NATIONAL AGRICULTURAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD. Vs. DEPUTY COMMISSIONER OF COMMERCIAL TAXES (ASSESSMENTS 16)

JUDGEMENT

(1.) IN all these petitions filed under Section 23(1) of the Kamataka Sales Tax Act, 1957 read with Rule 31(1) of the Karnataka Sales Tax Rules, 1957 the common petitioner has questioned the legality and correctness of the common judgment dated September 18, 2007 passed by the Karnataka Appellate Tribunal, Bangalore in STA Nos. 1796 of 2004, 1116 of 2005, 1118 of 2005 and 1798 of 2004 respectively. Therefore all these petitions were heard together and are being disposed of by this common order.

(2.) THE facts leading to presentation of these petitions, in brief, are as under: The petitioner is a Government of India undertaking. Whenever the market price of any agricultural commodity falls below certain limits, the Government of India fixes a price called "minimum support price" for such agricultural commodity and procures such commodity from the farmers to protect their interest. Ministry of agriculture, Government of India, issues directions to various Government organisations to execute the scheme. As the minimum support prices are fixed on a national -level basis, the Government nominates organisations at national as well as local level for implementation of the scheme. The organisation at the national level is referred as "central nodal agency" and at the local level they are referred as "procurement agencies". The work of procurement agency is to purchase the specified agricultural commodity from the farmers at the minimum support price fixed by the Government and to supply them to the central nodal agency. The work of central nodal agency is to sell such commodities to local markets and losses, if any, incurred on such transactions will be reimbursed by the Government of India to the central nodal agency. For these activities carried on by these agencies, certain amount of charges are paid to take care of their overheads. The petitioner was nominated as a central nodal agency by ministry of agriculture, Government of India, by its letter dated May 8, 2000 for procurement of copra. The petitioner in turn appointed Karnataka Marketing Federation who is also a member of the petitioner federation, as procurement agency to procure copra from centres like Tiptur, Hassan, and Channarayapattana. As per the terms of the agreement dated November 22, 2002 entered into between the appellant and the procurement agency, the procured commodity has to be stored in State Warehousing Corporation and Central Warehousing Corporation godowns as per instructions of the petitioner and the petitioner would pay the rent payable to the respective warehousing corporation and the goods stored in such godowns are taken as running stock of the petitioner. The goods so stored are required to be insured by the procurement agency at the cost of the petitioner. The procurement agency was entitled to receive commission for the services rendered by it. As per the scheme the procurement agency purchased copra and supplied them to the petitioner. In turn, the petitioner sold the same to the consumers through different agencies. In the returns submitted to the sales tax authorities for the assessment years 2000 -01 and 2001 -02, the petitioner disclosed total and taxable turnovers in respect of its business by claiming the amount of turnover in respect of the sale of the procured commodity as exempted on the ground that such sales or second sales by the petitioner and that the necessary taxes have been collected from it by the procurement agency and the same has been credited to the Treasury and as such it is not liable to pay sales tax on such sales. However the assessing authority disallowed the turnovers claimed by the petitioner as second sales, inter alia, on the grounds that the relationship between the petitioner and the procurement agency is that of principal and agent and procurement of the commodities by the procurement agency is for and on behalf of and for the benefit of the nodal agency, namely, the petitioner and therefore there is no instance of sale and purchase between procurement agency and the petitioner attracting payment of sales tax and even if the tax is collected by the procurement agency from the petitioner, it is for such agency to approach the respective assessing authority seeking refund of amount paid. The assessing authority further held that since the petitioner has sold the procured commodity to various organisations, it is liable to pay sales tax and other taxes in respect of such sales. Aggrieved by the said order of the assessing authority the petitioner preferred appeals before the Joint Commissioner of Commercial Taxes (Appeals), City Division I, Bangalore, under Section 20 of the KST Act. The appellate authority by its order dated April 13, 2004 upheld the orders of the assessing authority and dismissed the appeals. Against the orders of the appellate authority, the petitioner preferred appeals before the Tribunal. The Tribunal by its order dated September 18, 2007 dismissed the appeals and upheld the orders of the appellate as well as assessing authority. It is against the aforesaid orders the petitioner has presented these petitions.

(3.) WE see no substance in any of these contentions of the learned counsel. The perusal of the copies of the orders of the appellate authority and that of the Tribunal produced along with these petitions would clearly indicate that the assessing authority referring to various terms and conditions contained in the agreement entered into between the petitioner and the procurement agency and also having regard to the manner in which the scheme is operated has held that the relationship between the petitioner and the procurement agency is that of principal and agent and that the purchases made by the procurement agency was for and on behalf of the petitioner. Admittedly, as per the scheme evolved by the Government of India, the scheme has to be implemented through the nodal agency and for the purpose the nodal agency was permitted to appoint procurement agencies at the local level. As per the scheme, the procurement of commodity by the procurement agency was not for its benefit but on the other hand, it was for the benefit of the petitioner. The procurement agency only gets a fixed amount of commission. The goods stored in the godowns are treated as stocks of the petitioner and the petitioner pays charges payable to the warehousing corporations. The goods are insured at the cost of the petitioner. Therefore, when the commodities procured are transferred to the petitioner, it cannot be said that there was an instance of sale. It is only when the petitioner sells the procured commodity to different organisations, it attracts payment of sales tax. Under the circumstances we see no error of law or facts in the orders of the Tribunal and other authorities. If the petitioner has paid sales tax to the procurement agencies when the procured commodities were transferred, as held by the appellate authority, the petitioner is entitled for set -off of such amount. Therefore, no prejudice is caused to the petitioner and its apprehension that it is made liable to pay the tax twice has no substance. In view of the above discussion, we see no merits in these petitions and therefore there are no grounds to admit them. Accordingly the petitions are dismissed.