Full Judgment Text
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PETITIONER:
CONSOLIDATED COFFEE LIMITED & ANR.
Vs.
RESPONDENT:
THE COFFEE BOARD & ANR.
DATE OF JUDGMENT22/11/1994
BENCH:
SINGH N.P. (J)
BENCH:
SINGH N.P. (J)
JEEVAN REDDY, B.P. (J)
MAJMUDAR S.B. (J)
CITATION:
1995 SCC (1) 312 JT 1995 (1) 1
1994 SCALE (4)1025
ACT:
HEADNOTE:
JUDGMENT:
N.P. SINGH, J.:
1. The appellants are the growers of coffee. They filed
Writ Petitions for injuncting the Coffee Board respondent
No. 1 (hereinafter referred to as ’the Board’) from making
any payment under the head ’Purchase Tax’ out of the Pool
Fund maintained under Section 30 of the Coffee Act, 1942.
According to the appellants, the Board cannot discharge its
liability in respect of payment of ’Purchase Tax’ to the
State Government, under the provisions of the Karnataka
Sales Tax Act, 1957 (hereinafter referred to as ’the Act’)
out of the Pool Fund.
2. The High Court held that growers/ producers were not
liable under Section 5(3)(a) of the Act to pay the tax in
respect of the sale of coffee by them to the Coffee Board.
It also held that the Board was liable to pay the
’Purchase Tax’ under Section 6 of the Act. But according to
’the High Court, the Board was authorised in law to pay the
tax which it is liable to pay to the State Government, out
of the Pool Fund. On that finding, the writ petitions, filed
on behalf of the appellants, were dismissed.
3. Section 5(3)(a) of the Act provides that the tax
under the Act shall be levied in the case of sale of goods
mentioned in Column No.2 of the Second Schedule to that Act
by the first or the earliest of the successive dealers in
the State who is Liable to tax under the said Section, on
the taxable turnover of sale of such dealer in each year
relating to such goods. The coffee is included in Entry 43
of the Second Schedule in the Act. The expression ’dealer’
has been defined in Section 2(k) of the Act. The relevant
portion of the definition along with exception is as
follows:-
"2(k) ’dealer’ means any person who
carries on the business of buying, selling,
supplying or distributing goods, directly or
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otherwise, whether for cash or for deferred
payment, or for commission, remuneration or
other valuable consideration and includes-
Exception: An agriculturist who sells
exclusively agricultural produce grown on land
cultivated by him personally shall not be
deemed to be a dealer within the meaning of
this clause""’
It need not be pointed out that in view of the exception
aforesaid, as the growers of the coffee are statutorily
required to sell the coffee to the Board, they shall not be
liable to pay the sales tax as prescribed under Section
5(3)(a) of the Act. However, the purchasers which in the
present case, shall include the Board, arc made liable to
pay the tax under Section 6 of the Act. The relevant part of
Section 6 says:-
"6. Levy of purchase tax under certain
circumstances. - Subject to the provisions of
sub-section (5) of Section 5, every dealer who
in the course of his business purchases any
taxable goods in circumstances in which no tax
under Section 5 is leviable on the sale price
of such goods, and
(i) either consumes such goods in the
manufacture of other goods for sale or
otherwise (or consumes otherwise) or disposes
of such goods in any manner other than by way
of sale in the State, or
(ii) despatches them to a place outside
the State except as a direct result of sale or
purchase in the course of interState trade or
commerce,
shall be liable to pay tax on the purchase
price of such goods at the same rate at which
it would have been leviable on the sale price
of such goods under Section 5."
There was a controversy as to whether the Board shall be
liable ’to pay the Purchase Tax under Section 6 of the said
Act. However, that was settled by this Court in the case of
Coffee Board v. Commissioner of Commercial Taxes, Karnataka,
AIR 1988 SC 1487 = 1988(3) SCC 263 It was held by this Court
that Section 6 was applicable to the transactions entered
into
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between the Board and the growers of the coffee and the
Board was liable to pay the ’Purchase Tax’.
