Citation Codes

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Case Number

T.R.C No. 214 of 1953

Advocates

For the Appellant: A. Bhagavantha Rao, K. Rajah Iyer, K.V. Kapali Sastri, M. Ranganatha Sastry, Advocates

Judges

Chandra Reddy
Umamaheswaram, JJ.

Acts

framed.12. Sec. 3 sub-sections 4 and 5 read thus:Sec. 3(4)
Sec. 2(i) of the Madras General Sales Tax Act
Rules. Rule 5-A(7) of these Rules
sub-rule 7(2). Sub-rules 8 and 9
Government.Rule 8
Section 8-B(1),
Sales Tax Act
sub-rule (7)

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Smart Summary

Structured Summary of the Opinion (Chandra Reddy, J.)

Factual and Procedural Background

This case concerns the interpretation of Section 2(i) of the Madras General Sales Tax Act as amended by the Legislative Assembly of the Andhra State in May 1954. The assessment under challenge relates to the year 1949–1950.

In the assessee's turnover return the amount of sales-tax collected from purchasers was excluded. The Sales Tax Department contended that the tax collected by the dealer formed part of the dealer's turnover and so should be taxed; it sought to levy tax on that tax. On appeal, the Sales Tax Appellate Tribunal accepted the assessee's contention and exempted the tax collected by the dealer from being included in turnover. The Government filed a revision petition against the Tribunal's order. While that petition was pending, the Andhra State Legislature amended the statutory definition of "turnover" by substituting a broader definition (quoted in the opinion).

Legal Issues Presented

Whether the amended definition of "turnover" (substituted by the Andhra State Legislature) is comprehensive enough to include sales-tax collected by a dealer (i.e., whether tax collected by the dealer forms part of the dealer's "turnover").
Whether the deletion of Sections 8-B(1) and 8-B(2) from the Act had the effect of withdrawing any authority of a registered dealer to collect tax, and if so whether such withdrawal would render amounts collected by the dealer unauthorised and hence part of turnover.
Whether the relevant rules (notably Rule 5-A(7) and Rules 8 and 9 of the Turnover and Assessment Rules) are impliedly repealed or rendered inoperative by the omission of Section 8-B (i.e., whether the repeal of the statutory provision under which rules were thought to operate necessarily repeals or invalidates those rules).
Whether, if any apparent inconsistency exists between the amended statutory definition and the rules, an implied repeal should be inferred (i.e., the appropriate approach to alleged repugnancy between the amended definition and existing rules).
(Mentioned but not decided) Whether the Provincial Legislature has competence to define turnover so as to embrace sales-tax when legislating under the entry relied on — the court observed it was not necessary to decide this larger question in view of its conclusion.

Arguments of the Parties

Advocate-General / Government (Petitioner)

Argued that the amended definition of "turnover" is of wider import and brings within its ambit the tax collected by the dealer; the clause "and any other sums charged by the dealer whatever be the description, the name or object thereof" should be read as embracing the tax collected.
Contended that the phrase "including any sums charged ... and any other sums charged ... whatever be the description" refers to the "total amount set out in the bill of sale," and thus the tax collected could be treated as part of the consideration set out in the bill.
Argued that by deleting Sections 8-B(1) and 8-B(2) the statutory privilege or authority for a dealer to collect the tax was withdrawn; consequently any collection by the dealer after repeal would be unauthorised and would form part of turnover (invoking Batta Company v. Board of Revenue, West Bengal).
Maintained that when a later enactment is in negative terms and inconsistent with earlier provisions, the earlier may be held impliedly repealed; relied on passages from Maxwell and Craies on statutory interpretation to support an argument that the repeal/omission should be read as effecting inconsistency with the rules.

Assessee / Appellate Tribunal (Respondent)

The Assesssee had excluded the tax collected from turnover; the Sales Tax Appellate Tribunal accepted that tax collected by the dealer did not constitute part of turnover and therefore was not liable to be taxed again.
Relied, as reflected in earlier decisions, on the principle that a dealer collects tax as an agent on behalf of the taxing authority and hence those amounts are not part of the dealer's taxable turnover.
Implicitly relied on the continued existence and operation of the Turnover and Assessment Rules (including Rule 5-A(7) and Rules 8 and 9) which presuppose a dealer's right and obligation to collect tax and to pay it over to the Government.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Deputy Commissioner of Commercial Taxes, Coimbatore v. Krishnaswamy (1954 2 M.L.J. 151)	Held that tax collected by a dealer did not constitute part of the dealer's turnover and therefore was not liable to be taxed again.	The court referred to and followed this view when interpreting the definition of "turnover" as it stood prior to amendment; it treated the principle as supportive of excluding collected tax from turnover.
Deputy Commissioner of Commercial Taxes, Kakinada Division v. Bujranga Jute Mills Ltd. (T.R.C. 131/53)	Expressed the view that the dealer collects tax as an agent for the taxing authority and that such collected tax is not part of the dealer's turnover.	The court confirmed that it had recently taken the same view, and later in the opinion expressly stated that its judgment in T.R.C. 131/53 is correct and does not require reconsideration or review.
Batta Company v. Board of Revenue, West Bengal	Invoked by petitioner to support the proposition that unauthorised collections by a trader may be treated as part of the trader's takings (i.e., part of turnover).	The court noted the petitioner relied on this case but rejected the submission that omission of Section 8-B(1) and (2) had the effect argued for; the court did not accept that Batta Company dictated the result here given the statutory and rule context.
Madras Province v. Boddu Pydanna & Sons	Used to illustrate that liability to tax under the Sales Tax Act arises on the occasion of sale (i.e., only after sale is completed).	The court cited the case to support the proposition that tax is levied on the occasion of sale and thus the concept of levying tax on a tax collected on the occasion of sale is inconsistent with the structure of the Sales Tax Act.
State of Bombay v. United Motors (India) Ltd. (Supreme Court)	Also cited for the principle that liability to tax under the Sales Tax Act arises on the occasion of sale.	The court relied on the authority to reinforce that tax liability arises only after sale is completed, and therefore an interpretation that would tax the tax collected would be inconsistent with that principle.

Court's Reasoning and Analysis

The court proceeded through a sequential analysis grounded on textual interpretation of the amended definition, statutory rules, rule-making authority, and established principles on implied repeal.

First, the court examined the amended statutory definition of "turnover" which defines turnover as "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 ... including any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof."

The court rejected the Advocate-General's suggested construction that the phrase "any other sums charged by the dealer whatever be the description, the name or object thereof" should be read to include sales-tax collected by the dealer. It held that the "total amount set out in the bill" can only refer to the consideration for the sale and that the subsequent words make the definition comprehensive only as to elements of consideration (sums charged for services, packing, etc.). To construe the definition to include sales-tax, the court said, would be to strain language beyond its plain and ordinary meaning.

The court reiterated the established principle — cited in its earlier decisions and in the Madras High Court — that a dealer collects sales-tax as an agent of the taxing authority; amounts so collected are not the dealer's own receipts and therefore are not part of his turnover. While the Advocate-General conceded the correctness of that principle, he argued that deletion of Sections 8-B(1) and 8-B(2) withdrew the dealer's power and duty to collect and remit tax, thereby making any collections unauthorised and thus part of turnover.

To assess that contention the court examined Section 8-B as it previously stood and the Turnover and Assessment Rules, particularly Rule 5-A(7). The court observed that Rule 5-A(7) expressly authorises a registered dealer to collect amounts by way of tax subject to conditions (including limits on rates and the obligation to pay over amounts collected by specified dates). Rules 8 and 9 presuppose and enforce the dealer's duty to account for and pay amounts collected. The court concluded that these rules perform the same functional role as Section 8-B(1) in relation to a dealer's right to collect tax and a dealer's obligation to remit it.

The court rejected the submission that omission of Section 8-B necessarily implied the repeal of the rules. It reasoned that the rules were not made under Section 8 but under the rule-making power derived from Section 19 to carry out the purposes of Section 3(4) and (5). Because the rules derive authority from provisions other than Section 8-B, the mere omission of Section 8-B did not effect their repeal.

On the argument of repugnancy and implied repeal, the court reiterated the orthodox principle: courts should, as far as possible, read different provisions so as to harmonise them; implied repeal will be inferred only where the later enactment is so inconsistent with the earlier that both cannot stand. The court found no such irreconcilable repugnancy here. Instead of assuming repugnancy, the court read the amended definition in the light of the existing rules.

The court also relied on the conceptual point that under the Sales Tax Act the liability to tax arises on the occasion of sale (as established in cited authorities), meaning the tax arises only after completion of sale; levying tax on a sum collected as tax (i.e., tax on tax) would be inconsistent with that scheme. That reinforced the textual interpretation that "turnover" does not include the tax collected by the dealer.

The court further observed that if the deletion of Section 8-B were taken to have withdrawn the authority to collect tax, then there would be no need to include the tax within the definition of turnover — the issue of taxing the tax would arise only if the dealer is permitted to collect it. On the evidence of rules and forms (Form A with separate columns for net turnover and tax collected), the practice and statutory instruments continued to treat collected tax as distinct.

On the basis of the foregoing textual, purposive and structural analysis, the court concluded the amended definition is not comprehensive enough to include sales-tax collected by the dealer and therefore the Appellate Tribunal's conclusion excluding tax collected from turnover was upheld.

Holding and Implications

Holding: Petition dismissed with costs. The court dismissed the Government's revision petition against the Appellate Tribunal's order. Advocate's fee was fixed at Rs. 250/-. The court also expressly stated that its earlier judgment in T.R.C. 131/53 (Deputy Commissioner of Commercial Taxes, Kakinada Division v. Bujranga Jute Mills Ltd.) is correct and does not require reconsideration or review.

Immediate consequences for the parties:

The Appellate Tribunal's decision that sales-tax collected by the dealer is not part of the dealer's turnover and is not liable to be taxed again was upheld.
The Government's challenge was rejected and the petition was dismissed with an award of costs and a fixed advocate's fee.

Broader implications:

The court did not find it necessary to decide the larger constitutional or competence question relating to the Provincial Legislature's power to define turnover so as to embrace sales-tax; accordingly, no new pronouncement on that larger competence question was made.
The opinion reaffirmed and applied earlier case law and routine administrative rules that treat collected sales-tax as amounts held by the dealer as agent for the Government rather than as part of the dealer's consideration for sale.

Note: This summary is prepared exclusively from and limited to the content of the provided opinion. No information has been added beyond what appears in that opinion.

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State Of Madras v. Tungabhadra Industries Ltd.

Chandra Reddy, J.:— The interpretation of Sec. 2(i) of the Madras General Sales Tax Act as amended by the Legislative Assembly of the Andhra State in May 1954 is involved in this case. The assessment relates to the year 1949-1950.

2. In the return of turnover submitted by the assessee, the tax collected from the purchasers was excluded. The Sales Tax Department sought to levy tax on this tax on the ground that it formed part of the turnover. The Sales Tax Appellate Tribunal before whom the matter was carried in appeal by the assessee accepted the contention of the assessee and gave relief to him in that respect. The Government have preferred this revision petition against the order of the Appellate Tribunal. Pending this petition, the Andhra State Legislature amended the definition of ‘turnover’ by substituting the following:

“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 or deferred payment or any other thing of value), including any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof”. (We are not concerned in this enquiry with the other provisions of the amended Section).

3. Prior to the amendment, Sec. (2)1 read thus:

“Turnover” means the aggregate amount for which goods are either bought by or sold by a dealer whether for cash or for deferred payment or other valuable consideration provided that the proceeds of the sale by a person, of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover.”

