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TMI Blog1972 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The petitioners were all assessed to tax on their turnovers in respect of purchases and sales of jaggery of several ryot-principals by the concerned Commercial Tax Officers for assessment years ranging from 1964-65 to 1969-70. The monthly returns submitted by the assessees revealed that they collected certain amounts like rusum, kolagaram and "chamber cooli collection " for a part of the year while they collected sales tax for the rest of the year. The assessees claimed exemption from the levy of tax, but the same was disallowed by the assessing authorities. The assessees preferred appeals to the Assistant Commissioner of Commercial Taxes, Hyderabad. The Assistant Commissioner by his common order held that the "chamber cooli collectionsformed part of the taxable turnovers of the assessees and that the inclusion of these amounts by the assessing authority in the taxable turnovers of the assessees was unassailable. He rejected the contention advanced on behalf of the assessees that the sales of jaggery effected by the commission agents on behalf of the ryot-principals cannot be regarded as sales by a dealer in jaggery as the ryot-principals themselves were not carrying on busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected by way of tax. The Tribunal rejected the third contention of the assessees. The assessees have preferred these revision petitions against the said order of the Tribunal. The learned counsel for the assessees assailed the order of the Tribunal on two grounds, namely, (1) that the principals in question are not dealers and the sales of jaggery by those ryot-principals are not sales in the course of their business; and (2) that the petitioners are entitled to the benefit of section 9 of the Andhra Pradesh General Sales Tax (Amendment) Act (9 of 1970), as they did not collect any amount by way of tax. Before we proceed to consider these contentions we would pause to observe that sales tax or turnover tax which is one of the modern methods of indirect taxation is now an important element of national taxation. Sales tax was first introduced in this country for raising the revenues of the State in Madras State in 1939 by the Madras General Sales Tax Act, 1939. The Andhra area of the present State of Andhra Pradesh was then a part of the Madras State. When the Andhra State was carved out in 1953, the Madras General Sales Tax Act, 1939, with all its amendments was adopted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was entitled to only when the amount for which the goods concerned were sold or purchased was included in the turnover of the principals or would have been so included but for an exemption provided under the Act. The licensing scheme in respect of commission agents was dropped by the Amendment Act 16 of 1963 and a new section was inserted in place of section 11. As a result of the amending Act 16 of 1963, commission agents of agriculturistsprincipals were made liable for assessment and collection of tax but their liability was made coextensive with that of the respective principals. Jaggery, which was being taxed at the first point of sale from 1960 to 31st July, 1963, was subjected to multi-point tax from 1st August, 1963, by virtue of the Amendment Act, 1963. The assessing authorities were, however, making assessments of the turnovers of the commission agents in respect of the purchase and sale of jaggery of several principals without giving exemption to principals on turnovers up to Rs. 10,000. The section that was substituted by the amending Act in the place of section 11 of the principal Act read as follows: "The tax or penalty due under this Act, in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this section was again challenged before this court in Konathala Venkata Ramana and Budha Appa Rao v. State of Andhra Pradesh[1969] 24 S.T.C. 367. This court struck down the section as discriminatory in so far as it makes the agent liable for the turnover of principal as if it is agent's turnover irrespective of whether each of the principals is liable or not. As a result of this decision, it became necessary for the Government to refund large sums of money levied and collected from the commission agents, where principal himself was not liable. So to meet this serious situation, the Legislature enacted the Andhra Pradesh General Sales Tax (Amendment) Act (9 of 1970). In place of section 11 which was struck down, the following section was substituted by section 4 of the Amendment Act: "The tax or penalty due under this Act, in respect of a transaction of sale or purchase effected by any agent on behalf of a principal who is a resident of the State shall be assessed or levied and collected from the agent, in every case where such principal would be otherwise liable to pay such tax or penalty in respect of that transaction. Where the agent has paid the tax or penalty in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler shall not be liable to pay any tax under the principal Act, as amended by this Act, in respect of such sale or such part of the turnover relating to such sale. (2) For the purposes of sub-section (1), the burden of proving that no amount by way of tax was collected under the principal Act in respect of any sale referred to in sub-section (1) or in respect of any portion of the turnover relating to such sale, shall be on the dealer effecting such sale." The validity of the provisions of this Amendment Act 9 of 1970 was again challenged before this court in another batch of writ petitions, viz., Jonnala Narasimharao v. Stage of Andhra Pradesh[1971] 28 S.T.C. 262 at p. 264. This court upheld the validity of all the provisions of the aforesaid amending Act except the validity of section 9 thereof. Aggrieved by this judgment, the assessees preferred appeals to the Supreme Court. The Supreme Court set aside the judgment of the High Court in so far as it struck down section 9 of the Amendment Act as unconstitutional and upheld the validity of that section. So the net result is that the validity of the Amendment Act 9 of 1970 has been completely upheld. What finally emerges after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 300. So it is evident from these facts that the ryots with a view to make profit and with a view to conduct business have converted cane into jaggery. It cannot be said that due to the difficulty of supplying cane to the factories alone that the ryot-principals converted sugarcane into jaggery." The learned counsel for the petitioners attacked the aforesaid finding before the Tribunal on the ground that they are not based on any enquiry conducted by the assessing authorities and that they are purely based on conjectures and surmises of the Assistant