4,95,194.07 representing the turnover in sugar-cane setts which, according to the respondent, was wrongly exempted from being brought to tax in the earlier order. Even so the petitioner received a notice for the assessment year 1966-67 proposing, among other things, to tax a sum of Rs. 2,19,013.36 representing the turnover in sugar-cane setts as if they were sugar-cane. Even so in W.Ps. Nos, 1802 to 1804, 588 and 589 of 1968 and T.C. No. 2 of 1968 similar action was taken by the respondent in each of those petitions either to revise a closed assessment or to bring to tax for the first time the turnover of sales relating to sugar-cane setts as if they were chargeable under item 62 of the First Schedule to the Madras General Sales Tax Act, 1959.

10. Mr. V.K. Thiruvenkatachari who addressed the main arguments on behalf of the petitioners and the appellant in this batch contended that sugar-cane setts are only seedlings which are necessary for the propagation of the plant and that botanists and other agricultural experts consider that such setts are suitable only for planting purposes and they are not sugar-cane as popularly and commercially understood. According to him, sugar-cane setts, because of their low sucrose content, are useless for producing sugar and it cannot be a substitute for sugar-cane in any manner whatsoever. On the other question whether the petitioners in each of these cases are dealers of sugar-cane setts, his contention is that as sugar-cane is taxable only at single point under Section 3(2) of the Madras General Sales Tax Act, 1959, it cannot be subject to such tax twice, once at the stage when they are sold as sugar-cane setts and at another time as sugar. He has taken us through the correspondence that passed between the ryot, the sugar-cane sett grower and the petitioner and tried to establish that in so far as the petitioner is concerned, there was no purchase of sugar-cane setts as such by the petitioner from the sugar-cane sett grower or the ryot and if at all the part played by the petitioner in such transactions was that of a financier to advance moneys to the ryot to purchase good quality sugar-cane setts so that ultimately the mills of the petitioner could secure the best raw material for the manufacture and production of sugar.

11. The learned Assistant Government Pleader, however, would state that as the point involved for determination is purely one of fact, the petitioners ought not to be allowed to canvass the same in these proceedings under Article 226 of the Constitution. He would also state that the writs of prohibition filed by the petitioners are premature and as the enactment provides a hierarchy of tribunals for the adjudication of the problems concerned and arising thereunder, this Court ought not to exercise its extraordinary jurisdiction under Article 226 of the Constitution at this stage. He however alternatively pleads that sugar-cane setts are liable to be taxed as the commodity is to be equated to sugarcane and even otherwise the petitioners being the last purchasers of sugar-cane setts are liable to be taxed as dealers thereof and the impugned notices, according to the respondent, in each of these petitions are valid and legal.

12. No doubt the main point urged is one of fact. But if a factual determination on a question tantamounts to the investigation of a jurisdictional fact, then this Court will not refrain from investigating the same and adjudicating upon it. If the result of such an investigation decides a jurisdictional fact which would enable the taxing authorities to assume jurisdiction and bring to tax certain articles, then it cannot be said that no rule at all under Article 226 can be issued. Each case has to be decided on its own merits and we are inclined in the instant cases to consider whether the respondent in each of these petitions has the jurisdiction to assess the petitioners as proposed by him and whether his completed orders of assessment in respect of certain of the years under consideration are proper and legal.

