PETITIONER:
JOINT COMMERCIAL OFFICER, DIVISION II,MADRAS-2 ETC.
Vs.
RESPONDENT:
SPENCER & CO. ETC. ETC.
DATE OF JUDGMENT02/05/1975
BENCH:
GUPTA, A.C.
KRISHNAIYER, V.R.
SARKARIA, RANJIT SINGH
CITATION:
1975 AIR 1801 1975 SCR 439
1975 SCC (2) 358
ACT
Madras General Sales Tax Act, 1959, Sections 2(q), 2(r) and 3(1)--an Dealer in foreign liquor and other goods--Tax paid under s. 21-A of Madras Prohibition Act, 1937 by purchaser if part of taxable turnover of the dealer.
HEADNOTE
The respondents-assessees are dealers in foreign liquor, among other goods. They have been assessed to sales tax as dealers on sales or purchases of other goods under s. 3(1) of the Madras General Sales Tax Act, 1959. They filed Writ Petitions in the High Court challenging certain orders (relating to different assessment years, ranging from 1959 to 1964-65) made by the assessing authority under the Madras General Sales Tax Act, 1959 proposing to redetermine the taxable turnover of the respondents by including the saleprice of foreign liquor which, it was alleged, had escaped assessment. The High Court directed the sales tax authorities not to include in the assessable turnover the tax paid by the respondents under s. 21-A of the Madras Prohibition Act, 1937. These appeals have been filed on the basis of the certificate of fitness granted by the High Court. It was contended for the appellants that the amount collected by the assessees by was of sales tax from the purchasers were part of their total turnover and as much liable to be taxed under s. 3(1) of the Act. Rejecting the contention and dismissing the appeals, HELD : It is clear from s. 21-A of the Madras Prohibition Act, 1937 that the sales tax which the section requires the seller of Foreign liquor to collect from the purchaser is a tax on the purchaser and not on the seller. It is a tax on the price of the liquor and that tax is to be paid by the purchaser. Section 21-A makes the seller a collector of tax for the Government, and the amount collected by him as tax under this section cannot therefore be a part of his turnover. Under the Madras General Sales Tax Act, 1959 the dealer has a statutory duty to collect the sales tax payable by him from big customer, and when the dealer passes on to the customer the amount of tax which the former is liable to pay, the said amount does not cease to be the price for the goods although "the price is expressed as X plus purchase tax". But the amounts collected by the assessees concerned in these appeals under a statutory obligation cannot be a part of their taxable turnover under the Act. [442A-D]. M/s. George Oakes (P) Ltd., V. State of Madras, [1962] 2 S.C.R. 57Q, State at Kerala v. Ramaswamy Iyer and Sons, [1966] Suppl. S.C.R. 582 and Delhi Cloth and General Mills Ltd. v. Commissioner of Sales Tax, Indore, [1971] Suppl. S.C.R. 945, held not applicable. Paprica Ltd. and Anr. v. Board of Trade, [1944] 1 All. E.R. 372, referred to.
JUDGMENT
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2005 to 2016 of 1970. From the Judgment and Order dated the 10th April, 1969 of the Madras High Court in W.Ps. Nos. 2787 to 2790 of 1966 and 2988 to 2991 of 1966 and T.C. Nos. 102, 104 & 195 of 1967. 10 SC/75-29 440 S. Govind Swaminathan, K. Venkataswami, N. S. Sivam, A. V. Rangam and A. Subhashini, for the appellants. T. A. Ramchandran, for the respondents (In C.As. Nos. 2005-2008 & 2013-2016/70). Vineet Kumar, for respondent No. 1 (In C.A. Nos. 2009-2012/ 70). The Judgment of the Court was delivered by GUPTA, J.-These twelve appeals arise out of a common judgment of the Madras High Court disposing of the writ petitions filed by the respondents in which they challenged certain orders of the assessing authority under the Madras General Sales Tax Act, 1959 proposing to redetermine the taxable turnover of the respondents by including the saleprice of foreign liquor which, it was alleged, had escaped assessment. The High Court directed the sales tax authorities not to include in the assessable turnover the tax paid by the respondents under sec. 21-A of the Madras Prohibition Act, 1937. In these appeals, brought on certificate of fitness, the correctness of the High Court’s decision is questioned by the sales tax authorities. The appeals have three different assessees as respondents and relate to different assessment years concerning each assessee, ranging from 1959-60 to 1964-65. The assessees are dealers in foreign liquor, among other goods. They have been assessed to sales tax as dealers on sales or purchases of other goods under sec. 3(1) of the Madras General Sales Tax Act, 1959. Sec. 3(1) is the charging section providing generally that a dealer whose total turnover for a year is not less than the specified amount, shall pay a tax for each year at the specified rate. ’Turnover’ is defined in sec. 2(r) of the Act. The relevant part of the definition is as follows :
"’turnover’ means the aggregate amount for
which goods are bought or sold, or supplied or
distributed, by a dealer, either directly or
through another, on his own account or on
account of others whether for cash or for
