Holding

A High Court cannot refuse to decide a question of law referred by a tribunal where sufficient material and factual details are on record; such refusal is erroneous.

Summary

The Food Corporation of India (FCI) claimed deductions for sales of tax‑free goods and sales to registered dealers under the Punjab General Sales Tax Act, 1948. The Assessing Authority rejected the claim, and the Sales Tax Tribunal upheld the rejection. FCI sought a reference of two questions of law to the High Court under Section 22(2) of the Act; the High Court directed the Tribunal to refer the questions. The Tribunal did so, and the High Court answered the second question (market fee inclusion) in FCI's favour but returned the first question (whether expenses incurred by State agencies after purchase form part of gross turnover) unanswered, stating no factual basis. The Supreme Court held that the High Court erred in refusing to decide a question that had been properly referred and for which adequate material existed, set aside that part of the High Court’s order and remitted the matter for fresh determination. The appeal was partly allowed.

Issues considered

Whether the High Court can decline to answer a question of law referred by the Sales Tax Tribunal when material facts are available.
Whether expenses incurred by State agencies after acquiring or purchasing goods constitute part of gross turnover liable to sales tax under the Punjab General Sales Tax Act, 1948.

Legislation cited

Punjab General Sales Tax Act, 1948s. 11(2), s. 22(1), s. 22(2)

Subjects

Sales taxDeductionGross turnoverIncidental expensesReference to High CourtProcedural lawTribunal

Judgment

[2009) 13 (ADDL.) S.C.R. 456
/

A FOOD CORPORATION OF INDIA
v.
STATE. OF PUNJAB
(Civil Appeal No. 5712 of 2009)
AUGUST 21, 2009
B
[R.V. RAVEENDRAN AND P. SATHASIVAM, JJ.]

Punjab General Sales Tax Act, 1948-Assessee's claim
-+"
for deduction from sales tax - Denied by Sales tax Tribunal
c - Petition for referring the questions involved, to High Court,
denied - After direction from High Court, tribunal referring two
questions of Jaw to High Court - On reference, High Court
returning one of the questions unanswered finding no factual ~.
basis for that - On appeal, held: The question having been
D referred on the direction .of High Court, it could not have left -~
it unanswered - Adequate materials and factual details are
available for determining the question.
Appellant-assessee in its quarterly returns claimed
deduction In respect of sale of tax-free goods and sales
E
made to the regi~tered dealers. Assessing Authority
rejected the claim of deduction. The claim was also
denied by the Sales Tax Tribunal. The assessee's petition. ..
for referring the questions involved to the High Court was +
dismissed. Assessee filed petition before High Court
.F praying for direction to the tribunal to refer the questions
to High Court. High Court directed the tribunal to refer the
questions for its opinion. Tribunal referred two questions
of. law~ High Court decided one· question in· favour.of the
assessee, while returned the other question unanswered,
G concluding that the question did not emerge from the
-~ ...
order of the tribunal, there being no factual basis
available. Hence the present appeal.

Partly allowing the appeal, the Court
H 456
FOOD CORPORATION OF INDIA v. STATE OF 457
PUNJAB
HELD: 1. The High Court, after satisfying itself, with A
reference to the questions of law to be determined
directed the tribunal to state the relevant case and refer
the questions· for the opinion of the High Court. In view
of the specific order/direction of the High Court, the Sales
Tax Tribunal, has no other option but to refer the same B
to the High Court and rightly referred it. In those
circumstances, unless there were very clear reasons, the
High Court could not have held that there was no material
available in the order of the Tribunal for considering the
same. [Para 6] [461-F-H; 462-A] c
...._ 2. Adequate materials as well as factual details are
available for determination of the first question of law
referred to the High Court. Therefore, the order of the
High Court insofar as it relates to the first question of law
is set aside and the same is remitted to it for answering D
the same after affording opportunity to both parties.
[Paras 10 and 11] (463-D-F]

Anand Swarup Mahesh Kumar vs. Commissioner of
Sales Tax 1980 (46) STC 477, referred to. E

Case Law Reference:
1980 (46) STC 477 Referred to. Para 3
CIVIL AP PELLATE JURISDICTION : Civil Appeal No.
F
5712 of 2009.

From the Judgment & Order dated 8.2.2007 of the High
Court of Punjab & Haryana at Chandigarh in G.S.T.R. No. 16
of 1991.
G
Y. Prabhakara Rao for the Appellant.

Ajay Pal for the Respondent.

The Judgment of the Court was delivered by H
'/
458 SUPREME COURT REPORTS (2009) 13 (ADOL.) S.C.R.