13. What is the jurisdictional fact that confronts us in this case It is whether sugar-cane setts are sugar-cane, and if it is so established, then the revenue will have jurisdiction to assess the petitioners and the appellant and if not, the absence of the jurisdictional fact is apparent. This leads us to enquire as to what is a sugar-cane sett. Sugar-cane sett is a portion of cane stalk (cutting) such as is used for planting. It is a seedling which could be propagated and multiplied indefinitely from cuttings-See Encyclopaedia Britannica. Sugar-cane seed is very small, rather silky and rarely viable-See Van Nostrand's Scientific Encyclopaedia. It is said that sugar-cane seeds are so small that nearly 100 sugar-cane seeds would be required to equal the weight of a single wheat grain (Encyclopaedia Britannica). Therefore propagation of sugar-cane is by cuttings 8 to 10 inches long known as 'seeds', made from the upper joints of old canes. They are placed in trenches and merely covered with soil. They begin to sprout in about two weeks and the crop is harvested in 10 to 20 months. See Chambers's Encyclopaedia. Thus sugar-cane can be conveniently classified as a genus of which sugar-cane sett is a specie. But yet it would be commercial and etymological perversity if sugar-cane setts are to be equated and understood as sugarcane itself. Sugar-cane setts are botanical seeds from which spring sugarcane. The physical and chemical properties of sugar-cane setts are entirely different from sugar-cane. The sucrose content in both varies. The physical appearance is different. The use to which one can be put is totally different from the use to which the other can be put. Even more, in mercantile contracts it cannot be said that sugar-cane sett is a substitute for sugar-cane in the matter of performance or discharge of contracts involving supply or delivery of the one or the other of the commodities. If sugar-cane is asked for, can sugar-cane setts be supplied by a merchant and discharge by performance thus pleaded? It cannot be. No light is thrown in the Act as to what sugar-cane is. But the same being a word which is commonly used 'it must be construed in its popular sense meaning that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it': See Ramavalar Budhai-prasad v. Assistant Sales Tax Officer [1961] 12 S.T.C. 286. We are therefore of the opinion that sugar-cane setts are not sugar-cane as is understood in commerce and trade. Fiscal enactments resulting in the imposition of sales tax or purchase tax on the sale or purchase of goods have to satisfy the cardinal test that the goods enumerated as subjects of taxation are those which are commercially and popularly understood as such. An arbitrary and naked attempt on the part of the revenue to rope in goods and commodities having a special signification of their own in commerce, into the net of taxation as if they are goods enumerated in the Schedules to the Act without establishing a substantial nexus between the two articles and without proof of their identity, has to be, and ought to be, discouraged. On the only ground that the articles sugar-cane setts and sugar-cane have a striking and phonetic resemblance, they are not the same articles or similar commodities. We have already stated that sugar-cane setts beget sugar-cane. But that by itself does not tantamount to saying that one is equivalent of the, other. Their properties are different; their user is different and they are understood by the common man and the commercial community in different and distinct ways. Thus we find that sugarcane setts are not classifiable as sugar-cane and therefore the respondent had no jurisdiction to issue the impugned notices and pass the impugned assessment orders. Even so the order of the Board of Revenue in T.C. No. 2 of 1968 is unsustainable.

14. The further question is whether the sugar-cane setts were purchased by the petitioners or the appellant as dealers and if so are they exigible to tax. In the view that we hold that sugar-cane setts are not sugarcane it may not be quite necessary for us to consider this aspect. But as the revenue urged in the alternative that sale of sugar-cane setts being the subject of the bargain between the parties and being goods, they are in any event liable to tax as they are the subject-matter of a sale and purchase between the parties to such a bargain. It is to repel this contention of the revenue that it has become necessary for us to consider the material facts in the cases to find whether the petitioners are dealers in sugar-cane setts and whether at all they have purchased the same resulting in such purchases being exigible to tax.

