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TMI Blog1965 (3) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... m by way of sales tax shall be deemed to have formed part of his turnover. It also declared that all assessments and collections made, and all judgments, decrees or orders pronounced by any tribunal or court on the basis that amounts collected by a dealer by way of tax under the Madras General Sales Tax Act before the 1st of April, 1954, formed part of the turnover of the dealer, had been validly made or passed, and any finding recorded by any officer, tribunal or court to a contrary effect shall be void and of no effect. These provisions accordingly validated the assessments and collections made on the footing that the sales tax collected by the dealer was also part of his turnover and could be subjected to sales tax. That was in respect of such orders, assessments and collections made prior to the 1st of April, 1954. Another provision stated that the validation or the declaration referred to shall not authorise the inclusion of the tax amounts collected by the dealer in his turnover on and after the 1st of April, 1954. By virtue of the above decision and the provisions of this Act, the sales tax collected by the dealer was no longer being included in his taxable turnover on and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d tax." The 1939 Act contained only definitions of "sale" and "turnover" and carried no separate definition of "sale price". They observe [1961] 12 S.T.C. 476 at p. 483.: "On the contrary, the expression 'turnover' means the aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration, and when a sale attracts purchase tax and the tax is passed on to the consumer, what the buyer has to pay for the goods includes the tax as well and the aggregate amount so paid would fall within the definition of turnover." After referring to certain English cases, they say: "There is nothing in those provisions which would indicate that when the dealer collects any amount by way of tax, that cannot be part of the sale price. So far as the purchaser is concerned, he pays for the goods what the seller demands, viz., the price, even though it may include tax. That is the whole consideration for the sale and 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." They then dealt with the assessment and the position made in Krishna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce." In another decision of the Supreme Court, George Oakes Private Ltd. and Others v. State of Madras[1962] 13 S.T.C. 98., the further question arose whether when the tax collected by the dealer was included in his turnover and subjected to tax, the rate of tax should be the general rate of 3 pies in the rupee, or the rate applicable in the case of special classes of goods bearing an additional tax should also be applied to that part of the turnover represented by the tax collections in respect of those special classes of goods. To amplify the above, the rate of tax in respect of motor vehicles and such classes of goods was 6 pies in the rupee. The assessee had collected tax at this rate and by reason of Act XVII of 1954, such tax collections were included in the turnover and brought to tax. The assessee's contention was, firstly, that the tax could not be included in the turnover. That point stood decided against the assessee in Messrs George Oakes (Private) Limited v. State of Madras[1961] 12 S.T.C. 476. The further question whether the tax collections at the special rate should also suffer tax at the special rate after being included in the turnover was also decided against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions but maintained them in the same form as in the repealed Act, the normal presumption should be that the Legislature accepted that judicial interpretation as valid in the context of the new Act as well. It is claimed accordingly that unless there had been a proper provision embodied in Act I of 1959, which resulted in making the tax collections part of the sale price or the turnover, which no doubt it is competent for the Legislature to do, it cannot follow merely on the decisions of the Supreme Court in Messrs George Oakes (Private) Limited v. State of Madras[1961] 12 S.T.C. 476. and George Oakes (Private) Ltd. and Others v. State of Madras[1962] 13 S.T.C. 98. that there has been a change in the law in so far as Act I of 1959 is concerned. On behalf of the State, the counter affidavit disputes the maintainability of the writ petitions on the ground that they are directed against a departmental circular and not against any act done in pursuance of the statute. But this objection is however not valid, for it is not in dispute that the appropriate assessing authorities have issued notices purporting to be under the Act proposing to levy tax, including the tax collections i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 of Act I of 1959, the expression "turnover" has been broadly defined in the Act to include all collections, the purpose for which Act XVII of 1954 was enacted was to nullify the decision in Krishnaswami Mudaliar's case[1954] 5 S.T.C. 88. That did not impose a ban for all time upon the assessing authority to include the tax in the assessable turnover. It is claimed that the basis of the decision in Krishnaswami Mudaliar's case[1954] 5 S.T.C. 88. has been undermined. It is also pointed out that it is not a proper rule of construction that when a decision has been found to be erroneous by a later decision, the mere circumstance that the Legislature re-enacted the Act should result in the incongruous situation that a mistaken interpretation is to be accepted and adhered to even subsequently. In an early case of the Patna High Court in Kaniram Janki Das v. State of Bihar[1952] 3 S.T.C. 230., it was held that the amount of sales tax realised by a dealer could be included in his taxable turnover. In that context, the principal point decided by the learned Judges of the Patna High Court was that the aggregate amount of sale prices received by the dealer would constitute his gross turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivery of the goods. It was contended