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TMI Blog1985 (1) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... p firm of partners, is also a registered dealer under the Act on the file of the Assistant Commissioner of Commercial Taxes (Assessments), Belgaum ("ACCT") which acts as a commission agent for resident and non-resident principals dealing principally in tamal patra, cocum, shikkakai, etc. In his proposition Notice No. 5010201-0 dated 23rd June, 1984 (annexure A) the ACCT has called upon this petitioner to show case for its non-payment of turnover tax levied by section 6B of the Act for the periods set out therein. 5.. All the petitioners have challenged the validity of section 11 of the Act substituted by the Karnataka Sales Tax (Second Amendment) Act, 1983 (Karnataka Act 23 of 1983) ("Amending Act") that came into force on 18th November, 1983 on which day it was first published in the Karnataka Gazette (Extraordinary) [vide section 1(2) of the amending Act and section 5(3) of the Karnataka General Clauses Act of 1899]. In addition to this challenge, the petitioner in Writ Petition No. 17117 of 1984 has also challenged the proposition notice issued by the ACCT on the basis of the said amendment. 6-1. All the petitioners have urged that section 11 substituted by the Amending Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the tax or taxes paid by him on behalf of the principal such agent may retain out of any moneys payable to the principal by the agent, a sum equal to the amount of the tax assessed on or paid by the agent. The principal on whose behalf the agent has paid the tax as aforesaid shall not again be taxed in respect of the same transaction but the burden of proving that the tax in respect of the transaction has been paid by the agent shall be on such principal; (ii) the commission or brokerage agreed upon and specified in the accounts represents the entire remuneration payable to the agent, apart from the tax paid by him on behalf of the principal and the legitimate incidental charges actually incurred by him and specified in the accounts in respect of insurance, transport, loading and unloading, godown rent, interest, correspondence, telegram, the use of the telephone and the like." The Statement of Objects and Reasons, appended to the Karnataka Sales Tax (Second Amendment) Bill of 1983 (L.A. Bill No. 29 of 1983) introduced in the Legislative Assembly on 22nd September, 1983 that ultimately became the amending Act, so far as section 11 with which alone we are concerned, states thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turist a sum equal to the amount of tax assessed on or paid by the agent." While the original section 11 required the agents only to obtain licences under the Act without making them liable for payment of taxes, the new section expressly makes them liable for payment of taxes under the Act. The change made against agents is clear and unequivocal. 13.. An agent is a dealer within the meaning of that term occurring in section 2(1)(k) of the Act. The petitioners have not rightly challenged the validity of section 2(1)(k) of the Act. 14.. A heading of a section gives a clue in understanding that section, though it cannot control the plain language of the section itself. The heading of section 11 itself states that agents are liable to pay taxes under the Act. 15.. Sub-section (1) of section 11 opens with a non obstante clause. A non obstante clause is generally employed to give overriding effect to the specific provision made in the provision itself. The opening part of sub-section (1) declares that the provision made therein shall have effect notwithstanding any contrary provision in any other law or the very Act itself. Under sub-section (1) any one who for an agreed commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retain so much of the amounts paid or payable by him as taxes. But, this does not necessarily mean that the other rights of the agent under other laws are in any way affected. We need hardly elaborate on all of them. But, it is obvious that this salutory provision had been made to safeguard the interests of unwary agriculturists who are generally exploited by every one in the Indian society and the commission agents in particular. With this analysis of this provision, we now proceed to examine the contentions urged for the petitioners. 19.. The general rules for interpretation of entries found in the Seventh Schedule to the Constitution are now well-settled by a large number of rulings of the Supreme Court, Federal Court and Privy Council and some of them that are deducible from the decided cases need only be noticed. 20.. The power to legislate is given by article 246 and other articles of the Constitution. The various entries in the three lists are not "powers" of legislation, but are only "fields" of legislation. The entries in the lists are of an enabling character. The language of these entries should be given the widest scope of their meaning is fairly capable because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory or statutory sales were sales exigible to sales tax, however, considered it unnecessary to overrule the majority opinion in New India Sugar Mills' case [1963] 14 STC 316 (SC) and left open the same. 23.. The term "dealer" exhaustively defined in section 2(1)(k) of the Act shows that he is a person engaged in the act of buying or selling or both. A commission agent engaged in the sale or purchase or in the taxable event under the Act, is a "dealer" within the meaning of that term occurring in the Act. Earlier, we have noticed that the petitioners had not challenged section 2(1)(k) of the Act. From this it necessarily follows that the challenge of the petitioners that section 11 of the Act was beyond the legislative competence of the State, has hardly any merit. 24.. Even otherwise, whether the activity of a commission agent qua as agent was or was not buying or selling is no longer res integra. 25.. In Kandula Radhakrishna Rao v. Province of Madras [1952] 3 STC 121 (FB); AIR 1952 Mad 718 (FB) a Full Bench of the Madras High Court examined the activities of a commission agent, his true legal position and his liability to pay taxes as a dealer under the Madras General Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the former High Court of Mysore in R. Nanjiah, In re [1954] 5 STC 443 relied on by Sri Katageri to contend to the contrary does not really bear on the point as the same was based on the language of the too simple an enactment called "The Mysore Sales Tax Act of 1948" and its provisions that stood then and does not assist the petitioners. We will also assume that the same bears on the point. But, then that ruling which is not in accord with the law declared by the Supreme Court and this Court noticed by us earlier, with respect, cannot be followed by us. 28.. On the above discussion, we hold that there is no merit in this contention of the petitioners and we reject the same. 29.. On our above conclusions, it also follows that the contention of the petitioner in Writ Petition No. 17117 of 1984 that section 11 of the Act really taxes his income and not purchases and sales and is, therefore, a colourable legislation cannot be upheld. What is taxed is not the income of a commission agent but the sales or purchases effected by him qua as agent. Hence, the doctrine of colourable legislation, the true scope of which has been explained by the Supreme Court in K.C.G. Narayan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover tax from 7th November, 1983 on which day the Amending Act received the assent of the Governor. The Act does not come into force on the very day it receives the assent of the Governor unless the same is also published on that day. The Amending Act was first published on 18th November, 1983 and therefore, as provided in section 5(3) of the General Clauses Act, section 11 of the Amending Act came into force only on 18th November, 1983 and not on 7th November, 1983 as tentatively expressed by the ACCT. We have no doubt, that in making his final order and issuing a demand notice the ACCT will so regulate the same. But, if the ACCT has already made his order and issued his demand, then also it would be proper for him to suitably regulate this aspect, without unnecessarily driving the petitioner in another proceeding to that extent. We hope and trust that all other authorities under the Act also will so regulate this aspect, 38.. As all the contentions urged for the petitioners fail, these writ petitions are liable to be dismissed. We, therefore, dismiss these writ petitions and discharge the rule issued in all these cases. But, in the circumstances of the cases, we direct the ..... 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