JUDGMENT M.N. Shukla, Ag. C.J.
1. The assessee, namely, the Food Corporation of India, procures foodgrains for the Central Pool of the Government of India from the cultivators and grain dealers. The procurement price is fixed by the Government of India and after procurement the grain is stored in the godown of the Food Corporation of India and is subsequently distributed through the public distribution system under the orders of the Government of India and the State Government. For the year 1967-68 regular assessment was made on 24th March, 1972, by the assessing officer and the disclosed version of the assessee was accepted. It was taxed on the turnover of purchase as disclosed by it.
2. Subsequently, however, a notice under Section 21 of the U.P. Sales Tax Act (hereinafter referred to as the Act) was issued on 28th March, 1972, to the assessee which stated that a part of turnover had escaped assessment. The asses-see put in appearance and on 26th March, 1972 the assessment order was passed. Against that order the assessee appealed to the Assistant Commissioner (Judicial), Sales Tax who remanded the case for assessment afresh. After remand the case was transferred to the Assistant Commissioner (Assessment) who fixed the taxable turnover under Section 21 at Rs. 21,78,000 vide order dated 28th February, 1978. The tax on that turnover came to Rs. 34,805.42. The first appeal against the order was decided by the Deputy Commissioner (Appeals), Sales Tax, Kanpur who reduced the tax by Rs. 2,135.42. The assessee came in second appeal which was decided by the Sales Tax Tribunal, U.P., Lucknow by its order dated 9th July, 1981, which has been impugned in the present revision.
3. Two points were urged by the learned counsel for the revisionist. Firstly, the notice under Section 21 of the Act was assailed on the ground that it did not recite therein the particulars of the alleged escaped turnover. The terminology of Section 21 makes it clear that a notice thereunder shall be competent only if the assessing authority has reason to believe that the whole or any part of the turnover of a dealer for any assessment year or part thereof has escaped assessment to tax. Thus, the condition precedent to such notice is that the assessing authority must have reason to believe that such escape of assessment has actually taken place. It is not sufficient that such belief should be purely mental or subjective. It must be reflected in the notice in the sense that it should indicate that the authority concerned had reason to believe. If this crucial ingredient is not expressed in the notice and there is nothing in its terms to indicate that according to the authority reason to believe did exist, the validity of the notice would be destroyed. But this legal requirement is some times over-elaborated and over emphasised to the extent that it is argued that the material or ground maintaining such belief must also be recited in the order. This contention is untenable. Surely, a notice under Section 21 of the Act would be invalid if it did not indicate that the assessing authority had reason to believe that the whole or any part of the turnover of a dealer for any assessment year or part thereof had escaped assessment and that a claim had wrongly been allowed. The belief of the assessing authority noted above and communication thereof to the person concerned are the very foundation of the exercise of jurisdiction under Section 21 of the Act. The absence of such belief and its reflection in the notice would make it invalid but no further requirements are enjoined by law In the instant case the finding of the Tribunal is that after perusal of the notice in question it was clear that the assessing officer had come to the conclusion that a part of the turnover had escaped assessment. In my opinion under the law it was not necessary to give details in the notice and such details could later be furnished to the dealer during the course of assessment. Thus, I find no substance in the first contention raised on behalf of the revisionist.
4. It is the second argument which has been more strenuously urged before me on behalf of the revisionist and which raises a question of law of some importance. I have already indicated in the earlier part of this judgment the procedure which is adopted by the assessee-corporation in the course of its functioning. It purchases grain from the Government and in that process it has to make payment to the Government for certain expenses incurred, by it. In other words, the Government has to be reimbursed for the expenses incurred by it for rendering certain services to the petitioner. Thus, the payment made by the petitioner is described as "incidental" or "administrative charges" which according to the petitioner should not be included in the turnover. The question, therefore, which arises for decision is as to whether such administrative charges paid by the assessee would form part of the turnover. The argument of the learned counsel for the revisionist is that it does not pay any charges at the time of or before the purchase except the price of the grain fixed by the Government and the incidental charges are paid, if at all, to its agents as handling charges after the transaction of purchases of foodgrain is completed. In support of this plea a copy of the costing sheet prepared by the Government of India has been submitted and it was urged that it proved that the handling charges were paid to the agents for filling, making and weighing of bags and for transporting and stacking them in the godowns after the grain had been purchased by the assessee.
5. Section 2(gg) of the Act defines "purchase price", as follows:
(gg) 'Purchase price' means the amount of valuable consideration paid or payable by a person for the purchase of any goods, less any sum allowed by the seller as cash discount according to trade practice and shall include any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of freight or delivery or the cost of installation when such cost is separately charged.
The term "turnover of purchases" is defined in Section 2(ii) as follows :
"(ii) turnover of 'purchases' with its cognate expression means the aggregate of the amounts of purchase price paid or payable by a dealer in respect of purchases of goods made by or through him after deducting the amount, if any, refunded to the dealer by the seller in respect of any goods returned to such seller within such period as may be prescribed."
