M/S. NEYVELI LIGNITE CORPORATION LTD. versus COMMERCIAL TAX OFFICER, CUDDALORE AND ANR.

Citation: [2001] SUPP. 3 S.C.R. 163 · Decided: 19-09-2001 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

cites 1 · see the full citation network in Lexace

Judgment (excerpt)

M/S. NEYVELI LIGNITE CORPORATION LTD. 
A 
v. 
COMMERCIAL TAX OFFICER, CUDDALORE AND ANR. 
SEPTEMBER 19, 2001 
[B.N. KIRPAL, S.N. PHUKAN AND P. VENKATARAMA REDDI, JJ.] 
B 
Tamil Nadu General Sales Tax Act : Section 2(n) & (r) and 3. 
Sales Tax-Fertilizer-Subsidy on-Liability to sales tax-AY 1996-97-
Maximum sale price of fertilizer fixed under Fertiliser (Control) Order-
Subsidy, being difference between retention price and selling price, given to 
manufacturer-Held: The price which is receivable in respect of sales made by 
a dealer forms part of his taxable turnover-The two payments, namely, the 
subsidy and sale price, are independent of each other-Subsidy is not part of 
sale price-Hence, not liable to sales tax-Essential Commodities Act, 1955, 
S.3-Fertilizer (Control) Order, 1985. 
The appellant manufactured fertilizer and its maximum sale price 
was fixed under the Fertilizer (Control) Order, 1955 promulgated under 
Section 3 of the Essential Commodities Act, 1955. In order that no hardship 
was caused to the manufacturer a Retention Price Scherµe was introduced 
by the Central Government under which an amount of subsidy, being the 
difference between the retention price and the maximum selling price, was 
disbursed to the claimant-industry. This subsidy was payable on the basis 
of the quantity of fertilizer produced and removed from the factory. 
c 
D 
E 
The appellant received notices for the Assessment Year 1996-97 from 
F 
the sales tax authority to the effect that according to it the subsidy received 
by the appellant would form part of the taxable turnover of the appellant 
under the Tamil Nadu General Sales Tax Act and, therefore, was liable to 
sales tax. The Tamil Nadu Taxation Special Tribunal dismissed the 
appellant's petition challenging the aforesaid notices. Hence this appeal. 
G 
The following question arose before this Court:-
Whether the subsidy received by the appellant was to form part of 
its taxable turnover under the provisions of the Tamil Nadu Gene;al Sales 
Tax Act? 
H 
163 
164 
SUPREME COURT REPORTS 
[2001) SUPP. 3 S.C.R. 
A 
Allowing the appeal, the Court 
B 
c 
D 
E 
F 
G 
HELD.: l. It is that sale consideration, whether in cash or otherwise, 
which is receivable in respect of sales made by a dealer, which can possibly 
form part of the turnover of a dealer. It is that sum which can be legitimately 
regarded as forming part of the aggregate amount for· which the goods 
have been bought or sold. The sum has to be paid either by the purchaser 
or on his behalf by some other person. [168-A·B] 
2.1. Whereas in respect of sale offertilizer the purchaser has to pay the 
price as fixed under the Fertilizer (Co!'trol) Order, 1985 giving of subsidy is 
not contemplated by the said Order and the same is given pursuant to an 
administrative decision taken by the Central Government. The subsidy so 
given is undoubtedly to see that the ultimate consumer gets fertilizer at a · · 
reasonable price and the manufacturer is not unduly burdened by the lower 
fixation of the price of fertilizer. The payment, which is so made by the 
Central Government to a manufacturer, cannot be regarded as a discharge 
of any liability or obligation by t~e Government towards the purchaser of 
fertilizer. The two payments received by manufacturer, namely, the subsidy 
and the price fixed under the Fertilizer (CoQtrol) Order, 1985 are independent 
of each other. Subsidy does not form part of the bargain between ·the 
manufacturer and the purchaser of fertilizer. [168-H; 169-A-B] 
2.2. It is the amount whkh flows from the purchaser to the seller 
which alone would form part of the turnover of the seller. Any sum received 
dehors the contract of sale from another entity, whether it be the 
Government or any one else, cannot be regarded as being an amount 
which would form part of the sale price on which tax is payable. [170-E] 
2.3. Whatever is payable by the purchaser to the seller in terms of a 
Control Order promulgated under Section 3 of the Essential Commodities 
Act, 1955 has to be regarded as a part of the sale price a.nd no more. [170-H] 
State of T.N. v. Kothari Sugars ~-Chemicals Ltd., [1996) 7 SCC 751, 
Mis. George Oakes (P) Ltd. v. State of Madras, [1962) 2 SCR 570 and Assam 
State Electricity Board v. E!rahma Putra Steels (P) Ltd., [1996) 8 SCC 73, 
relied on; 
· E.l.D. Pany (/) Ltd. v. Asst!. Commnr. of Commercial Taxes, [2000) 2 
H sec 321, held inapplicable. 
.. 
.it 
NEYVELI LIGNITE CORPN. LTD. v. COMM

Excerpt shown. Read the full judgment & AI analysis in Lexace.