Civil Appeal No 33451979
Appeal by Special Leave from the Judgment and Order dated 31 7 1979 of the Assistant Commissioner Judicial Sales Tax
Meerut in Appeal No 1502 of 1978
V M Tarkunde P H Parekh and section B Singh for the Appellant
section Markendaya for the Respondent
The Judgment of the Court was delivered by VENKATARAMIAH J
The appellant is a firm carrying on business at Mandi Anandganj Barut District Meerut in the State of Uttar Pradesh and is a dealer as defined in the UP Sales Tax Act 1948 Act No XV of 1948 hereinafter referred to as the Act 
It has filed this appeal by special leave under Article 136 of the Constitution against the order dated July 31 1979 passed in Appeal No 1502 of 1978 on the file of the Assistant Commissioner Judicial Sales Tax Meerut Range Meerut upholding the inclusion of the market fee and the commission otherwise called dami  payable to the commission agent operating within a market area established under the UP Krishi Utpadan Mandi Adhiniyam 1964 UP Act No XXV of 1964 hereinafter referred to as the Adhiniyam  in the turnover of purchases of the appellant for purposes of levy of sales tax under section 3 D of the Act
The assessment year in question is 1974 75
The appellant was granted leave to appeal to file the above appeal directly against the order of the Assistant Commissioner Judicial since the question involved in this case had already been decided by the High Court of Allahabad in Ms Durga Dass Narain Dass vs The State of Uttar Pradesh 710 Ors
upholding the inclusion of the market fee and the Commission dami in the purchase turnover for purposes of levy of sales tax
It is necessary at the out set to refer to some of the relevant provisions of law bearing on the questions involved in the case in order to appreciate the contentions urged on behalf of the appellant
There is no dispute that the appellant is a dealer as defined in section 2e of the Act and is a purchaser of goods notified under section 3 D1
Section 3 D of the Act provides that except as provided in sub section 2 thereof there shall be levied and paid for each assessment year or part thereof a tax on the turnover to be determined in the prescribed manner of purchases of such goods and with effect from such date as the State Government may be notification in the Gazette specify in relation to purchases made within Uttar Pradesh by a dealer whether on his own account or on account of any one else or through a dealer acting as a purchasing agent at the rate specified therein
Sub section 4 of section 3 D of the Act provides that on the issue of a notification under sub section 1 thereof no tax shall be levied under any other section in respect of the goods included in the notification
The expression purchase price  is defined in section 2gg of the Act as follows 2gg purchase price  means the amount of valuable consideration paid or payable by a person for the purchase of any goods less any sum allowed by the seller as cash discount according to trade practice and shall include any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof other than the cost of freight or delivery or the cost of installation when such cost is separately charged The expression turnover of purchases  is defined in section 2ii of the Act thus 2ii turnover of purchases  with its cognate expressions means the aggregate of the amounts of purchase price paid of payable by a dealer in respect of purchase of goods made by or through him after deducting the amount if any refunded to the dealer by the seller in respect of any goods returned to such seller within such period as may be prescribed 711 Section 3 F of the Act which provides for the levy of additional tax on certain dealers was introduced into the Act by UP Act No 3 of 1971
When it was so introduced it provided that every dealer liable to pay tax under section 3 section 3A section 3 AA or section 3 D whose total turnover of sales or of purchases or of both in any assessment year exceeded rupees two lacs would in addition to the said tax be liable to pay for that assessment year an additional tax at the rates specified in respect of his turnover liable to tax subject to the other provisions contained in that section
We shall hereafter refer to some of the provisions of the Adhiniyam and the Rules made thereunder
Clauses b and e of section 2 of the Adhiniyam define the expressions broker  or dalal  and commission agent  or arhatiya  respectively Broker  or dalal  means a person who in the ordinary course of business negotiates or arranges contracts for the purchase or sale of agricultural produce on behalf of his principal on payment of commission or remuneration whether in cash or kind but does not include the servant of such principal whether engaged in negotiating or arranging such contracts Commission agent  or arhatiya  means a person who in the ordinary course of business makes or offers to make a purchase or sale of agricultural produce on behalf of the owner or seller or purchaser of agricultural produce for arhat or commission
