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1975 (5) TMI 75 - SC - VAT and Sales TaxWhether the sales tax collected by these assessees under section 21-A of the Madras Prohibition Act 1937 can be treated as part of their total turnover? Held that - Appeal dismissed. It is clear from section 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 section 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. 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 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 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.
Issues:
1. Whether the sales tax collected by the assessees under section 21-A of the Madras Prohibition Act, 1937, can be treated as part of their total turnover under the Madras General Sales Tax Act, 1959. The Supreme Court heard twelve appeals arising from a common judgment of the Madras High Court regarding writ petitions filed by respondents challenging orders of the assessing authority under the Madras General Sales Tax Act, 1959, proposing to redetermine the taxable turnover by including the sale price of foreign liquor. The High Court directed the sales tax authorities not to include the tax paid under section 21-A of the Madras Prohibition Act, 1937, in the assessable turnover. The appeals involved three different assessees and related to various assessment years. The assessees were dealers in foreign liquor among other goods and were assessed to sales tax under section 3(1) of the Madras General Sales Tax Act, 1959, which defines turnover and total turnover. The question was whether the sales tax collected under section 21-A of the Prohibition Act should be considered part of the total turnover. The appellants argued that the amounts collected by the assessees were part of their turnover and thus taxable under the Sales Tax Act, citing previous court decisions. The court referred to past judgments, including George Oakes (P.) Ltd. v. State of Madras and State of Kerala v. Ramaswami Iyer & Sons, which held that the aggregate amount paid by the purchaser, including tax, should be considered turnover. However, the court distinguished the present case by highlighting that under section 21-A of the Prohibition Act, the tax collected by the seller is on the purchaser and not on the seller. The seller acts as a collector for the government and is obligated to pass on the tax to the government. The court emphasized that under the Sales Tax Act, the dealer has no statutory duty to collect sales tax from customers, and amounts collected under a statutory obligation cannot be part of the taxable turnover. Therefore, the court dismissed the appeals, stating that the amounts collected by the assessees under the statutory obligation were not part of their taxable turnover under the Sales Tax Act. In conclusion, the Supreme Court ruled that the sales tax collected by the assessees under section 21-A of the Prohibition Act could not be considered part of their taxable turnover under the Madras General Sales Tax Act, 1959. The court emphasized the distinction between the obligations of the seller as a collector of tax for the government under the Prohibition Act and the absence of a statutory duty for the dealer to collect sales tax from customers under the Sales Tax Act. The appeals were dismissed with costs.
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