A Bench headed by Justice MK Sharma has posted the matter for for hearing on November 8. Challenging the Punjab and Haryana High Courts judgment that upheld Punjabs decision to levy sales tax on overhead expenses, FCI said it procures food grains both through levy as well as procurement from mandis and the buffer stock so created is utilised by the Centre in supplying foodgrains to the states, public distribution system, national rural employment programme, armed forces and to meet contingencies and emergencies like drought and floods.
It said the high court erred in including the expenses incurred by it towards handling charges, paid to the labour, transporation, packaging, as part of consideration for purchase of food grains even when it purchases the foodgrain only at a minimum support price fixed by the Centre and not any negotiated price.
FCI submitted that the whole process of procurement, either directly from the farmers or through state agencies, is essentially part of welfare functions of the state in as much as the procurement is made not only for creating buffer stock but also for protecting the farmers from exploitation by traders.
FCI said the sale consideration cannot include any other components like overhead expenses which are paid separately by the statutory body to the respective persons. The incidental charges as part of the sale consideration are not paid to seller but to different persons who provide the services, adding that the high court also erred in including these expenses incurred as part of the turnover even when the definition of turnover excludes any such expense subsequent to the delivery of goods.
The expenses referred to in the definition of turnover in Section 2(i) of the Punjab General Sales Tax Act necessarily have to be expenses essential or necessary for materalising or completing the sale/purchase and since these expenses are neither necessary for completion of sale nor form part of sale consideration cannot be included in turnover, the petitions stated.
These expenses are incurred by it subsequent to the delivery of foodgrain and, therefore, are excluded from the turnover, FCI added. Even the tribunal had erred in including the cost of gunny bags as part of sale consideration even when there is no agreement for sale of such bags. It further added that cost of gunny bags cannot be included in the turnover as being part of sale consideration unless there is a specific express or implied contract to this effect.