Section 10 of the Adhiniyam provides that as from the date to be notified by the State Government in the Gazette no person shall in a Principal Market Yard or Sub Market Yard levy charge or realise any trade charges other than those prescribed by rules or bye laws made under the Adhiniyam in respect of any transaction of sale or purchase of the specified agricultural produce and no Court shall in any suit or proceeding arising out of any such transaction allow in any claim or counter claim any trade charges not so prescribed and that all trade charges shall be payable by the purchaser
Sub clause b of clause iii of section 17 of the Adhiniyam empowers the market committee to levy market fees and to utilize such market fees and other fees collected by it under that section for purposes of the Adhiniyam
Section 17iiib of the Adhiniyam as it stood before its amendment in 1973 read as follows 17
A Committee shall for the purposes of this Act have the power to     iii levy and collect 712     b market fees on transactions of sale or purchase of specified agricultural produce in the Principal Market Yard and Sub Market Yards from such persons and at such rates as may be prescribed but not exceeding one half percentum of the price of the specified agricultural produce sold or purchased therein
After clause b of section 17iii was substituted by a new clause by UP Act 13 of 1973 as re enacted by UP Act 20 of 1974 it read thus 17    iii     b market fees which shall be payable by purchasers on transactions of sale of specified agricultural produce in the Principal Market Yard or a Sub Market Yard at such rates being not less than one percentum and not more than one and a half percentum of the price of the agricultural produce so sold as the State Government may specify by notification in the Gazette
 The above clause was substituted by a new clause by UP Act No 7 of 1978 with retrospective effect from June 12 1973 as follows 17        iii       b market fee which shall be payable on transactions of sale of specified agricultural produce in the market area at such rates being not less than one percentum and not more than one and half percentum of the price of the agricultural produce so sold as the State Government may specify by notification and such fee shall be realised in the following manner 1 if the produce is sold through a commission agent the commission agent may realise the market fee from the purchaser and shall be liable to pay the same to the Committee 713 2 if the produce is purchased directly by a trader from a producer the trader shall be liable to pay the market fee to the Committee 3 if the produce is purchased by a trader from another trader the trader selling the produce may realise it from the purchaser and shall be liable to pay the market fee to the Committee and 4 in any other case of sale of such produce the purchaser shall be liable to pay the market fee to the Committee
 Rule 791 of the Rules framed under the Adhiniyam for purposes of section 10 of the Adhiniyam provides that as from the date notified by the State Government under section 10 no person shall in a Principal Market Yard or Sub Market Yards levy charge or realize in respect of any transaction of sale or purchase of the specified agricultural produce any trade charges other than those specified by the Market Committee under sub rule 2 thereof
Sub rule 2 of Rule 79 of the Rules provides that the Market Committee shall specify in its bye laws the trade charges that may be charged or realized by a trader or a commission agent or a broker or a weighman or a measurer or a palledar holding licence under the Rules but not exceeding the limits prescribed by that sub Rule
Sub rule 3 of Rule 79 of the Rules also provides that all trade charges including commission shall be payable by the purchaser
Three contentions are urged before us in support of the above appeal 1 that it is not open the assessing authority to demand any additional tax under section 3 F of the Act in view of the provision contained in sub section 4 of section 3 D of the Act which expressly prohibits the levy of tax under any other section of the Act in respect of purchase turnover of the goods notified under section 3 D1 2 that the market fees payable under the Adhiniyam being a sum which can be collected from the purchaser by virtue of the provision contained in section 17iii b of the Adhiniyam by the commission agent who is required to pay the same to the Market Committee cannot be considered as forming part of the consideration paid or payable by the purchaser to the commission agent in respect of purchase of goods at an auction held within a market area established under the Adhiniyam and therefore it cannot be included in the turnover of purchases for purposes of levy of tax under section 3 D of the Act and 3 that the commission dami payable by a purchaser of goods to the commission agent 714 operating within the market area being a trade charge payable by the purchaser by virtue of section 102 of the Adhiniyam read with Rule 793 of the Rules framed thereunder cannot also be included in the turnover of purchases
In so far as the first contention is concerned the appellant depends upon sub section 4 of section 3 D of the Act which no doubt says that in respect of the turnover of purchases of the goods notified under section 3 D1 no tax can be levied under any other provision of the Act
But section 3 F of the Act which was introduced into the Act subsequently by UP Act No 3 of 1971 provides that every dealer liable to pay tax under section 3 section 3 A section 3 AA or section 3 D whose total turnover of sales or purchases or of both in any assessment year exceeds rupees two lacs shall in addition to the said tax pay for that assessment year an additional tax at the rate specified therein
Since section 3 D of the Act is expressly mentioned in section 3 F it has to be held that section 3 F overrides sub section 4 of section 3 D and that additional tax can be collected even in respect of the turnover of purchases of goods notified under section 3 D1 notwithstanding sub section 4 of Section 3 D of the Act
It cannot be said that by enacting sub section 4 of section 3 D the State Legislature forfeited its power to levy any other tax under the Act on the goods notified under section 3 D1 for ever
It is always open to the Legislature to modify the effect of sub section 4 of section 3 D by a subsequent legislation
We do not therefore find any substance in the contention that additional tax levied under section 3 F cannot be levied in respect of the turnover of purchases of goods notified under section 3 D1 of the Act
The first contention therefore fails
We shall now proceed to consider the question whether market fees paid on transactions of sale or purchases of specified agricultural produce in the market area established under the Adhiniyam can be included in the turnover of purchases for purposes of levy of tax under the Act
Before the amendment of section 17iii b of the Adhiniyam by UP Act No 7 of 1978 it specifically provided that market fee payable on transactions of sale or purchase of specified agricultural produce in the market area should be paid by the purchaser
After the amendment which was brought into force with retrospective effect from June 12 1973 market fees payable on transactions of sale or purchase of agricultural produce within the market area can be realized by the Market Committee 715 from the commission agent who is authorised to realize the same from the purchaser by virtue of section 17iiib1 which reads 17    iii      b  1 If the produce is sold through a commission agent the commission agent may realise the market fee from the purchaser and shall be liable to pay the same to the Committee
 The argument urged on behalf of the appellant is that when a dealer who in this case happens to be a commission agent is permitted by law to collect the market fee which he is liable to pay to the Market Committee from the purchaser such market fee cannot form part of the consideration for sale and therefore cannot be included in the turnover of purchases for purposes of levy of tax under the Act
But on behalf of the State Government it is urged that all sums paid by a purchaser to a seller or to a commission agent for the purchase of the goods including any tax or fee payable by him form the consideration for the purchase and therefore are liable to be included in the turnover of purchases
Reliance is placed by the State Government on Ms George Oakes P Ltd vs State of Madras in which this Court while interpreting a similar provision in the Madras General Sales Tax Act 1939 observed that the expression turnover  meant the aggregate amount for which goods were bought or sold whether for cash or deferred payment or other valuable consideration and when a sale attracted purchase tax and the tax was passed on to the consumer what the buyer had to pay for the goods included the tax as well and the aggregate amount so paid would fall within the definition of turnover
In the above case the Court was construing the meaning of the expression turnover  appearing in a statute in which there was no provision authorising the seller to recover the sales tax payable by him from the purchaser although the price of the goods realized by him included the sales tax payable by him and thus he had passed on his liability to the purchaser
The next decision on which reliance was placed by the State Government is Delhi Cloth and 716 General Mills Co Ltd etc
vs Commissioner of Sales Tax Indore
In that case this Court held that the expression Sale price  as defined in section 2o of the Madhya Pradesh General Sales Tax Act 1958 included the sales tax collected by a dealer from his purchaser as there was no provision in that statute imposing any liability on the purchaser to pay the tax imposed by it on the dealer and there was no law empowering the dealer to collect the tax from his buyer
In both the decisions referred to above this Court relied upon Paprika Ltd  Anr
vs Board of Trade and Love vs Norman Wright Builders Ltd in which it had been laid down that the price payable by a purchaser under a contract of goods for the purpose of certain penal provisions was the price fixed by the contract and a seller who wished to recover the amount of the purchase tax should except where an adjustment was authorised by statute include that amount in the price so fixed
From the observations made in the decisions referred to above it follows that where a dealer is authorised by law to pass on any tax payable by him on the transaction of sale to the purchaser such tax does not form part of the consideration for purposes of levy of tax on sales or purchases but where there is no statutory provision authorising the dealer to pass on the tax to the purchaser such tax does form part of the consideration when he includes it in the price and realizes the same from the purchaser
The essential factor which distinguishes the former class of cases from the latter class is the existence of a statutory provision auhorising a dealer to recover the tax payable on the transaction of sale from the purchaser
It is on account of the above distinction that this Court held in Joint Commercial Officer Division II
Madras 2 etc
vs Spencer  Co etc
that the sales tax which a seller of foreign liquor was liable to pay under section 21 A of the Madras Prohibition Act 1937 did not form part of the turnover on which sales tax could be levied under the Madras General Sales Tax Act 1959 because the seller was entitled to recover the sales tax payable by him from the purchaser
The relevant part of section 21 A of the Madras Prohibition Act 1937 referred to above read thus 21 A
Every person or institution which sells foreign liquor a X X X b X X X 717 shall collect from the purchaser and pay over to the Government at such intervals and in such manner as may be prescribed a sales tax calculated at the rate of eight annas in the rupee or at such other rate as may be notified by the Government from time to time on the price of the liquor so sold
 In the course of the decision in the case of Spencer  Co this Court observed thus It is clear from sec
21 A of the Madras Prohibition Act 1937 that the sales tax which the section requires the seller of foreign liquor to collect from the purchaser is a tax on the purchaser and not on the seller
This is what makes the authorities on which counsel for the appellants relied inapplicable to the cases before us
Under sec
21 A the tax payable is on the price of the liquor and that tax is to be paid by the purchaser the seller is required to collect the tax from the purchaser which he has to pay over to the Government Sec
21 A makes the seller a collector of tax for the Government and the amount collected by him as tax under this section cannot therefore be a part of his turnover
Under the Madras General Sales Tax Act 1959 the dealer has no statutory duty to collect the sales tax payable by him from his customer and when the dealer passes on to the customer the amount of tax which the former is liable to pay the said amount does not cease to be the price for the goods although the price is expressed as X plus purchase tax Paprica Ltd  Anr
vs Board of Trade But the amounts collected by the assessees concerned in these appeals under a statutory obligation cannot be a part of their taxable turnover under the Madras General Sales Tax Act 1959
 We do not find any substantial difference between section 21 A of the Madras Prohibition Act 1937 and section 17iii b 1 of the Adhiniyam
Whereas the levy under section 21 A of the Madras Prohibition Act 1937 was sales tax payable to the State Government under section 17iii b of the Adhiniyam the levy in question is market fees payable to the Market Committee and secondly whereas the former provision stated that every person or institution which sells foreign liquor  shall collect from the purchaser and pay over to the Government  the latter provision states that If the produce is sold through a commission agent the commission agent may realize the market fees from the purchaser and shall be liable to pay the same to the Committee
718 The levies in both the cases are statutory although under the Madras Prohibition Act 1937 it is a tax payable to the Government and under the Adhiniyam it is a fee payable to a Market Committee which is a statutory body
The only distinguishing feature between the two laws is that whereas the Madras Act provides that every person who sells foreign liquor shall collect sales tax from the purchaser the Adhiniyam provides that the commission agent may realize the market fees from the purchaser
The use of shall  in the former case and of may  in the latter case is not of much consequence in so far as the question involved in the present case is concerned because in both the cases the seller or the commission agent who is liable to pay the tax or the fee as the case may be is entitled statutorily to realize it from the purchaser and wherever a dealer is authorised by law to do so the tax or fee realized by him from the purchaser cannot be treated as part of the turnover for purposes of levy of sales tax
