TMI Blog1972 (11) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, urged that as their principals are not liable to pay sales tax, they are also not liable. In some of the above writ petitions, the petitioners paid the tax to the authorities and hence they prayed for quashing the assessment orders and consequential refund of the amounts. There are some other writ petitions in which assessments are sought to be quashed, but no appeals were filed by the assessees. There is yet another category in which the assessees prayed for a writ of prohibition restraining the authorities from proceeding with the assessments. As the assessees raised the question as regards the validity of explanation II of section 2(1)(e) of the Andhra Pradesh General Sales Tax Act, these writ petitions have been entertained by this court instead of directing the assessees to seek their remedies under the Act. On behalf of the assessees Sri T.K. Sampath, Sri E. Manohar, Sri I.V. Rangacharya and Sri S. Dasaratharama Reddy addressed arguments raising the following contentions: Explanation II, which was added by the Andhra Pradesh Amending Act 16 of 1963 to section 2(1)(e) of the Andhra Pradesh General Sales Tax Act, which defines a "dealer", is void on the ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of buying, selling, supplying or distributing goods on behalf of any principal or principals. Explanation I.-Every person who acts as an 'agent of a non-resident dealer', that is, as an agent on behalf of a dealer residing outside the State, and buys, sells, supplies or distributes goods in the State or acts on behalf of such dealer as shall be deemed to be a dealer for the purposes of the Act. Explanation II.-Where a grower of agricultural or horticultural produce sells such produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, in a form different from the one in which it was produced after subjecting it to any physical, chemical or any process other than mere cleaning, grading or sorting, he shall be deemed to be a dealer for the purposes of this Act............. (s) 'turnover' means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment or any other thing of value) including any sums charged by the dealer for anything done in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nise with and clear up any ambiguity in the main section and cannot be so construed as to widen the ambit of the section. But this is also not a case of explanation introducing a deeming provision. In Century Club v. State of Mysore[1965] 16 S.T.C. 38., the Mysore High Court held that an explanation deeming a transaction as a sale which in fact is not, is beyond the scope of the Mysore Sales Tax Act. But, here as in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd.[1958] 9 S.T.C. 353 (S.C.). , the decision is based upon the legislative competence. The learned Government Pleader invited my attention to Krishna Ayyangar v. Nallaperumal Pillai[1920] I.L.R. 43 Mad. 550., in which the Privy Council stated as follows: "The construction of the explanation must depend upon its terms, and no theory of its purpose can be entertained unless it is to be inferred from the language used.........The question is, what does the explanation mean? No statement made on the introduction of the measure or its discussion can be looked at as affording any guidance as to the meaning of the words." In Chipping and Painting Employees' Association Pvt. Ltd., Bombay v. A.T. ZambreA.I.R. 1969 Bom. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is deemed to be something, the only meaning possible is that whereas he is not in reality that something, the Act of Parliament requires him to be treated as if he were. It was further held that though the agent is not a person in actual receipt of profits, the deeming provision under section 43 puts the person artificially in the position of agent and of assessee though he may not have received the profits as required by section 42. Reference has been made to State of Bihar v. Md. IsmailA.I.R. 1966 Pat. 1. for the proposition that an explanation or a proviso is added sometimes by way of an exception to what is stated in the main section. Sometimes an explanation stresses upon a particular thing which, ordinarily, would not appear clearly in the provision of the main section. In Public Prosecutor v. A.J. Gladstone(2), it was pointed out that an explanation can enlarge the scope of the main section. In State of Bombay v. Panduranga VinayakA.I.R. 1953 S.C. 244., it is said as follows: "When a statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the court is entitled and bound to ascertain for what purposes and between what persons t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n can be introduced either as an explanation or as a proviso and it has never been struck down on the ground that it is opposed to the spirit of the main section. By virtue of the deeming provision, a legal fiction is created and we have to assume that certain things exist though they really do not exist, and not only assume their existence but we have to give full effect to all the consequences as if it were a real state of affairs. We are familiar with the supreme powers of the Legislature in enacting retrospective laws validating invalid actions. The power to create a legal fiction or an imaginary state of affairs is indeed one of the magic powers of the Legislature. So long as the said power does not go beyond the legislative competence, the deeming provision cannot be held to be invalid. In the present case, the deeming provision says that an agricultural grower of sugarcane who converts the same to jaggery and sells it should be regarded as a "dealer" for all purposes of the Act. It follows, therefore, that such a person satisfies the definition of "dealer" wherever the word occurs in the Act, either in the definition clause (e) or in the charging section 5. It is no longer n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of deeming provisions various types of agents, who do not strictly come under the definition of "dealer". In this view of the matter, it is unnecessary to consider the decision of the Supreme Court in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Travancore Rubber and Tea Co.[1967] 20 S.T.C. 520 (S.C.)., in which the Supreme Court held that in order to come within the definition of "dealer" a person must carry on business and his activity must consist of a course of dealings. I will now refer to the decision in A. Kannu v. State of Madras[1971] 27 S.T.C. 25., on which strong reliance Is placed on behalf of the petitioners, as a case which is directly In point. It is, therefore, necessary to examine this case in detail. An agriculturist filed a writ petition challenging the levy of sales tax on the sale of jaggery manufactured and sold by him out of his own sugarcane. One of the contentions raised was that the explanation to section 2(r) of the Madras General Sales Tax Act, 1959, violates the real sense of the definition and that it should be struck down as ultra vires of the powers of the local Legislature. Section 2(r) of the said Act defines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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