Supply of molasses in lieu of licence fee amounts to sale: SC

New Delhi, May 18(UNI) The Supreme Court has held that supply of molasses in lieu of licence fee amounts to 'sale'within the meaning of Uttar Pradesh Tax Act 1948 and therefore, the price of molasses is liable to be taxed under the Act.

A bench comprising Mr. Justices S.B. Sinha and P.K.

Balasubramanyan vide judgment dated May 12, dismissed the appeal filed by M/s Dhampur Sugar Mills Ltd. challenging Allahabad high court judgment dated May 21,2004.

M/s Swaroop Vegetables Products Industries Ltd. owner of a sugar mill called Sir Shadilal Sugar and General Mills situated at Mansurpur in district Muzaffarnagar, UP executed a Deed of licence in favour of the appellant on Sept.3,1987. As per the agreement major part of licence fee was to be paid in the shape of molasses.

The contention of the appellant was that since molasses equivalent to the amount of licence fee was to be paid to the company, it did not constitute sale under the Act and therefore provisions of the UP Trade Tax Act were not attracted. The assistant commissioner, trade tax, Najibabad vide order dated July 30,1991 had held that the appellant company was liable to pay trade tax to the tune of Rs.3,19,699.12p for the assessment year 1987-88.

The apex court concluded by observing,"Molasses manufactured in sugar mills was the property of the appellant and it answers the description of 'goods'. In view of the terms and conditions of the Deed of Licence the appellant was the owner thereof. The company was to use the molasses for the purpose of manufacture of sugar in factory. Transfer of such molasses by the appellant to the company would not be a transfer by way of transfer of stock. It is transfer of the ownership of goods wherefor the Company was to pay the price to the appellant. The transaction,therefore beyond any doubt answers the description of 'sale' within the meaning of the provisions of the U.P. Trade Act,1948.In fact the transaction entered into by the parties even does not provide for any camouflage to evade tax. They are clear and unambiguous." UNI AKS/SC RP RN1914