4. The controversy, with which, we are concerned is as
to whether the Board was entitled to make payment of the
’Purchase Tax’ out of the Pool Fund required to be
maintained under Section 30 of the Coffee Act. The relevant
part of Section 25 is as under:-
"25. (1) All coffee produced by a,
registered estate in excess of the amount
specified in the internal sale quota allotted
to that estate ( or when 110 internal sale
quotas have been allotted to estates, all
coffee produced by the estate) shall be
delivered to the Board for inclusion in the
surplus pool by the owner of the estate or by
the curing establishment receiving the coffee
from the estate.
Provided that where no internal sale
quotas have bee. allotted to estates. the
Chairman may allow the owner of any estate to
retain with himself for purposes of
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consumption by his family and for purposes of
seed such quantity of coffee as the Chairman
may think reasonable
Provided further that where the Central
Government is satisfied that it is not
practicable for any class of owners producing
coffee in any specified area to comply with
the provisions of this Sub-Section on account
of the small quantity of coffee produced by
them or on account of their estates being
situated in a remote locality, the Central
Government may, in notification in the
Official Gazette exempt such class of owners
from the provisions of this Sub-Section.
(2) Delivery shall be made to the Board in
such places (at such times) and in such manner
as the Board may direct,and such directions
may provide for partial delivery to the
surplus pool at any time whether or not at
that time the internal sale quota has been
exceeded and the coffee delivered shall be
such as to represent fairly in kind and
quality the produce of the estate. The Board
may reject any consignment offered for
delivery which does not satisfy this
requirement; but shall not reject any
consignment merely for a defect in curing.
(3) Coffee delivered for inclusion in the
surplus pool shall upon delivery to the Board
remain under the control of the Board which
shall be responsible for storages, curing
where necessary, and marketing of the coffee.
(6) When coffee has been delivered or is
treated as having been delivered for inclusion
in the surplus pool, the registered owner
whose coffee has been so delivered shall
retain no rights in respect of such coffee
except his right to receive the payments
referred to in Section 34.
Section 26 says:-
"26.(1) The Board shall take all practical
measures to market the coffee included in the
surplus pool, and all sales thereof shall be
conducted by o: through the Board.
(2) The Board may purchase for inclusion
in the surplus pool coffee not delivered for
inclusion in it."
In view of Section 25 all coffee produced by a registered
estate in excess of the amount specified in the internal
sale quota allotted. to that estate shall be delivered to
the Board for inclusion in the Surplus Pool by the owner of
the Estate. After the
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coffee is delivered, it is to remain under the control of
the Board, which shall be responsible for storages, curing
where necessary and marketing of the coffee. In view of
sub-section 6 of Section 25, when the coffee has been
delivered for inclusion in the Surplus Pool, the registered
owner shall retain no rights in respect of such coffee
except his right to receive the payments referred to in
Section 34. Section 26 enjoins the Board to take all
practical measure to market the coffee included in the
Surplus Pool and all sales thereafter shall be conducted by
or through the Board. Section 30 says:-
"The Board shall maintain two separate
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funds, General Fund and a Pool Fund
Section 31 is as follows:-
"31. (1) To all General fund shall be
credited:
(a) all amount paid to the Board by the
Central Government under Sub Section (1) of
Section 13; and
(b) any sums transferred to the General
Fund under the provision to Sub-Section (2) of
(Section 32; and)
(c) all fees levied and collected by the
Board under this Act.
(2) The General Fund shall be applied;
(a) to meet the expenses of the Board;
(b) to meet the cost of such measures as
the Board may consider advisable to undertake
for promoting agricultural and technological
research in the interest of the coffee
industry in India;
(c) for making such grants to the coffee
estates or for meeting the cost of such other
assistance to coffee estates as the Board may
think necessary for the development of such
estates;
(d) to meet the cost of such measures as
the Board considers advisable to undertake for
promoting the sale and increasing the
consumption in India and elsewhere of coffee
produced in India; and
(e) to meet the expenses for securing
better working conditions and the provision
and improvement of amenities and incentives
for workers."