deferred payment or other valuable
consideration............ Total turnover’ is defined in sec. 2(q) of the Act as "the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax". The question is whether the ’sales tax’ collected by these assessees under sec. 21-A of the Madras Prohibition Act, 1937 can be treated as part of their total turnover. Sec. 21-A, so far as it is relevant for the present purpose, is in these terms :
"Every person or institution which sells
foreign liquor-
(a) x x x
(b) x x x
shall collect from the purchaser and pay over
to the Government at such intervals and in
such manner as may be pres-
441
cribed, a sales tax calculated at the rate of
eight annas in the rupee, or at such other
rate as may be notified by the Government from
time to time, on the price of the liquor so
sold." Counsel for the appellants contended relying on several decisions of this Court to which we shall presently refer, that the amount collected by the assessees by way of sales tax from the purchasers were part of their total turnover and as such liable to be taxed under sec. 3(1) of the Madras General Sales Tax Act, 1959. In M/s. George Oakes (P) Ltd. v. State of Madras,(1) this. Court considered the question whether inclusion of the amounts collected by the appellants in that case as sales tax under the Madras General Sales Tax Act, 1939 was valid. The expression ’turnover’ in the 1939 Act meant, as it does in the 1959 Act, aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration. This Court observed :
"......... when a sale attracts purchase tax
and the tax is passed on to the consumer, what
the buyer has to pay for the goods includes
the tax as well and the aggregate amount so
paid would fall within the definition of
turnover ...... so far as the purchaser is
concerned, he pays for the goods what the
seller demands, viz., price even thoug h it may
include tax. That is the whole consideration
for the sale and there is no reason why the
whole amount paid to the seller by the
purchaser should not be treated as the
consideration for the sale and included in the
turnover." A similar view was taken by this Court in State of Kerala v. Ramaswamy Iyer & Sons.(2) This was a case under the Travancore Cochin General Sales Tax Act, 1958. Here also the decision turned on the definition of ’turnover’ which is similar to the definition of the term in the Madras General Sales Tax Act, 1959. The position was further explained in Delhi Cloth and General Mills Ltd. v. Commissioner of Sales Tax, Indore,(3) which was a case under the Madhya Pradesh General Sales Tax Act, 1958. The relevant provisions of this Act appear to be similar to those of the Madras General Sales Tax Act, 1959. Stating that the liability to pay tax under the Act is that of the dealer, Hegde J. speaking for the Court said that the Act did not confer "any statutory power on the dealer to collect sales tax as such from any class of buyers. . . . Unless the price of an article is controlled,. it is always open to the buyer and the seller to agree upon the price to be payable.’ While doing so it is open to the dealer to include in the price the tax payable by him to the Government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers. The levy and collection of tax is regulated by law and not by contract. So long as there is no law empowering the dealer to collect tax from his buyer or seller, there is no legal basis for (1) [1962] 2 S.C.R. 570. (2) [1966] 3 S.C.R. 582. (1) [1971] Supp. S.C.R. 945. 442 saying that the dealer is entitled to collect the tax payable by him from his buyer or seller. Whatever collection that may be made by the dealer from his customers same can only be considered as valuable consideration for the goods sold". It is clear from sec. 21-A of the Madras Prohibition Act, 1937 that the sales tax which the section requires the seller of foreign liquor to collect from the purchaser is a tax on the purchaser and not on the seller. This is what makes the authorities on which counsel for the appellants relied inapplicable to the cases before us. Under sec. 21-A the tax payable is on the price of the liquor and that tax is to be paid by the purchaser, the seller is required to collect the tax from the purchaser which he has to pay over to the Government. Sec. 21-A makes the seller a collector of tax for the Government, and the amount collected by him as tax under this section cannot therefore be a part of his turnover. Under the Madras General Sales Tax Act, 1959 the dealer has no statutory duty to collect the sales tax payable by him from his customer, and when the dealer passes on to the customer the amount of tax which the former is liable to pay, the said amount does not cease to be the price for the goods although "the price is expressed, as X plus purchase tax".(1) But the amounts collected by the assessees concerned in these appeals under a statutory obligation cannot be a part of their taxable turnover under the Madras General Sales Tax Act, 1959. The appeals are dismissed withcosts : one hearing fee. Appeals dismissed. V.M.K. aprica Ltd. and Anr. v. Board of Trade, [1944] 1 All. E.R. 372. 443