TMI Blog1961 (4) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... Naunit Lal, Advocate, for the Intervener No. 2. D.V. Sastri and T.M. Sen, Advocates, for Intervener No. 1. S.M. Sikri, Advocate-General, Punjab (D. Gupta, Advocate, with him), for Intervener No. 3. -------------------------------------------------- The Judgment of the Court was delivered by S.K. DAS, J. -These are two appeals on certificates granted by the High Court of Madras and consolidated by its orders dated March 22, 1957. They are from the judgment and orders of the said High Court dated April 20, 1956, and July 30, 1956, in two Tax Revision Cases, by which the High Court dismissed two petitions filed by the appellants under section 12-B of the Madras General Sales Tax Act (Madras Act IX of 1939), hereinafter called the principal Act, in the following circumstances. Messrs George Oakes (Private) Limited, appellants herein, are dealers in Ford motor cars, spare parts and accessories. For the two years 1951-52 and 1952-53 the appellants submitted their returns under the relevant provisions of the principal Act and claimed exemption from tax with regard to certain amount realised on transactions of sales which the appellants contended were inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which the appellants contended were inter-State sales. Learned counsel for the appellants has conceded before us that that decision governs the present appeals, and the first question no longer survives. As to the second question, the High Court by oversight did not deal with it in its orders dated April 20, 1956. When the matter was brought to the notice of the High Court, it said in its orders dated July 30, 1956, that the second question was also concluded by its decision in Sri Sundararajan and Co. Ltd. v. The State of Madras [1956] 7 S.T.C. 105., where the validity of the impugned Act was upheld. When we heard these appeals along with Ashok Leyland Ltd. v. The State of Madras Since reported at [1961] 12 S.T.C. 379, Civil Appeal No. 446 of 1958, we expressed the view that there was some divergence of opinion in the High Courts on the second question and the substantial point for consideration before us was whether the impugned Act was validly made under entry 54 of the State List in the Seventh Schedule to the Constitution: thus the question raised was one of legislative competence and affected all the States. The State of Madras was already a party respondent to these ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re reading so much of the definition only as is material for our purpose) "every transfer of property in goods by one person to another in the course of trade or business for cash or deferred payment or other valuable consideration." It is worthy of note here that the tax imposed by the principal Act is a tax on total turnover, and turnover means the aggregate amount for which goods are either bought or sold by a dealer. Therefore, one of the questions which falls for considera- tion is whether the State Legislature went beyond its legislative competence in enacting by the impugned Act that the amounts collected by the dealer by way of tax shall be deemed to have formed part of his turnover. This brings us to section 8-B of the principal Act, which provides in sub-section (1) that no person who is not a registered dealer shall collect any amount by way of tax; nor shall a registered dealer make any such collection except in accordance with such conditions and restrictions, if any, as may be prescribed; sub-section (2) provides inter alia that every person who has collected or collects by way of tax any amounts shall pay over the same to the State Government. Section 15 provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal Act, to include in the turnover of the dealer amounts collected by him after the 1st April, 1954, by way of tax under the principal Act." The validity of the impugned Act was then questioned in the Madras High Court and in Sri Sundararajan and Co. Ltd. v. The State of Madras [1956] 7 S.T.C. 105., it was held that the impugned Act was valid. The High Court pointed out that the earlier decision in Krishnaswami Mudaliar's case [1954] 5 S.T.C. 88. , was not that the State Legislature could not make the amounts collected by a registered dealer by way of tax under section 8-B part of the assessable turnover, but that the principal Act as it stood at the relevant time did not make such amounts part of the assessable turn- over. It held that in pith and substance the impugned Act validated the assessments already made before April 1, 1954, and that even where the registered dealer collected any amount by way of tax under the authority of section 8-B, the payment by the purchaser was on the occasion of the sale by the dealer and vis-a-vis the latter it was in reality part of the price the purchaser paid the seller for purchasing the goods. The same view was also expressed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does is to impose what learned counsel calls " a tax on tax" and therefore not covered by the relevant legislative entry. His submission further is that what is collected by way of tax being distinct from sale price and therefore from turnover, it must be necessarily held that the amount collected by way of tax is not essentially connected with the transaction of sale and therefore the imposition of "a tax on tax" has no necessary connexion with the transaction of sale as understood in the general law relating to sale of goods. We are unable to accept this argument as correct. First of all, we