SEKAR COFFEE MANUFACTURING COMPANY Vs. COFFEE BOARD

JUDGEMENT

(1.) THE prayer in the Writ Petition No. 3675 is as follows :

(2.) THE petitioner, a coffee manufacturing company, is doing business for more than 30 years. THE petitioner-company takes part in the coffee pool auction whenever and wherever such auction is held by the Coffee Board, and the petitioner-company used to bid at the auction on the marginal release price fixed by the Coffee Board and the petitioner, being a successful bidder takes delivery of the coffee seeds from the godown in the State of Tamil Nadu after depositing the necessary bid amount and other dues. It is alleged in the affidavit that so far as the function of the Coffee Board is concerned, its rights and duties are governed by the provisions of the Coffee Act, 1942, that under the provisions of the enactment, every grower of coffee has to get himself registered and must deliver its marketable coffee to the Coffee Board, that a separate provision has also been made regarding the finance of the Board and that the said provision deals with a general fund and a pool fund, as provided under sections 31 and 32 of the Coffee Act. It is further alleged in the affidavit that the general fund would consist of all amounts paid to the Board by the Central Government under sub-section (1) of section 31 of the Coffee Act, and all sums transferred to the General Fund under the proviso to sub-section (2) of section 32 and all fees levied and collected by the Board under the Act, and that the Pool Fund shall be credited with all sums realised by sales by the Coffee Board from the surplus pool. It is also alleged in the affidavit that the Government of Karnataka effected an amendment to the karnataka Sales Tax Act in the year 1970 by which section 6 was inserted therein by which a levy of purchase tax was made on goods transferred from Karnataka to other States, otherwise than by sale, that pursuant to the said amendment, the Government of Karnataka, through the Commissioner for Sales Tax of Karnataka levied the purchase tax from 1974-75 onward, that the said demand has been challenged by the Coffee Board in W.P. Nos. 15536 to 15540 of 1982 before the High Court of Karnataka and that those writ petitions were pending when these writ petitions came to be filed. Now it transpires the High Court of Karnataka has dismissed the above-mentioned writ petitions on 16th August, 1985 [See Coffee Board v. Commissioner of Commercial Taxes 1985 (60) STC 142, 1985 (2) LJ 397, 1985 (2) Kar(LJ) 397, 1985 (2) KLJ 397] and it was affirmed by the Supreme Court on 11th May, 1988, which is reported in Coffee Board v. Commissioner of Commercial Taxes, Karnataka 1988 AIR(SC) 1487, 1988 (2) CompLJ 161, 1988 (2) JT 448, 1988 (70) STC 162, 1988 (1) Scale 1055, 1988 (3) SCC 263, 1988 (S1) SCR 348, 1988 SCC(Tax) 308 : 1988 AIR(SC) 1487, 1988 (2) CompLJ 161, 1988 (2) JT 448, 1988 (70) STC 162, 1988 (1) Scale 1055, 1988 (3) SCC 263, 1988 (S1) SCR 348, 1988 SCC(Tax) 308. THE case of the petitioner herein is that when the cases were pending before the High Court of Karnataka, the Coffee Board demanded and collected contingency deposits at 6.45 per cent from the wholesale dealers in Tamil Nadu, that in order to meet the said contingency, the Coffee Board issued a circular dated 16th May, 1984, to all pool sale dealers to provide for meeting the contingency liability of purchase tax in respect which the said writ petitions were pending before the High Court of Karnataka at that time, that the said circular came to be issued after a meeting of certain pool sale dealers and after discussion, that in and by virtue of the circular, the Coffee Board makes it a condition that the coffee purchased by a pool sale dealer at each auction will be delivered only if the dealer pays at the time of taking delivery, a contingency deposit at the rate of 6.45 per cent on the value of the stocks. It is further alleged in the affidavit that the said demand was protested by the dealers stating that the Coffee Board had no jurisdiction to levy such contingency deposits nor the Rules framed under the Act authorise such a levy, that in spite of the protest the Coffee Board continues to demand the contingency deposit and that the petitioner had to deposit the aforesaid contingency deposit under protect. It is also alleged by the petitioner that it has deposited nearly Rs. 6 lakhs by way of contingency deposit and it has been collected illegally and without jurisdiction. It is further alleged by the petitioner that the Coffee Board can only make such levies that are permissible under the Coffee Act or the Rules made thereunder, that there is no provision either under the Act or under the Rules authorising such levy, that the Coffee Board cannot by a circular say that the goods sold in the pool sale of auction will be delivered only on making the contingency deposit and that the demand for contingency deposit paid is clearly illegal and without jurisdiction. It is also alleged by the petitioner in the affidavit filed in support of the petition that the Coffee Board having challenged