The contention of the appellant that market fees payable under the Adhiniyam cannot be included in the turnover of purchases has therefore to be upheld
There is however no substance in the third contention of the appellant that the commission dami payable by a purchaser to a commission agent operating within a market area established under the Adhiniyam cannot be treated as forming part of the turnover of purchases for two reasons i the commission paid by the purchaser is not any tax or fee payable to a Government or statutory body which is not a party to the contract of sale and ii the commission is actually the profit of the dealer who in this case happens to be a commission agent and should therefore necessarily be considered as consideration for the sale of goods
The provisions contained in section 10 of the Adhiniyam and the Rules framed thereunder do not in any way affect the above conclusion reached by us
Section 10 of the Adhiniyam merely provides that as from the date to be notified by the State Government in the Gazette no person shall in a Principal Market Yard or Sub Market Yard levy charge or realize any trade charges other than those prescribed by rules or bye laws made under the Adhiniyam in respect of any transaction of sale or purchase of the specified agricultural produce and no Court shall in any suit or proceeding arising out of any such transaction allow in any claim or counter claim any trade charges not so prescribed
It also provides that such charges shall be collected from the purchasers thereby barring the collection of such charges from the producers of agricultural produce who are ordinarily the sellers in a market area
Sub rule 719 1 of Rule 79 of the Rules framed under the Adhiniyam provides that as from the date notified by the State Government no person shall in a Principal Market Yard or Sub Market Yard levy charge or realise in respect of any transaction of sale or purchase of the specified agricultural produce any trade charges other than those specified by the Market Committee under sub rule 2 thereof and sub rule 2 of Rule 79 authorises the Market Committee to make bye laws prescribing the maximum commission that may be charged by a commission agent or a broker
Sub rule 3 of Rule 79 reiterates that all trade charges shall be payable by the purchaser
A combined reading of section 10 of the Adhiniyam Rule 79 of the Rules made under the Adhiniyam and the bye laws made by the Market Committee shows that a commission agent cannot realize any commission higher than what is prescribed by law
The commission chargeable by the commission agent is not a sum which he has in his turn to pay to an authority either by way of tax or by way of fee but is only a reward for the services rendered by him
We therefore reject the above submission made on behalf of the appellant
For the foregoing reasons the appeal is allowed in part
The inclusion of the market fees in the turnover of purchases of the assessee for purposes of levy of tax under the Act is set aside
The assessing authority is directed to modify the order of assessment in accordance with this decision
In the circumstances of the case the parties shall bear their own costs
NVK Appeal allowed in part


Summary:
Section 3D of the U P Sales Tax Act 1948 provides for the levy of a tax on the turnover of purchase of goods by a dealer
Sub section 4 provides that on the issue of a notification under sub section 1 no tax shall be levied under any other section in respect of the goods included in the notification
In 1971 section 3F was included in the Act providing for the levy of additional tax on certain dealers
The section provides that every dealer liable to pay tax under section 3D among others whose total turnover exceeds rupees two lakhs would in addition to the said tax be liable to pay for that assessment year an additional tax at the rates specified therein subject to the other provisions of the section
Section 10 of the U P Krishi Utpadan Adhiniyam 1964 provides no levy or realisation of any trade charges other than those prescribed by rules or byelaws made under the Adhiniyam in respect of transactions of sale or purchase of specified agricultural produce
Section 17iiib empowers the market committee to levy market fees and to utilize such market fees collected by it under that section for purposes of the Adhiniyam
Before the amendment of the provision by U P Act No 7 of 1978 it specifically provided that market fee payable on transactions of sale or purchase of specified agricultural produce in the market area should be paid by the purchaser
After the amendment which was brought into force with retrospective effect from June 12 1973 market fees payable on transactions of sale or purchase of agricultural produce within the market area can be realized by the Market Committee from the Commission agent who is authorized to realize the same from the purchaser by virtue of section 17iiib1
