Messrs. Srikanyakapa... v. State Of Madras

(Delivered by Rajagopalan, J.)

T.R.C No. 205 of 1953:—The assassee was a registered dealer. He was also a registered manufacturer of groundnut oil, registered under R. 18(1) of the Madras General Sales. Tax Turnover and Assessment Rules, 1939. R. 4(2) of the Turnover and Assessment Rules prescribed that in the case of groundnut, “the gross turnover of a dealer for purposes of these rules shall be amount for which the goods are bought by the dealer.” The assessee was assessed to tax on his turnover of the purchases of groundnut effected by him during January 1952. The assessee claimed that the turnover was not taxable as the purchases had been made by him from persons who had themselves grown the groundnut their lands. There was no occasion to verify if that claim was correct as a fact. The Department and the Tribunal negatived the claim of the assessee on the ground, that what was excluded from the taxable turnover by S. 2(1) of the Sales-Tax Act was only the proceeds of sale of agricultural produce grown by the dealer himself. The Tribunal held:

“What the definition accordingly contemplates is that where a dealer who carries on business of buying or selling goods, also sells his own agricultural produce grown by himself or on any land in which he has an interest, the proceeds of the sale of that agricultural produce is not liable to be included in the dealer's general turnover.”

It is the correctness of that decision that has been challenged by the petitioner in this petition before us.

Section 2(1) of the General Sales-Tax Act runs:

“‘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.”

It is needless to cite authority for the well settled principle of construction of provisions of a fiscal statute, that where there is any ambiguity in the provision, the ambiguity should be resolved in favour of the tax payer and not in favour of the State. At the same time, the Court cannot look for any ambiguity if there is none.

The Tribunal held that the expression ‘his turnover’ in the proviso to S. 2(1) of the Act meant the dealers's turnover. The correctness of that interpretation was not challenged by the learned Counsel for the petitioner. The construction appears to us to be the only correct one. It was the dealer's turnover for purposes of assessment that had to be defined, and “his turnover” in that context can only refer to the dealer's turnover.

For easy reference, the portion of S. 2(1) relevant for our present purpose can be set out thus:

“Turnover' means the aggregate amount for which goods are either bought or sold by a dealer……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……shall be excluded from his turnover.”

The pronouns “himself” “he” and “his” in the proviso to S. 2(1) obviously all refer to “a person” as mentioned in the proviso to S. 2(1), i.e, the person who sells the produce grown, by himself or grown on any land in which he has an interest. We have already pointed out that the pronoun “his” in the expression “his turnover can refer only to the dealer. That by itself should be sufficient to hold that all the three pronouns “himself” “he” and “his” in the proviso to S. 2(1) also refer to the dealer mentioned earlier in S. 2(1).

The proviso to S. 3, the main charging section in the Act runs:

“(1) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed, shall be taxed;

(2) Where a dealer has been taxed in respect of purchase of any goods in accordance with the rules referred to in clause 1 of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him.”

Learned Counsel for the petitioner urged that the scheme of the Act, as explained by the proviso referred to above, was to tax either the sale or the purchase, the purchase and sale being different aspects of the same transaction. On that basis, he further urged that if the sale aspect of a particular transaction was not taxable, neither was the purchase taxable. In our opinion, that does not appear to be the true scope of S. 2(1) of the Act. “Turnover” as defined in S. 2(1) does not include every sale or every purchase. It includes only sales and purchases by dealers, dealers as defined by the Act. “Sales by a producer” (by that expression, in the rest of this judgment, we shall mean, a person who grows agricultural or horticultural produce on his own land or on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise) are not within scope of S. 2(1), unless the producer is also a dealer, A producer who is not a dealer is obviously not within the scope of 5. 2(1). Let us take the case of a sale of groundut by a producer who is not a dealer. There can be no question of the sellers “turnover” in such a case, because the seller is not a dealer. There can therefore, be no question of any need for a statutory exclusion from a turnover, the seller's turnover, where there is no turnover, at all, that is, a turnover to be taken into account for purposes of bringing it within the charging section, S. 3. It is true that it is not the seller's turnover that is taxable in the case of groundnut. But, while there is no seller's turnover, there is a turnover of purchase in the case of the dealer-cum-buyer. That is what is made taxable by the provisions of the statute and the rules framed thereunder.

