STATE OF KARNATAKA AND ORS. versus M/S SRI CHAMUNDESWARI SUGAR LTD.

Citation: [2008] 6 S.C.R. 16 · Decided: 08-04-2008 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Case Allowed

Judgment (excerpt)

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[2008] 6 S.C.R 16 
STATE OF KARNATAKA AND ORS. 
V. 
M/S SRI CHAMUNDESWARI SUGAR LTD. 
(Civil Appeal No. 4934 of 2006) 
APRIL 8, 2008 
[DR. ARIJIT PASAYAT, P. SATHASIVAM AND 
AFTAB ALAM, JJ.] . 
Sales Tax. 
Karnataka Sales Tax Act, 1957 - Sugarcane (Control) 
Order, 1966 - Clause 5 and 3A - Purchase tax - Levy of -
Purchase of sugarcane from cane growers - Liability of 
purchaser to pay purchase tax on excess E;Jmount paid by 
purchaser to cane-grower as advance over and above 
minimum cane price and additional cane price -
Held: 
Assessee paid State Advised Price (SAP) which is subject to 
certain adjustments - It cannot take the plea that because it 
was agreed by the grower and the purchaser that certain 
amount would be paid, does not render the amount paid as 
SAP irrelevant - Agreement cannot determine the question 
of liability to pay the purchase tax - Revenue was justified in 
demanding purchase tax on the amount paid as SAP - Hence, 
order of High Court that advance price towards SAP cannot 
be subjected to tax is not sustainable and is set aside. 
Words and Phrases: 
'Purchase price' and 'Purchase' - Meaning of 
'Sale' - Meaning of - In the context of s. 2(t) of the 
Karnataka Sales Tax Act, 1957. 
The respondent company is the manufacturer of 
sugar. It was liable to pay tax on purchase of sugarcane. 
The assessing authority passed the assessment orders 
for assessment year 1990-1991 to 1993-1994. It took into 
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STATE OF KARNATAKA AND ORS. v. MIS SRI 
CHAMUNDESWARI SUGAR LTD. 
17 
coll'sideration the statutory minimum price fixed by the A · 
Central Government, the State Advised Price fixed by the 
State of Karnataka and all other amounts paid toe the 
sugarcane growers by the respondent-company, and 
determined the purchase price paid to sugarcane growers 
by the respondent company on which purchase tax was 
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levied under the Karnataka Sales Tax Act, 1957. 
Respondent-company filed writ petition which was 
dismissed holding that the amount paid under the different 
nomenclatures required to be considered as purchase 
price paid by the purchaser of sugarcane to the cane c 
growers. Appeal preferred thereagainst was disposed of 
alongwith other appeals by order dated 08.02.1996 i.e. 
State of Tamil Na du and Ors. v. Kothari Sugars and Chemicals 
Ltd. holding that without any contractual or statutory basis 
fixing the sale price of sugarcane at an amount higher D 
than the minimum cane price fixed under clause 3 of the 
Sugarcane (Control) Order, 1966 and the additional cane 
price fixed under clause 5-A, any sum paid by the 
purchaser to the grower as advance prior to fixation of 
the additional cane price under clause 5-A, to the extent 
that it is in excess of the additional cane price fixed later, E 
cannot form part of the price of cane sugar. 
One of the appeals against the decision ofKarnataka 
High Court in Tungabhadra Sugar Works and Anr v. State of. 
Karnataka and Ors was remitted back to High Court for· F 
fresh consideration in the light of certain observations and 
directions given by this Court. High Court remitted the 
matter to the Assessing Authority. The Assessing Officer 
held that the· State Advised Price paid by the respondent 
forms part of the purchase price paid to the sugarcane G 
growers and thus, was to be included in the turnover of 
the dealer for purpose of computation of tax. Respondent 
filed appeal which was dismissed. In second appeal, 
tribunal held that the advance price towards SAP cannot 
be subjected to tax and do not form part of purchase price. H 
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SUPREME COURT REPORTS 
[2008] 6 S.C.R 
A High Court upheld the order. It also held that in the 
absence of agreement between sugarcane purchasers 
and sugarcane growers, the payment of excess amount 
fixed by the State/Central Government was not to be 
reckoned. Hence the present appeal. On finding that there 
B was slight controversy in some of the decisions of this 
Court, a Division Bench referred the matter to a larger 
Bench and then the matter came up for hearing by the 
three Judge Bench. 
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Allowing the appeal, the Court 
HELD: 1 .. 1 In the State of U.P. the SAP forms part of 
the agreement. In the instant case, it is not there. UP 
Cooperative's case deal with question of statutory price. 
In Ponni Sugars case the decision in UP Cooperative's 
0 case was followed. There is no dispute that respondent 
paid the SAP which is subject to certain adjustments. That 
being so, the re

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