Commissioner himself. The Tribunal, after considering the relevant authorities cited before it, concluded as follows: "Whether the sugarcane as such is marketable, whether the conversion into jaggery of the sugarcane of the appellants, agriculturist-principals, other than the sugarcane, if any, supplied by them to the sugar factories, is a manufacturing process or merely a process essential for the marketing of the sugarcane and whether those agriculturistprincipals intended to carry on the business of selling or supplying jaggery, are all questions of fact on which we are not in a position to give any finding in the absence of evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation which buys goods from, or sells, supplies or distributes goods to, its members, and (iii) any commission agent, a broker, a del credere agent, an auctioneer, or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of disclosed or undisclosed principal." In the Hyderabad General Sales Tax Act, 1950, which was primarily based on the Madras model and which was in force in the Telangana area, the definition of dealer was incorporated in section 2(e) and was devoid of any explanations. As it was not desirable to have two different Sales Tax Acts, the Madras General Sales Tax Act, which was in operation in the Andhra area, and the Hyderabad General Sales Tax Act, which was in operation in the Telangana area of the State of Andhra Pradesh, were both repealed and replaced with effect from 15th June, 1957. Under the Andhra Pradesh General Sales Tax Act, 1957, the definition of "dealer" was further modified and an explanation was incorporated to include in the definition "a person who acts as an agent of a non-resident dealer". Subsequently, by Act 16 of 1963, a second explanation which is mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Amendment Act 16 of 1963 and took effect from 1st August, 1963, i.e., prior to the assessment orders in question. It is contended by the learned counsel that the conversion of sugarcane into jaggery is not one different from the form in which it was produced. Whether the ryots were unable to sell sugarcane as such to the sugar factories and whether they cannot realise income except by converting sugarcane into jaggery and whether in the circumstances it is only a mode of rendering produce marketable are all pure questions of fact, which can only be decided by the assessing authorities after the necessary enquiry. Therefore, we do not find any merit in this contention. We shall now pass on to consider the next contention of the learned counsel, namely, that the amounts collected by the assessees as rusum and kolagaram are not by way of tax and that the assessees are entitled to protection under section 9 of the Amendment Act 9 of 1970. The Assistant Commissioner after a perusal of the assessment files, ledgers, etc., held that some of the assessees collected only tax for the years 196465, 1965-66 and later on resorted to collection of rusum or kolagaram. He observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the expression "by way of tax"? The expression "by way of" has been explained thus in Corpus Juris Secundum, Volume 12, at pages 870-871: "'By way of: It has been said in a certain connection the phrase is idiomatic and difficult of rendition into exact phraseology, but that it may be taken to mean 'as for the purpose of', 'in character of', 'as being', which are characterised as synonymous phrases." The learned counsel relied upon the decision in Potts' Executors v. Commissioners of Inland Revenue[1952] 32 Tax Cas. 211., where Lord Simonds had occasion to consider the meaning of "by way of loan". In the circumstances of that case, it was held that the amount in question was not paid by the company by way of loan to the settlor. The learned counsel next relied upon the decision in George Oakes (Private) Ltd. v. State of Madras[1961] 12 S.T.C. 476 (S.C.). In that case, the Supreme Court observed that "the expression 'collected by way of tax' is merely descriptive of the 'amounts' so collected". That being so, it is submitted that an amount described as rusum or kolagaram cannot be said to have been collected by a dealer by way of tax while collecting it. In Spencer Co., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessee had not ex facie shown any collection in his books of account, it was open to the authorities to probe into the matter and find out whether in fact the assessee had collected the tax. This decision has been relied upon on behalf of the State in support of its contention that the price structure of the assessee could be examined in that regard and that it is within the jurisdiction of the assessing authorities to discover if any amount had been collected by way of additional tax. " Yet in another case reported as Commissioner of Income-tax, Andhra Pradesh v. Motors and General Stores (P.) Ltd.[1967] 66 I.T.R. 692 (S.C.)., at page 699, the Supreme Court observed as follows: "We pass on to consider the argument of Mr. Narasaraju that in revenue matters it was the substance of the transaction which must be looked at and not the form in which the parties have chosen to clothe the transaction. It was contended that, in the present case, there was in substance a sale of Sree Rama Talkies by the assessee-company for a money consideration of Rs. 1,20,000 though the mode of payment was by transfer of shares and the resolution of the board of directors dated September 9, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to probe into the nature of the transactions and find out from the registers, cash memos. or the invoices, etc., whether the seller passed on the tax to the buyer and the buyer paid the amount as part of the price amount. The real character of the payment can only be determined after a full enquiry. In such an enquiry the assessee may be able to adduce evidence to prove any existing mercantile custom among the commission agents for collecting from the customers amounts in the name of rusum or kolagaram irrespective of any tax. They may also show that the amounts so collected were utilised or spent for the purpose for which they were collected. Under sub-section (2) of section 9 of the Amendment Act, 1970, the burden of proving that no amount was collected by way of tax under the principal Act in respect of any sale of jaggery or in respect of any portion of the turnover relating to such sale effected by the assessee is cast on the assessee. In the circumstances, the Tribunal was justified in setting aside the assessments and remitting the cases to the assessing authorities for fresh disposal according to law after giving an opportunity to the assessees to adduce such evidence as th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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