4. Interpreting the definition of turnover as it stood prior to the amendment by the Legislature of the Andhra State a Bench of the Madras High Court in Deputy Commissioner of Commercial Taxes, Coimbatore v. Krishnaswamy 1954 2 M.L.J 151. declared that the tax collected by a dealer did not constitute part of the turnover and therefore was not liable to be taxed again. Recently we took the same view in Deputy Commissioner of Commercial Taxes, Kakinada Division v. Bujranga Jute Mills Ltd. (T.R.C 131/53)2. But subsequent to the rendering of the judgment in that case, the learned Government Pleader brought to our notice the amended definition and requested us to reconsider the matter in the light of this amendment.

5. It is contended by the learned Advocate-General for the Government that the amended definition is of wider import and brings within its ambit the tax collected by the dealer and the judgment of the Madras High Court based on the unamended definition cannot govern this case. According to him, the clause “and any other sums charged by the dealer whatever be the description, the name or object thereof” takes in the tax collected by the seller. The expression “whatever be the description, the name or object thereof”, continues the Advocate-General, is significant and embraces every item mentioned in the bill or paid into the hands of the seller. It is urged that the clause “including any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of goods and any other sums charged by the dealer whatever be the description, name or object thereof” have reference to “the total amount set out in the bill of sale”. In our opinion, this construction is opposed to the plain and ordinary meaning of the language of the sub-section. The total amount set out in the bill can have reference only to the consideration for sale and it is in the consideration that these sums, charges etc., are included. So, what is made comprehensive is the consideration for sale. To adopt the other interpretation would be straining the language a bit too much. If so, could a tax collected by a dealer come within the meaning of consideration for sale?

6. It has been pointed out by us in Deputy Commissioner of Commercial Taxes, Kakinada Division v. Bujranga Jute Mills (T.R.C 131/1953) and by the Bench of the Madras High Court in Deputy Commissioner of Commercial Taxes, Coimbatore v. Krishnaswamy that the dealer collects tax as an agent on behalf of the taxing authority and therefore it could not be subject to taxation. While conceding this position to be correct, what is argued by the Advocate-General is that by deleting Sec. 8(B) and S. 8-(C) from the Statute Book, the power given to a registered dealer to collect the tax was withdrawn.

7. To appreciate this contention, it is necessary to refer to S. 8(B) which is in the following words:—

“S. 8-B(1). No person who is not a registered dealer shall collect any amount by way of tax under this Act, nor shall a registered dealer make any such collection except in accordance with such conditions and restrictions, if any, as may be prescribed:

Provided that the State Government may exempt persons who are not registered dealers from the provisions of this sub-section until such date, not being later than the 1st day of April 1948, as the State Government may direct.

(2) Every person who has collected any amount by way of tax under this Act, on or after the 1st day of April 1947, shall pay over to the State Government within such time and in such manner as may be prescribed, all amounts so collected by him if they are in excess of the tax, if any, paid by him for the period during which the collections were made; and, in default of such payment, the amounts may be recovered as if they were arrears of land revenue.”

8. It is argued that it is by virtue of S. 8-B(1) that a dealer is entitled to collect tax under the Act from the purchaser, and S. 8-B(2) contemplates that liability of the registered dealer to pay to the State the tax collected by him and that the moment the privilege granted under S. 8-B(1) is withdrawn the liability under S. 8-B(2) ceases. By reason of the omission of these two sub-sections any collection made by the dealer will be unauthorised and therefore it will form part of the turnover, as evident from Batta Company v. Board of Revenue, West Bengal. We do not think we can accede to this proposition. It is clear from Sec. 8-B(1) that it does not confer in specific terms authority on the dealer to collect the tax. It is only by implication that this power can be gathered. It contains express prohibitions in respect of matters contained therein. The positive authority in this behalf is given by the Turnover and Assessment Rules. Rule 5-A(7) of these Rules runs thus:—

“A Registered dealer may collect amounts by way of tax or taxes under the Act subject to the following conditions:—

(i) He shall not collect any amount or amounts by way of tax or taxes under the Act at a rate or rates exceeding the rate or rates specified in Sec. 3 or 5 or notified under Sec. 6(1).

