CADBURY INDIA LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) The connected revision cases are filed by the petitioner challenging the common order of the Tribunal sustaining sales tax assessment on the purchase of coco by the petitioner company for the assessment years 1997-98 and 1998-99. We have heard counsel appearing for the petitioner and Government Pleader for the respondents.

(2.) The petitioner is a leading manufacturer of coco based chocolates and allied products. Raw coco beans are purchased by the petitioner directly and also through agents appointed by them. The agents purchase coco from farmers as well as from small traders and under agreement between them and the company, agents deliver coco at the godowns of the company located at various centres. There is written agreement between the company and the agents providing for reimbursement of price paid to farmers / dealers, all the cost incurred by the agents and also commission payable to them at the agreed rate. Coco beans is admittedly an item taxable at the point of last purchase in the State as provided in the First Schedule to the KGST Act. Even though petitioner claimed that the purchase is made through agents to whom commission only was paid, the Assessing Officer noticed that the petitioner's claim is contrary to facts because all the agents are registered dealers who account the transactions as their purchases and sales. In order to claim exemption from tax on purchase of coco made by the agents for sale to petitioner, the petitioner issued Form No. 25 to the agents who in turn issued Form No. 25 to the dealers from whom they purchased coco. Further, the agreement between the company and the agents establish that the company is liable to pay the agent the entire cost incurred by them until delivery of the goods at the stockyard of the company in the various centres and besides reimbursement of the cost, the company also pays certain amount which is termed as commission in the agreement. The Assessing Officer found that the transaction the company has with the agents is outright purchase and the bifurcation of the price is only an arrangement between the parties to avoid payment of tax on the actual purchase cost incurred by the company. The Assessing Officer, First Appellate Authority as well as the Tribunal after examining the terms of the agreement and the accounts came to the conclusion that the agency agreement is only a device to avoid payment of tax on the taxable turnover which is the cost incurred by the company until goods reach their stockyard where delivery is given by the agents at the cost of the company. What we notice is that though the entire cost reimbursed to the agent by the company may come within the description of 'purchase turnover', the Assessing Officer has added only 15% of other reimbursements to purchase price reimbursed by the company to the agents for payment to farmers and dealers. Since the assessment confirmed in first appeal is reconfirmed by the Tribunal in second appeal, the company has come up with these revision cases.

(3.) The contention raised by counsel for the petitioner is that the transaction between the company and the agents is an agency agreement whereunder company reimburses purchase cost and expenses and the agents are paid commission. However, Government Pleader referring to the Tribunal's findings contended that the transaction is a pure arrangement of purchase and sale between the parties and issuance of Form No. 25 by the company to the agents will clearly establish this position. We are in complete agreement with this argument because Form 25 prescribed under R.32(14) of the KGST Rules is to help chain dealers to avail exemption on their purchases leaving the last dealer to pay tax in terms of the taxable entry in the Schedule which is last purchase. In fact, admittedly all the agents of the petitioner are registered dealers who on purchase of coco beans issues Form No. 25 to the dealers from whom they purchased and after making sales to the company, they obtained Form 25 issued by the company and on production of the same, the agents got sales tax exemption. R.32(14) is as follows: