State of Andhra Pradesh vs T. Siddaiah Naidu and Co. State of Andhra Pradesh Vs K.G. Srinivasulu

Syed Shah Mohammed Quadri, J.—The short but interesting question that arises in these two T.R.Cs. is whether the cess payable under the Andhra Pradesh Agricultural Produce and Live Stock Market Act by an agent or dealer forms part of the turnover so as to be assessable to sales tax.

The respondent-assessee deals in jaggery. The disputed turnover for 1983-84 represents the market cess collected by him form the purchaser on the sale of jaggery in the market yards. The assessing authority included in the turnover "the market cess" and that view was affirmed by the appellate authority. In the second appeal filed by the assessee before the Tribunal it was contended that the market cess was included in the bills, therefore it would fall within the definition of the "turnover". The Tribunal rejected that contention and held that the market cess collected by the appellant was not consideration for transfer of property and could not be treated as part of "turnover" and accordingly allowed the appeal of the respondent-assessee on August 31, 1987. It is the correctness of that order that is assailed in these T.R.Cs.

The learned Special Government Pleader for Taxes contends that as the assessee has collected the market cess from the purchasers it would form part of the "turnover". The expression "turnover" in the relevant assessment year read as follows :

"2(s) ''turnover'' means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment or any other thing of value) including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof :

Provided that in the case of a sale by a person (whether by himself or through an agent) of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise, the amount of the consideration relating to such sale shall be excluded from his ''turnover'' when such produce is sold in the form in which it was produced, without being subjected to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading or sorting."

From the perusal of the definition extracted above it is clear that the whole amount set out in the bill must be towards consideration of sale or purchase of goods and then only it would fall within the ambit of the expression "turnover". The Appellate Tribunal relied upon the judgment of the Supreme Court in Anand Swarup Mahesh Kumar Vs. Commissioner of Sales Tax, to come to the conclusion that the market cess does not become part of the "turnover".

The learned Special Government Pleader for Taxes submits that that judgment is distinguished in Hyderabad Industries v. State of Andhra Pradesh (1987) 4 APSTJ 103 and the Supreme Court laid down the principle in the following terms :

"It has been found that the insurance charges were claimed in the bills of sale that being the position under clause (i), the amount becomes a part of the turnover and it is not necessary to rely upon III(c) of the definition to bring the insurance charges within the meaning of the definition ''turnover''...... Since the bill of sale included insurance charges and the assessee-appellate recovered the amount as part of the consideration for the transaction of sale there is no force in the challenge raised by the appellant against the demand."

From the above principle it is clear that it is not enough to show that there is no statutory provision authorizing the dealer to pass on the tax to the purchaser, such tax does not become part of the consideration for the transaction of sale or purchase. Where the provisions of a statute authorises the dealer to pass on the burden of tax, such tax does not form part of the consideration, unless it is shown that the dealer has included the tax in the price and realised the same from the purchaser. In the case before the Supreme Court, their Lordships having considered the provisions of rule 17 of the Rules made under the U. P. Krishi Utpadan Mandi Adhiniyam, 1964 (for short "the Adhiniyam") pointed out that a commission agent could not realize any commission higher than what is prescribed by law and that the commission chargeable by the commission agent was not a sum which he had in turn to pay to any authority by way of tax or by way of fee and that is only a reward for the services rendered by him. Therefore, the commission payable by a purchaser of goods to a commission agent operating within the market area established under the Adhiniyam, could not be treated as part of the turnover of purchases.

Now reverting to the facts of this case the Tribunal had recorded a finding that the market cess was not collected by the dealer/agent as part of the consideration either by virtue of any agreement between them and the purchaser and that the purchaser was under a statutory obligation to pay market cess for making purchases of agricultural produce in the market area and that the dealer collected the market cess payable by the purchaser for and on behalf of the market committee as its agent as provided under rule 74(4) of the Rules. In view of the above finding the essential requisite of the test, viz., the tax should have been included as consideration and passed on to the purchaser, is not satisfied. That being so the market cess cannot be treated as part of turnover. We, therefore, find no illegality in the order of the Tribunal; the T.R.Cs. are accordingly dismissed. No costs.

Petitions dismissed.