Yogeshwar Dayal, C.J and Upendralal Waghray, J.:— We have heard a batch of writ petitions in which a common question is raised viz., exigibility to Andhra Pradesh Sales Tax of the amount received by a manufacturer of fertilizer from the pool regulated by the Central Government as subsidy. The controversy is subject-matter of assessments from 1982-83 onwards of several manufacturers in the State, many of whom are Central Government undertakings and the facts necessary for a decision of the controversy are not in dispute and assessment in each case has resulted in a demand for several lakhs of rupees in each year affecting the liquidity of manufacturers of an essential commodity. It is stated that the appellate authorities have declined stay and the collection has been stayed only because of the interlocutory orders of this court. In these circumstances, we have considered it appropriate to decide this controversy in the writ petition itself. We have heard the counsel for the petitioners in the various writ petitions and the Government Pleader. This case being illustrative of the controversy we proceed to pronounce judgment in it.
2. The petitioner is Fertilizer Corporation of India and according to it for the assessment year 1983-84 the assessing authority viz., Commercial Tax Officer has treated the aforesaid amount of subsidy amounting to Rs. 23,05,15,503/- as liable to Sales Tax and raised the demand in dispute.
3. The manufacture, sale and distribution of fertilizers in the country is regulated by the Fertilizer (Control) Order, 1957, issued by the Central Government in exercise of the powers conferred under Section 3 of the Essential Commodities Act, 1955. Clause 3 of the said Order fixed maximum prices of fertilizers by which it can be sold by a manufacturer or a dealer. Sub-clause (3) of Clause 3 reads as follows:
“3.(3) No manufacturer or dealer shall sell or offer to sell any fertilizers at a price or rate exceeding the maximum price or rate fixed under this clause.”
4. Clause 4 of the said Control Order obliges every manufacturer or dealer to give a cash or credit memorandum to a purchaser of a fertilizer in such form as the Controller may direct. There are other regulatory provisions in the said Control Order with which we are not concerned. The object of the control of prices of fertilizers which is an essential commodity and important for agricultural production is to ensure their availability at fixed prices to the farmers throughout the country. It cannot be disputed that come manufacturing units may be having a better and efficient productivity and lower cost of production than others. The types of fertilizers manufactured by each may be different from others. Several criteria are taken into consideration by the Central Government for fixing the maximum price of fertilizers. In order to ensure that none of the manufacturers become sick because of fixation of the maximum price and to ensure a fair return to them the Government of India have evolved a scheme at about the same time in 1977 vide D.O No. 166/21/77-FD(A) Government of India, Ministry of Chemicals & Fertilisers, New Delhi dt 24-10-1977 by which ex-factory retention price per ton is worked out on the basis of an expert committee report net of excise duty and FPEC and exclusive of dealers margin and equated freight based on various factors like, capacity utilisation, consumption efficiency etc., and providing of post tax profit of 12% on net worth, etc. etc., Similarly, a standard ex-factory realisation net of excise duty and FPEC and exclusive of dealers margin and equated freight for the industry as a whole is fixed and is called the ‘transfer price’ from time to time. A manufacturer of fertilizer is paid the excess of the retention price over the transfer price. However, where the retention price of a unit calculated according to the formula in the scheme was lower than the transfer price, the said unit has to contribute such difference to the fund or pool. The controversy is whether the receipts by the assessee from the said pool or fund administered by the Central Government represents a part of the sale turnover exigible to tax under the APGST Act. The reasoning) in the assessment order on this aspect is follows:
“……The subsidy was granted to them by the Ministry of Agriculture, Government of India to compensate the loss or deficit incurred by the assessees due to retention prices system by Govt. of India due to which the assessees cannot increase the price of their production i.e Fertilisers from time to in proportion to their cost of production, freight incurred etc. The difference in value that the assessees have foregone which is subsidised by Government of India is a value received, that would have been received from the purchasers only that would have constituted the sale price of Fe???tilisers. The price support received from the Government of India is deemed to be a sale according to the provisions of the Act……
5. According to the petitioner this subsidy does not form part of the sales turnover and is not liable to Sales Tax.
6. The scheme of the APGST Act, 1957, discloses that Sales Tax is leviable under it on the sale turnover. Section 2(s) of the Act defines ‘Turnover’ (and it has undergone a change after the Amendment Act 18/85 with effect from 1-7-1985. It is useful to extract the definition prior to” and after amendment as the controversy covers a period from 1981-82 onwards:
7. The Original clause read as under:
“(s) ‘Turnover’ means the total amount set out in the bill of sale or if there is no bill of sale, the total amount charged as the consideration for the sale or purchase of goods whether such consideration be cash, deferred payment or any other thing of value including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof, or the aggregate of amounts charged under Section 5-C:
Provided that in the case of a sale by a person whether by himself or through an agent or agricultural or horticultural products grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise the amount of the consideration relating to such sale shall be excluded from his turnover when such produce is sold in the form in which it was produced, without being subjected to any physical, chemical or other process for being made fit for consumption save mere cleaning, grading or sorting.