Section 32 is as follows:-
"32. (1) To the Pool Fund shall be
credited all sums realised by sales by the
Board of coffee from the surplus pool.
(2) Subject to the provisions of
SubSection (4) of 13, the Pool Fund shall be
applied only to-
(a) the making to registered owners of
estates of payments proportionate to the value
of the coffee delivered by them for inclusion
in the surplus pool;
(b) the cost of storing, curing marketing
coffee deposited in and of administering the
surplus pool;
(c) the purchase of coffee not delivered
for inclusion in the surplus pool;
Provided that where, after the
requirements, of the Clauses of the Sub-
Section have been met there remains any excess
in the Pool Fund, the Board may, with previous
sanction of the Central Government, transfer
the whole or any part of such excess to the
credit of the General Fund. ’ ’
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According to the appellants, all sums realised from sales by
the Board from the surplus pool is credited to the Pool Fund
which can be applied only for the objects mentioned in
clauses (a), (b) and (c) of sub-section 2 of Section 32. As
none of the aforesaid clauses authorises or vests power in
the Board to incur or to apply any amount out of the Pool
Fund for payment of ’Purchase Tax’, the action of the Board
in making payment of ’Purchase Tax’ to the State Government
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under the Provisions of the Act aforesaid is without any
authority in law and in contravention of the mandate of sub-
section 2 of Section 32. On their behalf, it was pointed
out, that the High Court, was not justified in holding that
any such payment of ’Purchase Tax’ shall be part and parcel
of marketing by the Board and as such covered by Section
32(2)(b) of the Act. Reading Section 32(2)(b), in its proper
context, it obviously means marketing of coffee, which has
been deposited in, after curing. Reference was also made to
sub-section 3 of Section 25 where also it has been said in
clear and unambiguous words that coffee delivered for
inclusion in the Surplus Pool shall be delivered to the’
Board and shall remain under the control of the Board, which
shall be responsible for storages, curing where necessary
and marketing of the coffee. In other words, according to
appellants ,the expression "marketing" used in sub-section 3
of Section 25 or in Section 32(1)(b) refers to the process
of marketing after the coffee has been delivered by the
growers for inclusion in the Surplus Pool and is stored and
cured by the Board; the expression "marketing’’ shall not
include the process of purchase from the growers which
precedes the delivery of coffee to the Board for inclusion
in the surplus pool.
5. On behalf of the Board, it was pointed out that the
contention of the appellants that the payment of the
’Purchase Tax’ should be made from the General Fund, as
maintained under Section 31 of the Act should not be
accepted because the said General Fund does not have
capacity to pay the ’Purchase Tax’ after meeting the general
expenses of the Board under different heads mentioned in
sub-section 2 of Section 31. In this connection, Dr.
Singhvi, appearing for the said Board, referred to the
different amounts received under General Fund in different
years and the amounts paid as ’Purchase Tax’ during those
years.
6. But before this aspect is examined in detail, the
appellants have to establish that in the process of making
payment from the Pool Fund any right or interest of the
growers like appellants were being affected. We fail to
appreciate as to how the appellants are concerned with the
Pool Fund. Any balance amount left in the Pool Fund shall
not be available to the growers like appellants. Sub-section
6 of Section 25 specifically says that after the coffee has
been delivered for inclusion in the Surplus Pool, the
registered owner whose coffee has been so delivered shall
have no right in respect of such coffee except his right to
receive the payments referred to in Section 34. Proviso to
sub-section 2 of Section 32 also says that if after the
requirements of Clauses of that sub-section have been met
and there remains any excess in the Pool Fund, the Board may
with previous sanction of the Central Government, transfer
the whole or any part of such excess to the credit of the
General Fund. Inspite of repeated queries, the learned
counsel appearing for the appellants, could not pointed out
as to how the
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growers have any say in the matter of application of the
Pool Fund including for payment of the ’Purchase Tax’ by the
Board, except that in this process the interest of the
growers to receive the payment in accordance with Section 34
of the Act is not affected. Section 34 says:-
"34. (1) The Board shall at such times as
it thinks fit make to registered owners who
have delivered coffee for inclusion in the
surplus pool such payments out of the Pool
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Fund as it may think proper.