On reading the two definitions together it follows that the term "turnover of purchases" denoted the aggregate of the amount of purchase price paid. Therefore, if the administrative charges alleged to be paid can come within the ambit of the purchase price paid, then they will have to be included in the turnover. On the other hand, if such charges represent something distinct from the amount of purchase price paid, they would fall beyond that ambit. Where some payment is made in lieu of services rendered and particularly in pursuance of some statutory provision, obviously it would not form part of the purchase price paid. It is this basic consideration which would determine the question as to whether such charges can be regarded as part of the purchase price and ultimately be included in the taxable turnover or should be treated as separate from the price.
6. Learned standing counsel, however, raised a preliminary argument to meet the contention canvassed on behalf of the assessee. He referred me to the finding recorded by the Tribunal with respect to the concession made by the counsel for the assessee. The judgment of the Tribunal contained an observation :
It was conceded by the learned counsel for the assessee that arhat or administrative charges were paid by assessee to the agents, including the State Government.
Analysing this observation, two inferences are sought to be drawn. Firstly, that the words "arhat charges" or "administrative charges" have been used synonymously and are interchangeable. Secondly, the State Government was admittedly the assessee's agent of the administration. "Arhat" is a term well-known in business parlance and it has unmistakably the character of a commission paid to an agent. The moment it is construed as a commission paid to an agent privately employed and not statutorily provided for, it ceases to be in the nature of a fee paid and clearly becomes a part of the consideration paid.
Obviously administrative charges are paid by the assessee by virtue, of a private arrangement or contract made by it with its agent for whatever such agent has to do in order to effectuate the transaction. If the nature of the transaction is predominantly such that the dealer would have inevitably to requisition the services of an agent without which the entire activity cannot be effectively performed, then generally there is a statutory recognition of such phenomenon. This is the underlying principle of provisions being made for payment of dues, etc., for services rendered. Where the legislature has not accorded recognition to such activities and has refrained from making any provision for it in the statute but the exigencies of business make it necessary to employ and make payment to some agent, it cannot be labelled as a fee paid. It is really a part of the purchase price and would retain that character. It is on that basis alone that the question as to whether it should be included in the turnover has to be decided.
7. This point has arisen for judicial interpretation in some cases. In Durga Das Narain Das, Ghaziabad v. State of Uttar Pradesh 1979 UPTC 857 (Vol. II) the question arose as to whether on a proper construction of Section 2(gg) of the Act "arhat" and "tulai" as trade charges and market fee paid under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, were includible in the taxable turnover. It was held by a Division Bench of this Court that the market fee and trading charges formed part of the purchase price and as such were includible in the turnover of purchases of the purchasing dealer. In other words; all the three items, i.e., "arhat", "tulai" and "market fee", according to that decision formed part of the purchase price. The above decision was followed in Commissioner, Sales Tax, U.P., Lucknow v. Jagroop Ram Bhagwati Prasad, Sutterhatti, Jaunpur, 1980 UPTC 1043 in which it was held that "tulai" and "arhat" charges realised as trading charges from the customers were includible in the turnover of the purchase price and were part of the same. In that case the question of market price did not arise for consideration. On the other hand, the learned counsel for the assessee placed reliance on a decision of the Supreme Court in Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax 1980 UPTC 1308. In that case it was held that market fee payable under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, did not form part of the consideration paid or payable by the purchaser in respect of the purchase of goods and, therefore, it could not be included in the turnover of purchases. To that extent the dictum in the case of Durga Das Narain Das, Ghaziabad 1979 UPTC 857 was overruled. One of the principal considerations which appears to have weighed with the learned Judges of the Supreme Court in that case was that the payment of such market fee to the Market Committee was a statutory provision and there was a prohibition of selling the produce through a commission agent unless such agent paid the market fee which he could realise from the purchaser who in turn was liable to pay the same to the Market Committee. As already indicated where a whole or part of the transaction unfolds a process which does necessarily involve the instrumentality of an agent who has to be paid, law becomes alive to such situation and makes a statutory provision for payment of such amount of fee. Where this is not so done and the services of an agent have to be employed for some purpose, it remains a purely private arrangement and if any commission is paid to such agent, it must be regarded as a part of the purchase price. Strictly speaking, the concession made on behalf of the assessee to which the Tribunal has adverted clinches the point against the assessee because the payment was acknowledged to be a commission paid to an agent and the State Government was admitted to be one of such agents. However, even apart from pinning down the assessee to. the concession, on an analysis of the various provisions of law and the peculiar nature of the transaction involved in such purchase, I am of the opinion that the charges paid to the State Government by the petitioner under the expression "administrative charges" do essentially partake the character of payment made to commission agent. Consequently, it cannot escape the trappings of purchase price and such amount must be included in the turnover. I am inclined to agree with the view expressed by the Division Bench of this Court in Commissioner of Sales Tax, U.P., Lucknow v. Jagroop Ram Bhag-wati Prasad, Sutterhatti, Jaunpur 1980 UPTC 1043.
8. In the result I find no force in this revision and it is dismissed with costs.