Holding

Market fee is not part of the sale consideration and the seller has no liability to pay purchase tax on it.

Summary

The State of Punjab appealed a High Court decision that had held market fee payable by buyers was not part of the sale consideration, and therefore the seller was not liable to pay purchase tax on it. The Supreme Court examined the definition of "turnover" under the Punjab General Sales Tax Act and the provisions of the Agricultural Produce Market Committee Act. It affirmed that the buyer, not the seller, is legally obligated to pay the market fee, with the seller merely depositing it on the buyer's behalf. Consequently, the market fee cannot be treated as part of the sale consideration and is excluded from the seller's taxable turnover. The Court noted that if legislative clarity is required, the State may amend the relevant statutes. The appeal was dismissed, leaving the High Court's ruling intact.

Issues considered

Whether purchase tax can be levied on the market fee component of a transaction under the Punjab General Sales Tax Act.

Legislation cited

Sales Tax Act

Subjects

purchase taxmarket feeturnoversales taxPunjab General Sales Tax ActAgricultural Produce Market Committee Actseller liabilitybuyer obligation

Judgment

STATE OF PUNJAB A
V.

MIS. GURANDITTA MAL SHANTI PRAKASH ETC.

MAY 5, 2004

B
[RAJENDRA BABU, CJ. AND G.P. MATHUR, J.]

Punjab General Sales Tax Act :

Levy ofpurchase tax on marketfee~hallenge to-Allowed by High
Court-On appeal, Held : Buyer has to pay the marketjee-Seller is not C
under legal obligation to pay marketjee as he is only required to deposit
it on behalf of the buyer-Thus market fee could not be considered as part
of the sale consideration-Hence, Seller has no liability to pay sales tax
on the element pf market fee-State may amend the relevant provisions in
f the Agricultural Produce Market Committee Act/Sales Tax Act to clarify D
the law on the subject of levy of purchase tax on the market fee.

Words & Phrases :

'turn over'-Meaning of in the context of Punjab General Sales Tax E
Act.

The question which arose for consideration in these appeals was
as to whether the purchase tax could be charged on the element of
market fee on the basis that the same does not part of turnover.
F
Dismissing the appeals, the Court

HELD : Once it held by the High Court that the buyer has an
obligation to pay the market fee and it is the duty of the seller to deposit
the market fee on behalf of.the buyer and, therefore, to realize the same G
from the buyer, it is not the legal obligation of the seller to pay market
\
\ fee on such a transaction and thus the amount of market fee cannot
', be treated as part of the sale consideration. The conclusion thereof by
the High Court the seller has no liability to pay sales tax on the element
of market fee is justified. If the law is not clear, it is open to the State H
\. 23

/
24 SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R.

A to amend the law either with reference to the Agricultural Produce
Market Committee Act or the Sales Tax Act. 125-G-H; 26-A; C-DI

Anand Swarup Mahesh Kumar v. The Commissioner of Sales Tax,
(1980) Vol. 46 Sales Tax Cases 477, referred to.

B CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 14790-
14803 of 1966.

From the Judgment and Order dated 20.5.93 of the Punjab and
Haryana High Court in C.W.P. Nos. 796, 987, 988, 1079, 2352, 2353,
C 2654, 2917, 2925,. 2926, 2945, 3228, 3231 and 3672 of 1993.

WITH

C.A. Nos. 14736, 14810-14816 of 1996.
D
A. Sharan, H.M. Singh, Kaushal Yadav, Anil Hooda and R.S. Suri
for the Appellants.

P.N. Puri and K.L. Goel for the Respondents.
E
The Judgment oft.he Court was delivered by

RAJENDRA BABU, CJ. : In this case the question raised for
consideration is whether purchase tax can be charged on the element of
F market fee on the basis that the same does not form part of the turnover.

Writ petitions filed by Respondents in the High Court have ended in
their favour. Hence these appeals by special leave.

Under the Punjab General Sales Tax Act 'turnover' is defined to
G include 'the aggregate of the amounts of sales and purchase and parts of
sales and purchases actually made by any dealer during the given period
less any sum allowed as cash discount and trade discount according to
ordinary trade practice, but does not include any sum charged for anything
dont by the dealer in respect of the goods at the tinfe or or before delivery
H thereof'.
STATE v. GURANDITTA MAL SHANTI PRAKASH [RAJENDRA BABU, CJ.] 25

Interpreting this provision with reference to the Marketing Regulations, A
the High Court noticed that the incidence of tax in the present cases is when
the turnover exceeds the taxable quantum, the buyer has to pay market fee
as the appellants are licensees within the market area; that such market fee
is not paid by them to the sellers; that therefore such amount of the market
fee cannot be part of the sale consideration; that the appellants were not B
required to show in their turnover the amount of the market fee as part of
the purchase price of such of the agricultural produce purchased by them
locally; that such market fee is not to form part of the turnover for
assessment or payment of purchase tax.

This Court in Aliand Swarup Mahesh Kumar v. The Commissioner C
of Sales Tax, 1980 Vol. 46 Sales Tax Cases 477, had occasion to consider
whether additional tax on certain dealers levied on turnover of purchases
mentioned in Sectio.n 3-0(1) of the U.P. Krishi Utpadan Mandi Adhiniyam,
1964 collected from purchases by common agent can be included in the
turnover of purchases. This Court explained that there are four circumstances D
in which turnover could be included and they are, (i) if the produce is sold
through a commission agent, the commission agent may realise the market
fee from the purchaser and shall be liable to pay the same to the committee;
(ii) if the produce is purchased directly by a trader from a producer the
trader shall be liable to pay the market fee to the committee; (iii) if the E
produce is purchased by a trader from another trader, the trader selling the
produce may realise if from the purchaser and shall be liable to pay the
market fee to the committee, and (iv) in any other case of sale of such
\ produce, the purchaser shall be liable to pay the market fee to the
committee.
F
The Punjab Act, it is submitted, is different from the Act that was
considered by this Court in Anand Swarup Mahesh Kumar case and the
High Court had not properly examined the scope of the Agricultural
Produce Market Committee Act.
G
Under what circumstances the market fee is to be paid needs to be
considered and once it is held that the buyer has an obligation to pay the
market fee and it is the duty of the seller to deposit the market fee on behalf
of the buyer and, therefore, to realise it from the buyer, it is not the legal
H
26 SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R.

A obligation of the seller to pay market fee on such a transaction and thus
the amount of market fee cannot be treated as part of the sale consideration.
It cannot be seriously disputed that this was the position in law in the State
of Punjab.

B If the law was not clear, it is open to the State to amend the law either
with reference to the Agricultural Produce Market Committee Act or the
Sales Tax Act because this Court in Anand Swarup Mahesh Kumar case
has explained under what circumstances the liability to pay market fee
becomes part of the turnover. When the finding of the High Court is that
C on examining the enactment in question, there is no obligation on the part
of the seller to pay the market fee since it is the duty of the buyer to pay
the sai11e and seller can realise it from the buyer, the cunclusion thereof
that there was no liability to pay sales tax on the element of market fee
is justified.

D Therefore, we find no merit in these appeals and the same shall stand
dismissed.

S.K.S. Appeals dismissed.