STATE OF TAMIL NADU versus KOTHARI SUGARS AND CHEMICALS LTD .

Citation: [1996] 2 S.C.R. 275 · Decided: 08-02-1996 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Dismissed

Judgment (excerpt)

... 
STATE OF TAMIL NADU 
A 
v. 
KOTHARI SUGARS AND CHEMICALS LTD . 
FEBRUARY 8, 1996 
[J.S. VERMA, AND K. VENKATASWAMI, JJ.] 
B 
Sugarcane (Control) Order, 1966: Clauses 3 and 5-A. 
Purchase tax--Over and above minimum and additional cane 
p1ices-Paid by purchaser to cane grower as advance in anticipation of C 
fixation of additional cane price-Held: such excess amount paid-Not part 
of total price of sugarcane-Hence purchaser not liable to pay purchase tax 
under State Sales Tax Act on such excess amount-Unless there was agree-
ment between grower and purchaser for payment of higher p1ice-Such agree-
ment must be proved as fact-Court must record a clear finding to the 
effect-Essential Commodities Act, 1955. 
D 
The Central Government was empowered under Clause 3 of the 
Sugarcane (Control) Order, 1966 to fix the minimum price for sugarcane 
for each season and different areas or different quantities of sugarcane. 
The Central Government subsequently introduced Clause 5-A in the Con-
E 
trol Order whereby the State Government was authorised to determine and 
fix "additional can price" over and above the "minimum can price" fixed by 
the Central Government. The State Government duly exercised its power 
and determined and fixed the additional cane price. 
The occasion for payment by the respondents of the amount in excess F 
of the aggregate of the minimum cane price and the additional cane price 
so fixed arose on account of an order of the State Government purporting 
to fix a higher revised minimum can price and directing the respondent -
sugar factory in the State to pay that price to the cane growers. Pursuant 
to the direction, the respondents paid the excess amount as an "Advance" G 
in anticipation of fixation of the additional cane price under Clause 5-A. 
The respondents filed writ petition in the High Court challenging the 
demand by the State Government of purchase tax on the excess amount, 
which was allowed. Aggrieved by the High Court's J11:dgment the anellants 
had preferred this appeal. 
H 
275 
276 
SUPREME COURT REPORTS 
[1996] 2 S.C.R. 
A 
On behalf of the appellants it was contended that the higher price 
B 
inclusive of the excess amount in the advance paid was deemed to have 
been paid by an agreement between the grower and the appellant and, 
therefore, the entire amount would be the price of sugarcane. 
Dismissing the appeal, this Court 
HELD : 1.1. On a perusal of the relevant provisions of the sugarcane 
(Control) Order, 1966, particularly Clauses 3 and 5-A therein, it is clear 
that the total price of sugarcane fixed there~nder is the aggregate of the 
minimum cane price fixed under Clause 3 and the additional cane price 
C fixed under Clause 5-A. Thus, unless there be an agreement between the 
grower and the purchaser for purchase of the sugarcane at a higher price, 
\ 
the obligation of the purchaser is to pay to the grower only the aggregate 
of the amounts fixed under Clauses 3 and 5-A. Therefore, under the Statute 
here is no liability of the purchaser to pay to the grower any amount in 
excess of this aggregate amount. Thus, without any contractual or 
D statutory basis fixing the sale price of sugarcane at an amount higher than 
the minimum cane price fixed under Clause 3 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 
cannot form part of the price of sugarcane. (279-G-H; 280-A-B] 
E 
1.2. The amount paid as advance under the State advice also does 
not have. any contractual basis since this was not paid as a result of an 
agreement between the grower and the purchaser. The amount of advance 
was paid in anticipation of fixation of the additional cane price under 
Clause 5-A which means that in case the fixation under Clause 5-A was at 
F 
a higher amount than the amount paid as advance then the purchaser 
would have to pay the deficit amount. Similarly, when the amount of 
advance was in excess, the purchaser would be entitled to refund of the 
excess amount, irrespective of the fact whether the refund was actually 
made or not. For the purpose determining the price of sugarcane for 
G computation of the purchase tax, the only significant amount is the ag-
gregate of the minimum price fixed under Clause 3 and the additional cane 
price fixed under Clause 5-A, unless a higher price is paid to the grower 
by agreement between the purchaser and grower. (280-

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