by the State that by reason of this amended definition, the foundation of the decision in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar[1954] 5 S.T.C. 88. had been taken away, so that the turnover as defined by the amendment could include the collections of sales tax. It was also claimed by the Andhra State that section 8-B of the Act had been deleted from the statute book, so that the power given to a registered dealer to collect the tax had been withdrawn. It was the contention of the State that by reason of these features, the tax collected by the dealer as part of his sale transaction could no longer be characterised as anything apart from the price he charged for the goods and that therefore the tax, if collected by the dealer, would form part of the consideration of the sale and was liable to be included in the turnover. This contention was not accepted by the learned Judges, who pointed out that the relevant Turnover and Assessment Rules contained the necessary provision authorising a registered dealer to collect tax, subject to certain conditions, and also imposed upon him a liability to pay the amount so collected b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislature puts a construction on an Act, a subsequent cognate enactment in the same terms would prima facie be understood in the same terms." Again at page 303, "It must be taken for granted that the legislature is acquainted with the actual state of the law and the practice of the courts. Therefore, when the words of an old statute are either incorporated in, or by reference made part of, a new statute, this is understood to be done with the object of adopting any legal interpretation which has been put on them by the courts, though not necessarily all the reasons for that interpretation. So, the same words appearing in a subsequent Act in pari materia, the presumption arises that they are used in the meaning which has been judicially put on them, and that unless there is something to rebut that presumption, the new statute is to be construed as the old one was. The presumption may however be displaced in special circumstances, for example, where intervening legislation in pari materia would make it unjust or absurd to adopt the interpretation applied to the earlier Act in construing the later one." Craies "Statute Law" (5th Edn.) at page 133, also says: "If Acts are framed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e form in which they did and it is only reasonable to suppose that from their knowledge of the construction which the Judges had put upon the section in the earlier Act, they could tell what construction the Judges would be likely to put upon a similar section in the Act which they were passing........." A like view was expressed in another decision of the Queen's Bench Division in Foskett v. Kaufman(1885) 16 Q.B.D. 279., where the following observations occur, at page 286: "If we had only to deal with the Reform Act, I should say that the qualifications in these two sections are different and distinct, but in the case of Bartlett v. Gibbs5 M. & G. 81., it was decided that on the true construction of that Act of Parliament they are two distinct qualifications. That decision has been acted upon ever since, and Parliament, with full knowledge that that was the construction put upon the Reform Act, has not altered anything with regard to it. It would therefore be contrary to every rule of conduct of the courts after a case had been decided for so long a time, and after the matter had been subsequently before Parliament, and yet no alteration made therein, if this Court were to alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the interpretation contained in the 1926 decision, and it was urged that when that interpretation had been acted upon for such a longe time, it should not have been overruled. It was in those circumstances that the question came to be considered and the above observation made. Mr. Viswanathan contends that in the decisions of the Supreme Court to which reference has been made, it has been clearly stated that the inclusion of the sales tax in the turnover is not beyond legislative competence and that therefore the decision of the Madras High Court in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar(3), having been overruled, it is no longer incumbent upon the courts to adopt the construction that was given in that decision in interpreting similar provisions in Act I of 1959. This argument is to my mind unsound, for neither expressly nor by implication was the Madras decision overruled. What their Lordships of the Supreme Court have pointed out is only that it lies within the legislative competence of a State Legislature to include in the taxable turnover such tax collections as might be made by the dealer, and they point out that if the Legislature has assumed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1st of April, 1954, the statement of the law made by the High Court and not to include in the turnover of a dealer for the purpose of the assessment collections by way of tax subsequent to the 1st of April, 1954, and it is that statement of policy that finds expression in sub-clause (2) of section 3 of Act XVII of 1954. In effect, this provision prohibits the assessing authorities from including in the turnover of a dealer any amounts collected by him after the 1st of April, 1954. While the State Legislature is undoubtedly legislatively competent to include sales tax collections of a dealer in his assessable turnover, it deliberately refrained from assuming that power; that to my mind is the effect of section 3(2) of the Act of 1954. It is significant to note that though the principal Act, that is, Madras Act IX of 1939, was repealed and re-enacted as Madras Act I of 1959, Madras Act XVII of 1954 still stands on the statute book. Mr. V.K. Thiruvenkatachari argues that in the light of this feature and by reason of section 18 of the Madras General Clauses Act, Madras Act XVII of 1954 continues to Control Act I of 1959. Under the General Clauses Act, where an Act has been repealed a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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