(2) The sum of all payments made under
Sub-Section (1) to any one registered owner
shall bear to the sum of the payments made to
all registered owners the same proportion as
the value of coffee delivered by him out of
the years’s’ crop to the surplus pool bears to
the value of all coffee delivered to the
surplus pool out of that year’s crop.
Provided that in calculating the sum of
all payments made under Sub-Section (1) and
the value of coffee delivered to the surplus
pool out of the years’s crop, respectively,
any payment accepted by a registered owner as
final payment in immediate settlement for
coffee delivered by him for inclusion in the
surplus pool and the value of any such coffee
shall be excluded."
In view of Section 34, the Board has to make payment to the
registered owners who have delivered coffee for inclusion in
the Surplus Pool. The expression ’as it may think proper’
obviously means that the payment is made on reasonable basis
to the growers in respect of coffee delivered by them for
inclusion in the Surplus Pool. We are informed that a
procedure has been prescribed’ to determine the rate of
payment to the registered owners who have delivered coffee
for inclusion in the Surplus Pool. The appellants have not
questioned that procedure. On behalf of the Board, our
attention was drawn to the stand taken on behalf of the
Board, in para 47 of the Counter Affidavit, filed on behalf
of the Board, in the connected Writ Petition (Civil) No. 899
of 1990. It says:-
"47. The payments made to the growers for
their coffees is always above the cost of
production with a reasonable margin of profit
as determined by Cost Studies regularly
carried-out by the Cost Accounts Branch of the
Ministry of Finance and/or by the Board. The
reserve price fixed for the "Pool Open
Auction" is based on this Minimum Release
Price. For the Export Auctions the reserve
price is based upon the prevailing
international price as the export of coffee
from the country has to be competitive in the
international market and it cannot be made to
depend only on the domestic cost of
production. For over 20 years, the
international price of coffee has been very
much above the domestic cost of production
although for the last about a year and half
the price of several varieties of coffee in
the international market have been less than
the domestic cost of production. Pool
payments declared by the Board is on the basis
of per point (100 points = 50 kgs. of Fair
Average Quality plantation ’A" coffee). The
value per point so declared has always been
above the cost of production - in many years
almost twice the cost of production."
7. During the hearing of the appeals an apprehension was
expressed on behalf of the appellants that the Board while
discharging its liability towards payment of ’Purchase Tax’
may first deduct the amount for payment of the ’Purchase
Tax’ out of the Pool Fund and the, Board shall then make
payment to the registered own-
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ers as required by Section 34 of’ the Coffee Act and in any
particular year sufficient funds may not be left in the Pool
Fund, to enable the Board to make payment of reasonable
amount to the registered owners which shall affect and
jeopardize the interest of the appellants and other growers
of the coffee. It need not be impressed that the registered
owners who grow coffee and deliver the same for inclusion in
the surplus pool are entitled to the payment on some
reasonable basis and their interest cannot be defeated or
put in jeopardy by any act or omission on the part of the
Board. But in view of the stand taken by the Board itself in
the para 47 of the counter affidavit filed in the connected
writ petition before this Court, the appellants, need not be
apprehensive about their payments-
8. Accordingly, the appeals are disposed of with a
direction to the respondent-Board to perform its statutory
duty. in respect of payment for the coffee delivered to them
by the registered owners in accordance with the provisions
of the Act and to make payment to the growers at a rate
which in the facts and circumstances prevailing in any
particular year can be held to be just and reasonable and
which should cover cost of production of the concerned
coffee and reasonable percentage of profit thereon. In the
facts and circumstances of the case, there shall be no
orders as to cost.
WRIT PETITION N0S. 899 OF 1990 AND 66
9. Dr. Devi Pal, senior Advocate, after some arguments
sought permission to withdraw the Writ Petitions.
Accordingly, the Writ Petitions’, arc permitted to be
withdrawn. There shall be no orders as to cost.
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