1965 (3) TMI 62 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of sales tax collected by a dealer in the turnover.
2. Constitutional validity of Madras Act XVII of 1954.
3. Legislative competence of the State Legislature to include sales tax in the turnover.
4. Interpretation of the provisions of the Madras General Sales Tax Act, 1939, and Act I of 1959.
5. Effect of judicial interpretation on subsequent legislation.

Detailed Analysis:

1. Inclusion of Sales Tax Collected by a Dealer in the Turnover:
The judgment refers to the case of *The Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88*, where it was held that under the Madras General Sales Tax Act, 1939, the amount collected by a registered dealer from the purchaser by way of sales tax and paid over to the Government should not be included in the turnover of the registered dealer as part of the sale price of the goods sold. This decision was rendered on January 7, 1954. The Madras Legislature enacted Madras Act XVII of 1954 to validate certain assessments and collections made under the Madras General Sales Tax Act, 1939, which included amounts collected by way of sales tax as part of the dealer's turnover for sales before April 1, 1954. However, it explicitly stated that such inclusion would not apply to sales on or after April 1, 1954.

2. Constitutional Validity of Madras Act XVII of 1954:
The Supreme Court in *Messrs George Oakes Private Ltd. v. State of Madras [1961] 12 S.T.C. 476* upheld the constitutional validity of Madras Act XVII of 1954. The Court observed that the State Legislature could validly include amounts collected by way of tax as part of the turnover of the dealer. The Court rejected the contention that the State Legislature could not validly make a law that would include the amount collected by way of tax as part of the turnover of the dealer.

3. Legislative Competence of the State Legislature to Include Sales Tax in the Turnover:
The Supreme Court held that neither the Madras General Sales Tax Act of 1939 nor the impugned Act, Act XVII of 1954, proceeded on any "immutable distinction between sale price and tax." The expression 'turnover' was defined as the aggregate amount for which goods are bought or sold, including the tax passed on to the consumer. The Court stated, "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."

4. Interpretation of the Provisions of the Madras General Sales Tax Act, 1939, and Act I of 1959:
The petitioners contended that the decisions of the Supreme Court referred to were only authorities in the context of Act XVII of 1954 and did not imply that under the provisions of the Madras General Sales Tax Act, 1959, tax collections could form part of the turnover. The petitioners argued that the judicial interpretation in *Krishnaswami Mudaliar's case [1954] 5 S.T.C. 88* should continue to apply to the provisions of the 1959 Act, as the Legislature did not choose to vary the provisions but maintained them in the same form.

5. Effect of Judicial Interpretation on Subsequent Legislation:
The judgment emphasized that when a Legislature repeals a law and re-enacts the same law using identical words and expressions, the interpretation placed upon such words and expressions should follow the judicial interpretation that prevailed prior to the re-enactment. The Court referred to various legal principles and precedents, including Maxwell on "Interpretation of Statutes," Craies "Statute Law," and Halsbury, which support the view that the Legislature is presumed to adopt the judicial interpretation of the earlier Act when re-enacting it in similar terms.

Conclusion:
The Court concluded that the assessments made or sought to be made by including sales tax collections in the turnover were illegal. The rules were accordingly made absolute, and the writ petitions were allowed. There was no order as to costs in any of the writ petitions. The judgment underscores the principle that legislative intent and judicial interpretation must be considered in the context of both historical and current legislative frameworks.