15. Before adverting to the respective contentions of the parties it is necessary to note that under the Madras Sugar Factories Control Act, 1949 (Act 20 of 1949), which is an Act to provide for the licensing of sugar factories and regulating the supply and the prices of sugar-cane used in such factories, it is obligatory on the part of the occupier of every factory to submit to the Sugar-cane Commissioner an estimate of the quantity of sugar-cane which would be required by that factory during the crushing season. The Sugar-cane Commissioner thereafter declares any area to be a reserved area for such factory and during such crushing season. Thus obliged to purchase sugar-cane from a particular reserved area, the assessees are also called upon to select seeds for transplantation in such reserved areas from certain plots to be named by the Cane Development Officer of the district concerned. Invariably the Cane Development Officer of the district, on a reference made to him for the purpose by the factory concerned, approves certain plots which were selected and certified for seed purposes by the factories themselves and issues a directive that the plots are approved plots as seed plots, for cutting sugar-cane setts during a particular season. Such plots so selected for seedling purposes are owned by persons who are different from the cane growers (ryots). We have already noted that under the Madras Sugar Factories Control Act, 1949, the factory is obliged to purchase sugar-cane from a particularised reserved area. Such a reserved area is owned by a person ordinarily termed as a ryot. When the seed plots are approved in the manner stated above, the factory calls upon the ryots to purchase the seedlings (sugar-cane setts) from the owners of the seed plots, so that they could obtain the maximum quantity of sugar-cane from such approved seedlings. To achieve these purposes correspondence ensues between the owner of the seed plot, the ryot and the company. Invariably it happens that the company advances moneys to the ryot to enable him to purchase sugar-cane setts from the owners of the seed plots, which advance is ultimately adjusted towards the price of the sugar-cane supplied by the ryot to the factory during the crushing season. To enable the factory to have a hold on the ryot for such advances made> the factory secures a promissory note from the ryot at or about the time when advances are made by the factory to the seed plot owner and this promissory note is discharged either by adjustment against the price of sugar-cane supplied by the ryot to the sugar factory and if not supplied due to various causes, then the ryot becomes a debtor to the factory for the amount and he is obliged to pay interest also.

16. The modus operandi adopted by the factory which is reflected in the correspondence can be noted in support of the above resume of facts set out by us. The Cane Sub-Inspector of the sugar mills instructs the mills to effect a supply of sugar-cane setts to the ryot, who is obliged to supply sugar-cane ultimately to the mills, and he also indicates the person who is willing to supply such setts to the ryot in question. It is significant to note that the sugar factories are not only obliged in law to purchase the sugar-cane from and out of the lands allotted and allocated by the Cane Development Officer but equally they are also involuntarily compelled to see that the ryot, from whom they expect such supplies of sugar-cane, purchases sugar-cane setts from a farm owned by different persons in an area specified by the Cane Development Officer. Apparently this formula is adopted more in the interests of the mills so that they could secure the best raw material. The factories are indeed given the option to select the farms for seed purposes and it is in this behalf that the Cane Sub-Inspector or other officer of the factory intimates to the sugar mills about the availability of such sugar-cane setts from a particular individual and that the ryot in question from whom the mills are obliged to purchase the sugar-cane is also willing to purchase the sugar-cane setts from the seed farm-owner nominated by the officer of the company. The factory having been so instructed by its own officers prepares what is called 'setts delivery order.' It is convenient to extract one such delivery order for purposes of proper appreciation of the facts:

PaidSakthi Sugars Limited, AppakudalSetts Delivery Order. No. 259 64-65.ToSri G.A. Ramalingam, son of Akki Reddiar, Kannamoochi:R.No. 2294.Please supply 24000 (twenty-four thousand) setts of variety at Rs. 8.00 (eight only) per 1000 two budded setts to Sri Kamban Chetty R. No. Son of Kembara Chetty, Chettiyur. On production of this delivery order duly confirmed by the purchaser and attested by our field staff the company will effect payment after adjusting outstandings if any. Date 14-9-1964. (Sd.) x x x xCane Superintendent.... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... Received 24,000 (twenty-four thousand) setts of CO 419 the value as above to be debited to my 1965 special crushing season account. Date : 19-9-64. (Sd.) Kamban Chetty.R.No. New Signature of ryot.Kamban Chetty.... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... Area planted O. No. 97. on 14-9-64.Name of the field : Senguttaithottam PlantingVillage: Kannamoochi.Date: 19-9-64. (Sd.) x x x xCane Sub-Inspector.Billed Rs. 192 (Rupees one hundred and ninety-two only) on 22-10-64.'

[1964] 15 S.T.C. 812

[1955] 6 S.T.C. 157


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