the said assessment proceedings itself, it is not open to the Coffee Board to seek the contingency deposit from the dealer as a contingency measure to meet its liability, and that a pool sale dealer in an auction conducted by the Coffee Board cannot be in any event liable to pay the purchase tax, that the liability to pay purchase tax could only be fastened either on the Coffee Board or the grower of the coffee. A reference to the affidavit, field by the Coffee Board, before the Karnataka High Court is made in the affidavit field herein by the petitioner. After making the reference it is alleged in the affidavit that the liability cannot be passed on to the pool sale dealer, that it is not open to the Coffee Board to levy the contingency deposit, that the contingency deposit cannot be a condition for the sale of pool coffee and that to demand is, therefore, purely arbitrary. THE petitioner further alleges in the affidavit that the conduct of the Board in directing the pool sale dealers to deposit the contingency deposit for internal sale and at the same time not making any such demands from the export dealers is discriminatory in nature, that pursuant to the threat of the Coffee Board not to allow dealers to bid at the action otherwise, some dealers have been directed to execute an agreement to the effect that the dealers are liable to deposit the contingency deposit and that the said agreement is unenforceable being executed without lawful authority. It is also stated in the affidavit that the said agreement is executed under pressure. With these allegations, the petitioner has come before this Court with the prayer as stated supra.

(3.) A counter-affidavit has been field by the respondent-Coffee Board, stating that the petitioner has set out truly the circumstances under which the circular dated 16th May, 1984, came to be issued by the Coffee Board to all wholesale dealers calling upon them to furnish a contingency deposit at 6.45 per cent on the value of coffee delivered to Tamil Nadu in the auction. It is claimed in the counter-affidavit that the Karnataka State pressed into service section 6 of the Karnataka Sales Tax Act and demanded purchase tax from the Coffee Board in respect of the coffee that was delivered to the Coffee Board by the growers in the State of Karnataka, which was either stock transferred by the Coffee Board to other States or was directly exported out of the country by the Coffee Board. It is stated in the counter-affidavit that in respect of the assessment year 1974-75, the Commissioner of Commercial Taxes, Bangalore Division made a suo motu revision of the assessment of the Coffee Board under the Karnataka Sales Tax Act, levying purchase tax on such coffee which was the stock transferred to other States by the Coffee Board and which was directly exported out of India by the Coffee Board, that it is true that the Coffee Board disputed the said assessments in writ petitions and that they were waiting for the final disposals ending on the files of Karnataka High Court. (It is to be seen that his counter-affidavit has been filed in the year 1985, when the above-mentioned writ petitions were pending before the Karnataka High Court). It is also claimed in the counter-affidavit that the Coffee Board is a statutory body, that its finances have to be managed as set out by the Act, that after meeting the establishment expenses and the liability for tax, the balance has to be distributed to the growers whose coffee is pooled with and is marketed by the Coffee Board, that no portion of the proceeds realised by the sale of coffee is retained by the Coffee Board, that the Coffee Board pays in various installments to the growers the entirety of money after meeting the expenses and taxes, and as such there will be no funds left with the Coffee Board for payment of purchase tax at a later date if such liability is fastened on the Coffee Board. It is also claimed in the counter-affidavit that the liability to purchase tax will be of the order of about Rs. 8 cores in a year, that it will not be open to the Coffee Board to pay out of the funds that may come into its hands in the later years as those funds will be held in trust by the Coffee Board for the growers of that year who have delivered the coffee and that is why the Coffee Board decided to provide for the contingency of payment of purchase tax, though levy of purchase tax itself was questioned by the Coffee Board before the Karnataka High Court at that time. It is also claimed in the counter-affidavit that the pool sale dealers of coffee, including the petitioner herein, objected to such a course of action being adopted by the Coffee Board, that they threatened to boycott the auction scheduled to be held on 3rd May, 1984, and as such the Coffee Board had discussions with the pool sale dealers on 3rd May, 1984, 4th May 1984, and 10th May, 1984, that the pool sale dealers participated in such discussions and that the officer bearers of the association of the pool sale dealers of coffee also took part. It is also claimed in the counter-affidavit that after a detailed discussion