1955 (3) TMI 16 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of section 2(i) of the Madras General Sales Tax Act as amended by the Andhra State Legislature.
2. Inclusion of tax collected by the dealer in the definition of "turnover".
3. Validity of the Sales Tax Appellate Tribunal's decision.
4. Impact of the repeal of sections 8-B and 8-C on the dealer's authority to collect tax.
5. Competence of the Provincial Legislature to define "turnover" to include sales tax.

Issue-wise Detailed Analysis:

1. Interpretation of section 2(i) of the Madras General Sales Tax Act as amended by the Andhra State Legislature:
The case revolves around the interpretation of section 2(i) of the Madras General Sales Tax Act, which was amended by the Andhra State Legislature in May 1954. Before the amendment, section 2(i) defined "turnover" as "the aggregate amount for which goods are either bought by or sold by a dealer." The amendment redefined "turnover" to mean "the total amount set out in the bill of sale... 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."

2. Inclusion of tax collected by the dealer in the definition of "turnover":
The Sales Tax Department argued that the tax collected by the dealer should be included in the turnover. However, the court found that the phrase "whatever be the description, name or object thereof" did not extend to the tax collected by the dealer. The court stated, "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." Thus, the court concluded that the tax collected by a dealer does not form part of the consideration for sale and should not be included in the turnover.

3. Validity of the Sales Tax Appellate Tribunal's decision:
The Sales Tax Appellate Tribunal had ruled in favor of the assessee, excluding the tax collected from the turnover. The court upheld this decision, stating that the tax collected by the dealer is done so as an agent on behalf of the taxing authority and therefore could not be subject to taxation. The court cited previous judgments, including Deputy Commissioner of Commercial Taxes, Coimbatore v. Krishnaswamy and Deputy Commissioner of Commercial Taxes, Kakinada Division v. Bujranga Jute Mills Ltd., which supported this interpretation.

4. Impact of the repeal of sections 8-B and 8-C on the dealer's authority to collect tax:
The Advocate-General argued that the repeal of sections 8-B and 8-C removed the dealer's authority to collect tax, making any collection unauthorized and part of the turnover. The court disagreed, stating that section 8-B(1) did not confer explicit authority to collect tax but contained prohibitions. The court noted that Rule 5-A(7) of the Turnover and Assessment Rules still authorized registered dealers to collect tax, thus maintaining their right to do so despite the repeal of section 8-B.

5. Competence of the Provincial Legislature to define "turnover" to include sales tax:
The court did not find it necessary to address the broader question of the Provincial Legislature's competence to define "turnover" to include sales tax, as it had already concluded that the amended definition did not encompass the tax collected by the dealer. The court stated, "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."

Conclusion:
The court dismissed the revision petition, upholding the decision of the Sales Tax Appellate Tribunal. The court concluded that the tax collected by the dealer does not form part of the turnover and should not be subject to additional taxation. The court also clarified that the repeal of sections 8-B and 8-C did not affect the dealer's authority to collect tax, as this authority was maintained under the Turnover and Assessment Rules. The petition was dismissed with costs, and the Advocate's fee was fixed at Rs. 250.