The rules and bye laws made under the Act also provide that a commission agent shall not realise any commission higher than that prescribed by law
The Sales Tax Officer included the market fee and commission dami payable to the commission agent operating within a market area established under the U P Krishi Utpadan Mandi Adhiniyam 1964 in the turnover of purchases 708 of the appellant for the purposes of levy of sales tax under section 3D of the U P Sales Tax Act 1948 On appeal by the appellant the Assistant Commissioner Judicial Sales Tax upheld the order of the Sales Tax Officer
In an earlier case the High Court upheld the inclusion of the market fee and the commission dami in the purchases turnover for the purposes of levy of sales tax and therefore the appellant was granted special leave to appeal to this Court directly from the order of the Assistant Commissioner
Before this Court it was contended that i it was not open to the Assessing Authority to demand any additional tax under section 3F in view of the provisions contained in section 3D4ii
The market fee paid on transactions of sale or purchase of specified agricultural produce in the market area could not under the Adhiniyam be included in the turnover of purchases for the purposes of levy of tax under the Sales Tax Act
iii The commission dami payable by a purchaser of goods to the commission agent being a trade charge could not also be included in the turnover of purchases
 HELD 1
There is no substance in the contention that additional tax levied under section 3F could not be levied in respect of turnover of purchases of goods notified under section 3D1 of the Sales Tax Act
Although section 3D4 says that in respect of turnover of purchases of goods notified under section 3D1 no tax can be levied under any other provisions section 3F introduced in 1971 provides that every dealer liable to pay tax under section 3D whose total turnover of sales or of purchases or of both in any assessment year exceeds rupees two lakhs would in addition to the said tax pay for that assessment year an additional tax at the rate specified therein
714F B C
Since section 3D is expressly mentioned in section 3F this section overrides section 3D4 and that additional tax can be collected even in respect of turnover of purchases of goods notified under section 3D1 notwithstanding section 3D4
714D
It cannot be said that by enacting sub section 4 of section 3D the legislature has forfeited its power to levy any other tax under the Act on the goods notified under section 3D1 for ever
It is always open to the legislature to modify the effect of section 3D4 by subsequent legislation
714E
The contention of the appellant that market fee payable under the Adhiniyam cannot be included in the turnover of purchases must be upheld
Where a dealer is authorised by law to pass on any tax payable by him on transaction of sale to the purchaser such tax does not form part of the consideration for the purposes of levy of tax on sale or purchases but where there is no statutory provision authorising the dealers to pass on tax to the purchaser such tax does form part of the consideration when he includes it in the price and realises the same from the purchaser
The distinguishing factor between the two is the existence of a statutory provision authorising a dealer to recover the tax payable on the transaction of sale from the purchaser
718D 716D E
The use of the word may in section 17iii61 providing that the commission agent may realise the market fee from the purchaser is not of much consequence
The seller or the commission agent who is liable to pay the tax or the fee is entitled statutorily to realise it from the purchaser and wherever a dealer is authorised by law to do so the tax or fee realised by him from the purchaser cannot be treated as part of the turnover for the purpose of levy of sales tax
718B C
709 Ms George Oakes P Ltd vs State of Madras   Delhi Cloth and General Mills Co Ltd etc
vs Commissioner of Sales Tax Indore 1971 Supp
SCR 945 Paprika Ltd  Anr
vs Board of Trade  Love vs Norman Wright Builders Ltd referred to
Joint Commercial Officer Division 11 Madras 2 etc
vs Spencer  Co etc
1975 Supp
SCR 439 applied
There is no force in the appellant s contention that the commission dami payable by the purchaser on goods to the commission agent operating within a market area established under the Adhiniyam cannot be treated as forming part of the turnover of purchases because a conspectus of the provision of the Adhiniyam and rules made thereunder and the bye laws of Market Committee shows that a commission agent cannot realise any commission higher than what is prescribed by law
The commission chargeable by the commission agent is not a sum which he has in his turn to pay to an authority either by way of tax or by way of fee but is only a reward for the services rendered by him
718E 719 C D