do not think that either the principal Act or the impugned Act proceeds on any immutable distinction between sale price and tax such as learned counsel for the appellants has suggested. The principal Act does not contain any separate definition of sale price. We have already referred to the definitions of "sale" and "turnover"; those definitions do not show any such distinction. On the contrary, the expression "turnover" means the aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration, and when a sale attracts purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an obligation on the registered dealer to pay over the amount of tax collected by him to Government. The position under the Turnover and Assessment Rules is correctly summarised in the following extract from the judgment in Krishnaswamy Mudaliar's case [1954] 5 S.T.C. 88.: "Rule 4 provides that the gross turnover of a dealer for the purposes of the rules is the amount for which goods are sold by the dealer. Provision is made in rule 5 for certain deductions, and the mode or manner in which the tax to be levied has to be arrived at. The object of these rules is to assess the net turnover on which the tax is to be levied under the charging section. It is therefore clear that under the charging section, tax is to be paid on the turnover which is assessed according to the rules. Rule 11 requires that every dealer should submit a return under rule 6 every year to the assessing authority in Form A in which he has to show the actual gross and net turnover for the preceding year and the amounts by way of tax or taxes actually collected during that year. In Form A columns 1 to 10 relate to the gross turnover and the deductions to be made from the gross turnover; column 10 requires the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and the distinction between the two amounts-tax and price-loses all significance from the point of view of legislative competence. The matter is not in any way different under the Turnover and Assessment Rules. It is true that in column II of Form A the amount collected by way of tax under section 8-B has to be shown; that does not, however, mean that an immutable distinction such as will go to the root of legislative competence has been drawn and must be always maintained. It appears to us that the true effect of section 8-B and the Turnover and Assessment Rules is that (a) a registered dealer is enabled to pass on the tax, (b) an unregistered dealer cannot do so, and (c) the amount collected by way of tax is to be shown separately, for it has to be paid over to Government. This does not mean that it is incompetent to the legislature enacting legislation pursuant to entry 54 in List II by suitable provision to make the tax paid by the purchaser to the dealer together with the sale price in consideration of the goods sold, a part of the turnover of the dealer; nor does it mean what in law the tax as imposed by Government is a tax on the buyer making the dealer a mere collecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the effect of these amendments, the High Court of Andhra Pradesh said, "The ultimate economic incidence of the sales tax is on the consumer or the last purchaser and whatever he pays for the goods is paid only as price, that is to say, as consideration for the purchase. The statutory liability, however, for payment of sales tax is laid on the dealer on his total 'turnover' whether or not he realises the tax from the purchasers. Generally speaking, the price charged by the dealer would be inclusive of sales tax, for, it is to his interest to pass the burden of the tax to the purchaser. So far as the dealer is concerned, the payment of a sum covering the tax made by a purchaser on the occasion of sale, is really part of the price which the purchasers pay for the goods." Later, it referred with approval to the decision in Sri Sundararajan and Co. Ltd. v. The State of Madras [1956] 7 S.T.C. 105. In this latter decision the validity of the impugned Act was questioned and dealing with section 2 of the impugned Act, the High Court said: "Section 2 only enacted that such amount shall be 'deemed' to be part of the turnover and for a limited period. It may not be necessary to set out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own terms in the context of the provisions of the principal Act. Reading the impugned Act in the light of the provisions of the principal Act, it seems clear to us that the impugned Act cannot be held to be bad on the ground of legislative incompetence. Under the definition of turnover the aggregate amount for which goods are bought or sold is taxable. This aggregate amount includes the tax as part of the price paid by the buyer. The amount goes into the common till of the dealer till he pays the tax. It is money which he keeps using for his business till he pays it over to Government. Indeed, he may turn it over again and again till he finally hands it to Government. There is thus nothing anomalous in the law treating it as part of the amount on which tax must be paid by him. This conception of a turnover is not new. It is found in England and America and there is no reason to think that when the legislatures in India defined turnover to include tax also, they were striking out into something quite unknown and unheard of before. The only question which has been raised in these appeals is regarding the validity of the impugned Act. That question having been decided against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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