Section 2(1) provides both for the purchase turnover and sale-turnover. The statutory exclusion of proceeds of sale by a producer is intelligible only if the sales are by the producer as a dealer. But for the exclusion of these sales, sales by a dealer, whether he had bought the goods he had sold, or whether they were of the produce of his own land, would be included in the turnover that is to be taxed. When the dealer sells his own produce, there is certainly no element of purchase of that produce. That explains the absence of any specific reference to a turnover in relation to purchase, analogous to “proceeds of a sale” in the proviso to S. 2(1). As we have already pointed out, the definition of turnover and a purchase turnover, as we understand S. 2(1) it means;

“‘Turnover’ means the aggregate amount for which goods are either bought or sold by a dealer………provided that the proceeds of sale by such a dealer of agricultural or horticultural produce grown by himself or on any land in which he has interest………shall be excluded from such a dealer's turnover.”

But the learned Counsel for the petitioner wants us to construe the section as

“Turnover' means the aggregate amount for which goods are either bought or sold by a dealer……provided that the proceeds of the sale by any person to such a dealer or agricultural or horticultural produce grown by himself or grown on any land in which he has an interest……shall be excluded from such dealer's turnover.”

It should be sufficient to set out these two interpretations in juxtaposition to realise that it is the earlier construction that should prevail.

Learned Counsel for the petitioner urged that the scheme of taxation underlying the Act was to exempt from taxation the first sale of agricultural produce and with it this first purchase. It is not, of course, permissible to refer to any policy underlying an Act to construe the provisions of a specific section of a fiscal enactment. But, even on the basis of the alleged policy underlying the scheme of the Act, we are unable to accept the interpretation, the learned Counsel for the petitioner seeks to place on the proviso to S. 2(1). We have already pointed that a producer, who is not a dealer, will not be liable to tax at all on the agricultural produce sold to the dealer. There was, therefore, no specific need to provide for any such exclusion. A producer who is himself a dealer would have been liable to be taxed but for the specific statutory exclusion, and that was provided. Both cover sales. Purchases by a dealer were not specifically within the ambit and were not provided for. That it appears to us, is consistent with the economic principle that the ultimate incidence of the sales tax is on the consumer. The dealer, who on purchase, pays sales tax on the purchase turnover is expected to pass, and in truth he eventually passes on the tax to the ultimate consumer, not necessarily as a tax, but possibly as part of the sale price. Thus, a producer-seller whether he be a producer pure and simple, or whether he be producer-cum-dealer, is not really affected by the tax levied on the purchase turnover of an article like groundnut.

The view taken by the Appellate Tribunal was right. The petition is dismissed with costs Rs.-250.

T.R.C Nos., 206 to 209 and 303 of 1953: The assessee in these cases is the same as the assessee whose petition was dismissed in T.R.C 205 of 1953. That decision covers the question raised in these petitions also, and these petitions are dismissed but, without costs.

C.M.P Nos. 7170 to 7174 of 1953: These petitions are dismissed but without costs.

T.R.C Nos. 310 to 314 of 1953; The assessee is the same in all these petitions. The question raised in these petitions is covered by our decision in T.R.C 205 of 1953. These petitions are dismissed with costs in one T.R.C 310 of 1953, Rs. 250.

T.R.C Nos. 299, 521, 302, and 307 of 1953: The assessees in all these petitions is the same, and the question raised in these petitions is covered by our decision in T.R.C No. 205 of 1953. These petitions are dismisssed with costs in One T.R.C No. 299 of 1953-Rs. 250.

T.R.G Nos. 297, 298 and 300 of 1953: The assessee in all these petitions is the same, and the question raised in these petitions is covered by our decision in T.R.C No. 205 of 1953. These petitions are dismissed with costs in one T.R.C No. 297 of 1953-Rs. 250.

T.R.C No. 308 of 1953: The question raised in this petition is covered by our decision in T.R.C No. 205 of 1953. The assessment for the whole year was in issue in this case. This petition is dismissed with costs, Rs. 250.

T.R.C No. 309 of 1953; The question at issue in this petition is covered by our decision in T.R.C No. 205 of 1953. It was only the assessment for one month that was in issue in this petition. The petition is dismissed with costs, Rs. 125.

T.R.C Nos. 305 and of 306 1953: The assessee is the same in these two petitions. The question at issue is covered by our decision in T.R.C No. 205 of 1953 and the petitions are dismissed with coats in one T.R.C No. 305 of 1953-Rs. 250.

V.C.S