A P. SATHASIVAM, J. 1. Leave granted. .J~
'

2. This appeal by Food Corporation of India (in short
aFCI") is directed against the judgment and order of the High
Court of Punjab & Haryana at Chandigarh dated 08.02.2007
in G.S.T.R. No. 16of1991 by which the High Court disposed
B
of the reference made by the Sales Tax Tribunal. It returned the
first question unanswered and answered the second question
in favour of the assessee.
+"
3. The appellant, a Statutory Corporation, engaged in the
c purchase and sale of foodgrains, is an assessee registered
under the Punjab General Sales Tax Act, 1948 (hereinafter
referred to as "the Act") at Amritsar. The appellant filed its
quarterly returns in forms ST-XIII and ST-VIII-A showing gross
turnovers at Rs.76,26,49,211.19 and Rs.5,88,00,715.78
D respectively. Deductions were claimed in respect of sales of
~
tax free goods and sales made to the registered dealers.
Dissatisfied with the returns filed, the Assessing Authority
issued statutory notice in form ST-XIV under Section 11 (2) of
the Act requiring the appellant to produce their accounts. In
E response to the said notice, the appellant appeared before the
Assessing Authority and produced the accounts. After
examining the accounts, the Assessing Authority, Amritsar, vide
its order dated 20.1.1983 rejected the same and issued an •
additional demand of Rs.1,84,58,291/- including the penalty.
F Against the order of the Assessing Authority, the appellant filed
an appeal before the Deputy Excise and Taxation
"
Commissioner. By order dated 16.11.1983, the Deputy Excise
and Taxation Commissioner partly allowed the appeal and
remanded the case to the Assessing Authority {or a fresh
decision after affording reasonable opportunity of being heard
G
to the appellant. Dissatisfieq with the said order, the appellant·
filed an appeal before the Sales Tax Tribunal. The Sales Tax . ,.._ .
Tribunal vide its order dated 22.11.1984 dismissed the same.
The appellant filed a further petition before the Tribunal under
Section 22(1) of the Act for referring the questions involved to
H
FOOD CORPORATION OF INDIA v. STATE OF 459
PUNJAB [P. SATHASIVAM, J.]
the High Court for its opinion. On 4.11.1986, the Tribunal A
rejected the petition of the appellant on the ground that the
matter was already under consideration of the High Court and
the decision taken on this point would become applicable on
all such cases. Feeling aggrieved, the appellant filed a petition
under Section 22(2) of the Act before the High Court praying B
to direct the Tribunal to refer the questions to the High Court
for its opinion. Vide its order dated 27.09.1988, the High court
~ ~
directed the Tribunal to send the case and refer the questions
for its opinion. In compliance of the said order, the Tribunal by
order dated 15.09.1989 referred two questions of law for the c
opinion of the High Court which are as under:

"(1) Whether in the facts and circumstances of the case,
the expenses incurred by the State or Agencies of
~
the Food Corporation of India after acquiring or
purchasing the goods before delivery to the D
f
petitioner-dealer could form part of gross turnover
and be subjected to tax?
(2) Whether in the facts and circumstances of the case,
could the market fee be included in the purchase E
turnover in view of (1980) 46 STC 477 (Anand
Swarup Mahesh Kumar vs. Commissioner of
j
Sales Tax)?"
-I
The High Court by the impugned order dated 08.02.2007
concluded that the first question did not emerge from the order F
of the Tribunal there being no factual basis available, returned
the question unanswered. In respect of the sepond question,
the High Court concluded that the same was bovered by the
judgment of this Court in State of Punjab & Ors. vs. Guranditta
Mal Shauti Prakash & Ors., (2004) 136 STC 12 and G
.. .+· accordingly answered the question in favour of the assessee .
Aggrieved by the said order, the appellant - FCI preferred this
appeal by way of special leave before this Court.

4. We heard Mr. Y. Prabhakara Rao, learned counsel H
460 SUPREME COURT REPORTS [2009] 13 (ADDL.) S.C.R.

A appearing for the appellant and Mr. Ajay Pal, learned counsel
. appearing for the respondent. I

5. Since the second question of law referred to the High
Court is covered by the judgment of this Court and not disputed
by both sides, we are left with the first question being referred
8
to the High Court. As said earlier, the High Court by the
impugned order, after finding that the first question does not
emerge from the order of the Tribunal there being no factual
basis returned the same unanswered. Learned counsel
appearing for the appellant pointed out that the High Court
C committed an error in returning the first question referred to it
by the Tribunal unanswered when the said question was
referred by the Tribunal on the specific direction of the High
Court in Sales-Tax case No. 4 of 1987 dated 27.09.1988. He
also pointed out that such reference was made on a specific
D direction by the earlier Bench under Section 22(2) of the Act
and therefore the High Court ought not to have avoided or
declined the said question. The counsel also pointed out that
enough material/factual basis was available in the order passed
by the Assessing Officer as well as the Tribunal, hence, the
E High Court erred in observing that there was no factual basis
for~the first question. On the other hand, learned counsel
app~aring for the respondent - State of Punjab supported the
decision of the High Court and prayed for dismissal of the
appeal.
F
6. It is relevant to mention that when the FCI filed an
application for reference, pointing out certain questions of law
for adjudication to the High Court arising out of the order of the
Sales Tax Tribunal dated 22.11.1984, by order dated
04.11.1996, the Sales Tax Tribunal dismissed the said
G application holding that these questions need not be referred
to the High Court. Aggrieved by such decision, the FCI moved ·~ ~
the High Court in STC Case No. 4 of 1987 praying to direct
the Sales Tax Tribunal to refer to the High Court·the questions
of law which arose out of the aforesaid order of the Tribunal.
H
FOOD CORPORATION OF INDIA v. STATE OF 461
PUNJAB [P. 'SATHASIVAM, J.]