Explanation:—Subject to such conditions and restrictions, if any as may be prescribed in this behalf:
(i) the amount of such consideration, shall, in relation to a works contract, be deemed to be the money payable to the dealer for the supply of materials if the contract for such supply can be separated from the contract for the services and the work done, although the two contracts are embodied in a single document;
(ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and
(iii) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said customer, the sale in respect of such goods shall be included in the turnover of the latter dealer, but not in that of the former.”
8. After Amendment Act 18 of 1985 with effect from 1-7-85:
“(s) ‘Turnover’ means;
(i) the total amount set out in the bill of sale;
(ii) the total amount of consideration for the sale or purchase of goods as may be determined by the assessing authority, if the bill of sale does not set out correctly the amount for which the goods are sold; or
(iii) if there is no bill of sale, the total amount charged as the consider???tion for the sale or purchase of goods by a dealer either directly or through another, on his own account or on account of others, whether such consideration be cash, deferred payment or any other thing of value and shall include:
(a) the value of any goods as determined by the assessing authority,
(i) to have been used or supplied by the dealer in the course of execution of the works contract;
(ii) to have been delivered by the dealer on hire purchase or any other system of payment by instalments;
(iii) to have been supplied or distributed by a society including a co-operative society, club, firm or association to its members, where the cost of such goods is not separately shown or indicated by the dealer and where the cost of such goods is separately shown or indicated by the dealer, the cost of such goods as shown or indicated;
(b) any other sum charged by the dealer for anything done in respect of goods sold at the time of, or before the delivery of goods;
(c) any other sum charged by the dealer, whatever be the description, name or object thereof; and
(d) the aggregate of amounts charged under Section 5-C or realisable under Section 5-E:
Provided that in the case of a sale by a person whether by himself or through an agent of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, the amount off consideration relating to such sale shall be excluded from his turnover when such produce is sold in the form in which it was produced, without being subjected to any physical, chemical or other process for being made fit for consumption save mere cleaning, grading or sorting.
Explanation—Subject to such conditions and restrictions, if any, as may be prescribed in this behalf,—
(i) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover,
(ii) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said customer the sale in respect of such goods shall be included in the turnover of the latter dealer, but not in that of the former.”
9. At this stage it is useful to notice that under sub-rule (2) of 44-AA framed under the APGST Act, a dealer like the petitioner is obliged to issue a bill or cash memo for every sale transaction. The assessment order itself shows that the petitioners have been issuing bills of sale (which they are required to do under Clause 4 of the Fertilizers Control Order and also under Rule 44-AA of the Rules framed under the APGST Act). Neither the purchasers are under any obligation to pay anything more to the petitioners nor the petitioners have any right to collect anything more than the price mentioned in the bill from the purchaser.
10. The reasoning of the assessing authority add the case of Government Pleader is that the subsidy received by the manufacturer is also part of sale consideration and, therefore should be brought to tax as a part of the turnover of the petitioner.
11. The language of the definition of ‘turnover’ in Section 2(s) before the amendment indicates that the ‘turnover’ means the amount set out in the bills of sale. A finding is recorded by the assessing authority that bills of sale were prepared. It is nobody's case that the petitioner had received from the purchaser in respect of any sale transaction in excess of what is mentioned in the bill of sala. After the amendment Act 18 of 1985, the definition of ‘turnover’ is split into three parts viz., (1) the total amount set out in the bill of sale; (2) a situation where it is found that the bill of sale does not correctly set out the amount for which the goods were sold; and (3) a situation where there is no bill for sale. The various sub-clauses to the third limb of the definition are meant for a situation where there in no bill of sale or probably where the bill of sale is held to be not correct and rejected. The learned Government Pleader has laid stress on clause (iii) of Sections 2(s). As pointed out above, where a sale is covered by a bill of sale and in the absence of any finding that it does not set out correctly the amount for which goods are sold only Clause (i) will apply. In the present case the petitioners have not received any amount from the purchaser or on his behalf in connection with any sale transaction. The amount received by way of subsidy from the Central Government under the scheme is in the larger interest of Industry as a whole. The subsidy has no relation to any single sale transaction and is determined on the basis of several factors mentioned above.