(ii) He shall pay in full the amount or amounts collected by him by way of tax or taxes to the State Government on or before the 30th April of the year succeeding that in which such collection is made”.

9. Thus, this rule contains a provision authorising a registered dealer to collect tax subject to the conditions mentioned therein and also imposes a liability on him to pay in full the amount so collected by him. This rule performs the same function as Sec. 8-B(1) of the Act in regard, to the right of a dealer to collect the tax on the sales effected by him and the repeal of that sub-section does not, in our opinion, affect his rights in any way. Despite the disappearance of Sec. 8-B(2) the liability of the dealer to make over the payment to Government still continues under sub-rule 7(2). Sub-rules 8 and 9 proceed on the footing that the registered dealer retains the right to collect the tax and is under an obligation to pay it in full to the Government.

Rule 8 Says:

“The assessing authority may call for and examine the accounts of the registered dealer for the purpose of satisfying himself that the dealer has paid in full the amount or amounts collected by him by way of tax or taxes, as required by condition (ii) in sub-rule (7):

Provided that this power shall be exercised before the expiry of two years next succeeding that in which the collections were made.

(9) If the assessing authority is satisfied that any amount or amounts collected by the dealer by way of tax or taxes have not been paid by him to the State Government in any year as required by condition (ii) in sub-rule (7) the assessing authority shall issue a notice to the dealer in Form B-2 specifying therein the total sum so withheld by the dealer and the dealer shall pay such sum at the time and in the manner specified therein.”

10. Before it can be said that the whole tax structure which has been in vogue for several years has been altered something more is necessary than the mere omission of a provision in the Act which performs the same function by implication as the rules extracted above. Further, Form A prescribed for the return of turnover contains two columns, 10 and 11, one for net turnover liable to be taxed and the other for the amount actually collected by way of tax or taxes and it is still in force. So long as it is there, the dealer has to follow this form. Under this form he has to show the amount collected by him by way of sales-tax and which he has to make over to the Government.

11. It was then argued by the Advocate-General that by repealing Sec. 8-B the Legislature must be understood to have repealed the rules mentioned supra because when the main section under the authority of which the rules are framed is deleted, the rules must also be deemed to have been repealed. We do not think we can give effect to this contention. The rules extracted above were not issued under Sec. 8 of the Act. The rule-making authority is derived from Sec. 19 and it is to carry out the purposes mentioned in Sec. 3 sub-sections (4) and (5), that the rules have been framed.

12. Sec. 3 sub-sections 4 and 5 read thus:—

Sec. 3(4) “for the purposes of this section and the other provisions of this Act, turnover shall be determined in accordance with such rules as may be prescribed;

Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly.

(5) The taxes under sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed.”

13. It is thus clear that it is to carry out the intendment of Sub-rules (4) and (5) that the rules came into existence. Their existence is de hors Section 8-B(1), and consequently the result contended for by the Advocate-General does not follow.

14. It was next maintained by the Advocate-General that since these rules are repugnant to Section 2(1) of the Act and both cannot stand together, a repeal must be inferred. To support this argument he called in aid some passages from “Maxwell on Interpretation of Statutes” and ‘Craies on Statute Law’. At page 160 of ‘Maxwell on Interpretation of Statutes’ (10th edition) the following passage occurs:

“An author must be supposed to be consistent with himself, and, therefore, if in one place he has expressed his mind clearly, it ought to be presumed that he is still of the same mind in another place, unless it clearly appears that he has changed it. In this respect, the work of the legislature is treated in the same manner as that of any other author, and the language of every enactment must be construed as far as possible in accordance with the terms of every other statute which it does not in express terms modify or repeal. The law, therefore, will not allow the revocation or alteration of statute by construction when the words may be capable of proper operation without it. It cannot be assumed that Parliament has given with one hand what it has taken away with another. But it is impossible to construe absolute contradictions. Consequently, if the provisions of a later Act are so inconsistent with, or repugnant to, those of an earlier Act that the two cannot stand together, the earlier stands impliedly repealed by the later.”