Pursuant to the said petition, the High Court, by order dated A
27.09.1988, passed the following order:-

"V. Ramaswami, C.J. (Oral)

We are satisfied that the following questions of law do
arise out of the order of the Tribunal and accordingly we 8
direct the Tribunal to state a case and refer the questions
... -j..
for its opinion:-

1. Whether in the facts and circumstances of the case,
the expenses incurred by the State Agencies of the Food c
Corporation of India after acquiring or purchasing the
goods before delivery to the petitioner-dealer could form
.J part of gross turn over and be subjected to tax?
)
2. whether in the facts and circumstances of the case,
D
I could .the Market fee be included in the purchase turnover
in view of 46-STC-477?
Sd/-
V. Ramaswami.
Chief Justice E
Sd/-
G.R. Majithia
; Judge.
J September 27, 1988"
It is clear from the above order that the Division Bench of the F
High Court, after satisfying itself, with reference to the questions
of law to be determined directed the Tribunal to state the
relevant case and refer the questions for the opinion of the High
Court. In view of the specific order/direction of the High Court,
the Sales Tax Tribunal, Punjab has np other option but to refer G
the same to the High Court and by order dated 15.09.1989
~ 4.
rightly referred it. In those circumstances, as rightly pointed out
by counsel for the appellant, we are of the view that unless there
were very clear reasons, the High Court could not have held
that there was no material available in the order of the Tribunal
H
462 SUPREME COURT REPORTS (2009] 13 (ADDL.) S.C.R.

A for considering the same.

7. Now let us see whether any factual basis/materials were
available in the ·order of the Tribunal for determining the
question posed before the High Court. The counsel for the
B appellant took us through the order of the Assessing Authority
as well as Sales Tax Tribunal. A perusal of the orders of the
Assessing Authority, Amritsar, (Annexure-P1) and of Sales Tax
Tribunal clearly show that all the factual details pertaining to the ~
,,
first question of law were highlighted and placed for appropriate
orders.
c
8. The Assessing Authority on 20.01.1983 assessed the
Appellant-Corporation and made an additional demand of Rs.
1,84,58,291/- including the penalty. In its judgment, the Authority \...
made it clear that it considered the question whether the \.
D incidental expenses would be included in the assessment of
~-
the tax. The order states as under:
"The representative of the dealer argued that the expenses
so incurred are purely service charges and these do not
formed [sic.] a part of consideration and hence the same
E
should not be taxed. I am of the view that these expenses
includes market fees, dami and labour charges, which
form the part and parcel of the bill and hence are the part ..
of consideration, so the plea of the representatives of the
F
Corporation is not taxable. n
"'
9. Subsequently, the appellant filed an appeal before the
Deputy Excise and Taxation Commissioner (Appeals)
Jalandhar, wherein it specifically contended that market fee and
dami were not part of the turnover. Insofar as market fee was
G concerned, reliance was placed on the decision of this Court
in Anand Swarup Mahesh Kumar (supra). In regard to dami
.~ ~
(commission paid), it was contended that such expenses should
not be included in the taxable turnover. The Appellate authority
noticed the said contention, but rejected the same vide order
H dated 16.11.1983.
FOOD CORPORATION OF INDIA v. STATE OF 463
PUNJAB [P. SATHASIVAM, J.]
10. We are satisfied that the question of law that arose for A
decision of the High Court was whether in the facts and
circumstances of the case, the incidental charges could be
treated as a part of taxable turnover and if that is so, as to what
should be the correct rate at which the said incidental charges
should be calculated. Further, it was brought to our notice that B
the appellant-Corporation had paid the required tax for the
Assessment Year 1975-76 as demanded within the time
.... specified in the demand notice. In the same manner, when on
-!-
28.03.2001, the Excise and Taxation Officer had asked the
appellant-Corporation to deposit an amount of Rs. c
29,52,874.15 before 30.03.2001, the Corporation had
deposited the said amount on 28.03.2001. As by this order,
we propose to request the High Court to decide the first
~}
question afresh, there is no need to elaborate upon the same
except holding that adequate materials as well as factual details
D
,L are available for determination of the first question of law
referred to the High Court.
11. In the light of the above discussion, we set aside the
order of the High Court insofar as it relates to the first question
of law and remit the same to it with a request to answer the E
,# same referred to by the Sales Tax Tribunal, after affording
opportunity to both parties, and pass fresh order in- accordance
--... I>
_, with law as expeditiously as possible. To this extent, the
impugned order of the High Court is modified. The Civil Appeal
is partly allowed. No costs. F
K.K.T. Appeal partly allowed.