the pool sale dealers requested the coffee Board to the effect that Coffee Board should accept and implement the system by which it will collect a contingency deposit based on weighted averaged percentage to be arrived at and that the contingency deposit should be refunded to be dealers if the court were to hold that there was no liability to purchase tax on the Board and that in the event of liability to purchase tax being upheld by the court it should be appropriated by the Coffee Board towards the purchase tax liability. It seems that based on the recommendation of the pool sale dealers and their association, a circular dated 16th May, 1984, was issued, fixing the contingency deposit to be paid at 6.45 per cent in respect of sales ex-Tamil Nadu by the Coffee Board and that the petitioner had all along been paying the contingency deposit of 6.45 per cent from 17th May, 1984, till the date it filed the writ petition before this Court. It is also alleged that the petitioner did not make any protest and that there was no duress or compulsion in the matter of collection of contingency deposit. The allegation that under duress and coercion the petitioner was compelled to part with contingency fund is denied. It is also claimed in the counter-affidavit that if the minimum reserve price is raised, the pool sale dealers will be obliged to purchase coffee only over and above the said minimum reserve price, that what is paid by them will go into the pool fund of the Coffee Board, that it will go thereafter either as sales tax liability or surplus to the coffee growers, and that by collecting such amount separately by way of contingency deposit they though that they will stand to gain as in the event of the Coffee Board being held not liable to purchase tax and that the Coffee Board had agreed to change its stand and to collect contingency deposit as desired by them. It is further claimed in the counter-affidavit that when all the pool sale dealers are going to collect to pass on the incidence of such liability to their buyers as the entirety of coffee grown in India is only marketed throough the Coffee Board, no discrimination could be alleged by the petitioner herein. It is also stated that there is no violation of principles under article 14 of the Constitution arises in this case. It is also claimed in the counter-affidavit that in respect of coffee sold to pool sale dealers the minimum release price is fixed by the Government by adding excise duty and pool expenses and for coffee sold to exporters, the minimum reserve price is fixed by deducting from international market prices, incidental charge, transportation, etc., and that in the fixation of minimum reserve price for export auctions, the pool expenses are not a factor which is taken into account. It is also stated in the counter-affidavit that the Board sells coffee to the exporters above the minimum reserve price which is based on international market prices of which is much higher than the minimum reserve price fixed for pool sales based on the floor price assured to the growers and as such the need for colleion of contingency deposit separately from the exporters does not arise. It is also claimed in the counter-affidavit that the coffee sold to exporters has not been assessed for purchase tax by the Karnataka State Government and as such the peittioner cannot allege that there is a discrimination in this case. It is clearly stated in the counter-affidavit that the circular dated 16th May, 1984, was issued by the Coffee Board only after the said discussions with the pool sale dealers, that the subject-matter of the circular was made before the 109th meeting of the Coffee Board held on 14th June, 1984, at Bangalore, that there is no provision under the Coffee Act for collection of such a contingency fund, that the Coffee Board is empowered to market the coffee, that it has to discharge its statutory obligations when marketing the coffee belonging to the growers and as such it is empowered to collect tax and other liabilities that may be fastened on the Coffee Board. It is also clearly stated in the counter-affidavit that how the applicable sales tax or purchase tax is being collected at the request of the pool sale dealers. It is further claimed that the petitioner has not stated in the affidavit the true circumstances in which the contingency deposit came to be collected by the Coffee Board, that the petitioner herein had suppressed the fact that the Coffee Board was requested to revoke its decision to raise the minimum reserve price, that it was requested by the pool sale dealeras and their association to collect the contingency deposit, that this is a suppression of material fact and that it has a direct bearing on this issue, in this writ petition. It is also stated in the counter-affidavit that when the writ petitions were pending before the Karnataka High Court, the Coffee Board was making certain payments and as such, being a statutory body, the Coffee Board cannot go without protecting its interests as ultimately it is the interests of the growers which is sough to be protected.