1968 (10) TMI 92 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity and vires of section 11 of the Andhra Pradesh General Sales Tax Act, 1957, as amended by Act 5 of 1968.
2. Whether the amendment alters the basis of the decision in Irri Veera Raju's case.
3. The legality of imposing tax on agents when principals are not liable.
4. Whether the amendment contravenes the provisions of the Indian Contract Act.
5. Constitutionality of the amended provision under Articles 14 and 19(1)(g) of the Constitution.
6. Validity of the legislative session due to the Governor's inability to address the Assembly personally.

Detailed Analysis:

1. Constitutional Validity and Vires of Section 11:
The batch of writ petitions challenges the constitutional validity and vires of section 11 of the Andhra Pradesh General Sales Tax Act, 1957, as amended by Act 5 of 1968. The amendment aimed to make agents liable for the aggregate turnover of several principals exceeding Rs. 10,000, irrespective of each principal's turnover.

2. Basis of Decision in Irri Veera Raju's Case:
The petitioners contended that the amendment did not alter the basis of the decision in Irri Veera Raju's case, where the agent's liability was co-extensive with the principal's liability. The court held that the agent's liability remains representative, but the amendment made the agent liable for the aggregate turnover of multiple principals, irrespective of individual turnovers.

3. Legality of Imposing Tax on Agents:
The court examined whether it is permissible to tax agents when the principals are not liable. It was argued that the amendment treats agents as if they own the goods, which contradicts the representative nature of their liability. The court concluded that the agent's liability continues to be based on representation, but the amendment sought to make the agent liable for the cumulative turnover of all principals.

4. Contravention of the Indian Contract Act:
The petitioners argued that the amendment contravenes sections 217 to 233 of the Contract Act by denying agents the right to reimburse themselves from the collections. The court found that the amendment limits the agent's right to reimbursement to the extent of the principal's liability, which could conflict with the Contract Act.

5. Constitutionality Under Articles 14 and 19(1)(g):
The amendment was challenged under Article 14 for discriminating against agent-dealers and under Article 19(1)(g) for imposing unreasonable restrictions on agents. The court held that the amendment discriminates against agents by making them liable for turnovers less than Rs. 10,000, while principals are exempt. This was deemed discriminatory and violative of Article 14. However, the court did not find it necessary to address the Article 19(1)(g) argument in detail.

6. Validity of Legislative Session:
The validity of the legislative session was questioned because the Governor, due to illness, did not personally address the Assembly. The court examined whether the Governor's address is mandatory and concluded that substantial compliance with Article 176 is sufficient. The court noted that the address by the Governor was read by the Speaker, which constituted substantial compliance.

Conclusion:
The court allowed the writ petitions, declaring the amended section 11 discriminatory and violative of Article 14. The agent's liability remains co-extensive with the principal's liability. The court directed that assessments based on the amended section 11 be set aside and fresh assessments be made in accordance with the judgment. The petitioners were awarded costs.