12. The counsel for the petitioners have referred to a decision of this court reported in State of A.P v. Ranka Cables Pvt. Ltd. 7 APSTJ 1988 60. The controversy in that case was about sale price under the Central Sales Tax Act for the purpose of levy of tax under that Act. The assessee in that case was a manufacturer of cables and other electrical equipment. During the period relevant to that case, a Central Government Scheme was in force under which the assessee was entitled to a supplementary cash assistance equivalent to excise duty on the sale of goods. The assessee while preparing bills added excise duty at 5 per cent ad valorem and towards the end of the bill he deducted the very same excise duty in view of the supplementary cash assistance scheme. The court, after referring to the definition of ‘sale price’ under the Central Sales Tax Act came to the conclusion that the payment under the Central cash assistance scheme could not be treated as a payment on behalf of the purchaser but was in the larger interest of the industry and commerce. Further, as the excise duty was also not collected in anticipation of the receipt of the assistance, the turnover on the sale price determined by excluding these two items by the appellate tribunal was upheld. The facts in this case are on even a better footing as the bill does not even refer to or include or exclude any amount because of subsidy.
13. The learned Government Pleader while stating that there is no direct case in support of his stand has referred to some cases which we will briefly consider.
14. In Govt. of Andhra v. E.I.C Co. Ltd. AIR 1957 AP 83 FB. it was held that the amount charged as Dharmada or charity in the bill will form part of the turnover. The amount mentioned forms part of the consideration paid by the buyer and was mentioned in the bill. This does not help the respondents.
15. In State Of Orissa v. Utkal Distributors (P) Ltd.. 19???6 17 STC 320. there the controversy was regarding turnover in respect of sale of essential commodity viz., iron and steel by the assessees. Under the relevant cotrol order the customers were obliged to pay the central sales tax which was paid by the dealer in securing the goods. As the dealer was merely collecting what was paid by him in terms of the control order the Supreme Court held that it should not form part of the turnover as defined by the Orissa Sales Tax Act. The said decision also does not help the respondents.
16. The next decision is that of the Supreme Court reported in Hindustan Sugar Mills v. State Of Rajasthan & Others 1979 43 STC 13.. In that case under the relevant Control Order the sale price of cement was mentioned as “Free on Rail destination Railway Station”, and the assessee had collected amounts by way of deposit equal to Sales Tax on railway freight from the purchaser towars contingent liability. The purchasers actually paid the railway freight. In view of the definition of the sale price and the circumstances that purchasers paid the railway freight and the assessee had collected the amount though described it as a deposit the court held that it forms part of turnover for the purpose of levy of tax under the Rajasthan Sales Tax Act. This case also does not help in resolving the controversy before us.
17. Aother decision of this court reported in Sakti Engineering Co. v. State of A.P 1989 75 STC 215. was cited but, it is noticed that on review that judgment was set aside vide the decision reported in Shakti Engineering Co. v. Comml. Tax Officer 1990 78 STC 421..
18. Two cases of Kerala High Court roported in Food Corporation Of India, Cochin v. State Of Kerala 1974 34 STC 189. and The Aluminium Industries Ltd. v. State Of Kerala 1978 42 STC 72. have also been cited by the Government Pleader. They also do not lay down any ratio which is helpful to the Revenue.
19. In view of the above discussion it is clear that any subsidy received by a manufacturer cannot be treated as a part of a turnover within the meaning of Section 2(s) of the A.P.G.S.T Act, more so when the transactions are covered by bills as required by statutory provisions. No amount has been paid on behalf of the purchaser nor any such amount collected by the dealer in excess of the price mentioned in the bill.
20. The writ petition is, accordingly, allowed and the assessment order for the assessment year 1983-84 under the APGST Act dated 4-2-1988 on the file of the Commercial Tax Officer, Panjagutta Division, Hyderabad, to the extent it includes the subsidy as a part of turnover and brings it to tax is set aside. The proceedings under the Act in respect of other items will be decided according to law. No costs. G. Ps. fee Rs. 500/-.