1961 (11) TMI 46 - SC - VAT and Sales Tax

Whether the additional tax can be included in the turnover relating to the special goods and the resultant sum taxed at 6 pies for every rupee? Held that - Appeal dismissed. What the Deputy Commercial Tax Officer has ordered, and the High Court was right in setting aside the order of the Sales Tax Appellate Tribunal, and restoring the order of the Deputy Commercial Tax Officer. The tradesman pays tax at the rate of 3 pies for every rupee on all the goods and an additional tax of 6 pies on every rupee of the turnover relating to certain classes of goods. But, though he pays tax on the tax charged by him in the price, the tax at different rates goes into different turnovers, and there is no additional tax at 6 pies on those goods on which such tax is not imposed by the Act.

Summary

Issues:
1. Interpretation of the Madras General Sales Tax Act, 1939 regarding the definition of "turnover" and the levy of taxes on dealers.
2. Validity and application of the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954.
3. Whether additional tax can be included in the turnover relating to specific goods and taxed at a higher rate.

Detailed Analysis:
1. The judgment involved the interpretation of the Madras General Sales Tax Act, 1939, specifically focusing on the definition of "turnover" and the levy of taxes on dealers. The Act defined turnover as the aggregate amount for which goods are bought or sold by a dealer. Sales tax was imposed on dealers based on their total turnover at a specified rate. Additionally, an additional tax was levied on the turnover relating to certain classes of goods at a higher rate. The issue arose when the tax collected by dealers was included in the total turnover, leading to a dispute regarding the calculation of taxes on the tax amount.

2. The Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954, was enacted to address the inclusion of tax amounts in the turnover. Section 2 of the Act deemed amounts collected by dealers as part of their turnover for sales made before a specified date. This Act aimed to validate assessments and clarify the treatment of tax amounts collected by dealers. The validity and constitutionality of this Act were upheld in previous judgments, providing a legal framework for the taxation of turnover inclusive of tax amounts.

3. The central issue in the judgment revolved around whether the additional tax could be included in the turnover related to specific goods and taxed at a higher rate. The court analyzed the scheme of the Act, emphasizing that the additional tax was applicable to the turnover relating to certain classes of goods. It was determined that the tax on the tax amount included in the turnover was permissible, as the turnover for the additional tax encompassed all sale prices, including the tax. The court concluded that the tax calculation on different goods with varying tax rates ensured that the dealer paid taxes at the prescribed rates without imposing an additional tax on goods not subject to such taxation.

In conclusion, the Supreme Court upheld the decision to include the additional tax in the turnover relating to specific goods and affirmed the calculation of taxes based on the Act's provisions. The appeals challenging the tax treatment were dismissed, and the court made no order regarding costs in the circumstances of the cases.