15. Again at page 164 it is stated:

“When the later of two general enactments is couched in negative terms, it is difficult to avoid the inference that the earlier one is impliedly repealed by it. For instance, where a general Act exempted from licensing regulations the sale of a certain kind of beer and a subsequent one enacted that “no beer” should be sold without a licence it would obviously be impossible to save the former from the repeal implied in the later.”

16. These passages do not really advance the case of the petitioner. It is clear from these statements that consistency and not repugnancy must be presumed as far as possible and each enactment or a provision in it should be read so as to reconcile it with other provisions of the enactment. It is only in cases where it is not possible to adopt such construction and the language of one section is so inconsistent with or repugnant to those of the other and the two cannot stand together, the earlier stands impliedly repealed by the later. The rule is stated in similar terms in ‘Craies on Statute Law’ at page 337:—

“Where two Acts are inconsistent or repugnant, the later will be read as having impliedly repealed the earlier. The Court leans against implying a repeal, “unless two Acts are so plainly repugnant to each other that effect cannot be given to both at the same time, a repeal will not be implied.”

17. This passage has very succinctly summed up the principle applicable to implied repeals. Such a situation does not arise here.

18. It is only if it is assumed that the turnover as denned under the amended section is comprehensive enough to take in sales-tax, the question of repugnancy between that and rules 7 and 8 will arise. As already stated, courts should as far as possible, read two provisions of an enactment so as to harmonise them and not readily read repugnancy between them. Instead of assuming repugnancy between the definition and the rules, the former must be read in the light of the latter.

19. It was then contended that the Legislature must be presumed to have intended that turnover should include tax collected also. In considering whether the content of the definition could include tax, it is well to remember that under the Sales Tax Act tax is levied on the occasion of sale. It has been pointed out both in Madras Province v. Boddu Pydanna & Sons and by the Supreme Court in the State of Bombay v. United Motors (India) Ltd. that the liability to tax under the Sales Tax Act arises only on the occasion of sale which means that only after the sale is completed the tax would be levied. How then can tax be levied on a tax collected on the occasion of sale? The interpretation suggested for the petitioner is opposed to the very concept of tax on sales. The tax-structure should conform to the scheme of the Act which only provides for levy of tax on sale of goods as the very conception underlying the Act implies. To accept the connotation given to it by the Advocate-General would be to unduly enlarge the scope of the definition of turnover.

20. We must also observe that, if, as argued by the Advocate-General, the authority given to the dealer to collect the tax from the purchaser was withdrawn by the omission of Sec. 8-B (1), there is no need for including tax collected by the dealer within the definition of turnover. The question of levying tax on the tax collected by the dealer would only arise if he is permitted to collect the tax.

21. In our view, the definition of “turnover” as amended by the Andhra State Legislature is not comprehensive enough to include sales-tax collected by the dealer. It follows that the conclusion of the Appellate Tribunal is unassailable. In this view of the matter, it is not necessary for us to go into the larger question relating to the competence of the Provincial Legislature to define turnover embracing sales tax while legislating under the aforementioned entry.

22. In the result, the petition is dismissed with costs. Advocate's fee is fixed at Rs. 250/-.

23. (In the view taken above, our judgment in T.R.C 131/53 is correct and does not require re-consideration or review.)

T.A.B

24. Petition dismissed.

State Of Madras v. Tungabhadra Industries Ltd.

Structured Summary of the Opinion (Chandra Reddy, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Advocate-General / Government (Petitioner)

Assessee / Appellate Tribunal (Respondent)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

State Of Madras v. Tungabhadra Industries Ltd.

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