Case: M/s. George Oakes Private Ltd Vs. State of Madras &amp; Others

Messrs George Oakes (Private) Limited, appellants herein, are dealers in Ford motor cars, spare parts and accessories. For the two years 1951-52 and 1952-53 the appellants submitted their returns under the relevant provisions of the principal Act and claimed exemption from tax with regard to certain amount realised on transactions of sales which the appellants contended were inter-State sales and hence exempt from tax under Article 286 of the Constitution as it stood at the relevant time. The Deputy Commercial Tax Officer, Madras, not only rejected the claim of exemption, but added to the turnover certain amounts which the appellants had collected by way of tax. The amounts so added for 1951-52 were - (a) Rs. 8, 000 to the net turnover assessable at 3 pies per rupee, and (h) Rs. 4, 30, 000 to the turnover assessable at 9 pies per rupee. For 1952-53 the amounts so added were - (a) Rs. 30, 132 odd and (h) Rs. 2, 92, 257 oddby the orders of the Deputy Commercial Tax Officer, the appellants preferred two appeals to the Special Commercial Tax Officer, Appeals, Madras City. These appeals were dismissed. The matter was then taken to the Sales Tax Appellate Tribunal by means of two appeals. By this time the Madras Legislature had passed the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954, being Madras Act No. XVII of 1954. This Act we shall refer to as the impugned Act in this judgment, because its constitutional validity is now the only question for decision in these appeals. The Tribunal negatived the claim of the appellants arising out of the contention that some of the sale transactions in the relevant years were in effect inter-State sales and therefore exempt from tax; the Tribunal declined to go into the second question of the constitutional validity of the impugned Act. We may state here, though nothing now turns upon this, that the Tribunal held that when sales tax was included in the turnover, it was proper to tax the amounts so included at the minimum rate only, viz., 3 pies in the rupee under section 3(1) of the principal Act.Thereafter the appellants filed two revision petitions to the High Court under section 12-B of the principal Act. These were dismissed in limine. By the orders dated April 20, 1956, the High Court held that the contention as to some of the transactions being inter-State sales was concluded by one of its earlier decisions which came before us in Ashok Leyland Ltd. v. The State of Madras (Since reported at [1961] 12 S.T.C. 379), Civil Appeal No. 446 of 1958. In that appeal we delivered judgment on March 28, 1961, and held that the Sales Tax Laws (Validation) Act, 1956, applied and it was unnecessary to consider the true nature of the transactions which the appellants contended were inter-State sales. Learned counsel for the appellants has conceded before us that that decision governs the present appeals, and the first question no longerto the second question, the High Court by oversight did not deal with it in its orders dated April 20, 1956. When the matter was brought to the notice of the High Court, it said in its orders dated July 30, 1956, that the second question was also concluded by its decision in Sri Sundararajan and Co. Ltd. v. The State of Madras ([1956] 7 S.T.C. 105), where the validity of the impugned Act was upheld.

Reasoning: First of all, we do not think that either the principal Act or the impugned Act proceeds on any immutable distinction between sale price and tax such as learned counsel for the appellants has suggested. The principal Act does not contain any separate definition of sale price. We have already referred to the definitions of "sale" and "turnover"; those definitions do not show any such distinction. 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 ofSri Sundararajan and Co., Ltd. v. The State of Madras ([1956] 7 S.T.C. 105). In this latter decision the validity of the impugned Act was questioned and dealing with section 2 of the impugned Act, the High Court said2 only enacted that such amount shall be deemed to be part of the turnover and for a limited period. It may not be necessary to set out authorities for the well-settled principal of what the effect is of the use of the expression deemed in a statute. Was the legislature competent to enact section 2 including the deeming provision, is the real question. If the validity of section 2 of the impugned Act is established, there should be little difficulty in upholding the validity of section 3, which gave effect to the legal fiction enacted by section 2.Obviously, it is not the name the legislature accords to a payment by a purchaser to a seller, who is a dealer as defined by the Act, that determines the question of the legislative competence. No doubt section 8-B called the payment as amount (collected) by way of tax. It is equally true that the statutory liability to pay the sales tax is laid on the dealer. What is taxable is not each transaction of sale but the total turnover of the dealer, computed in accordance with the provisions of the Act and the Rules. But it is well-recognised that whatever be the form of the statutory provisions, the ultimate economic incidence of the tax is on the consumer, the purchaser. It was that well-settled principal that was re-stated in Bengal Immunity Co. Ltd. v. State of Bihar ([1955] 2 S.C.R. 603; 6 S.T.C. 446). Even if the registered dealer collects the amount by way of tax under the authority of section 8-B of the Act, the payment is by the purchaser on the occasion of the sale by the dealer. Vis-a-vis the dealer it is in reality part of the price the purchaser has to pay the seller for purchasing the goods. A tax on such a payment, in our opinion, is well within the ambit of Entry 54 of List II, Schedule VII, read with Article 246(3) of theare of the view that the aforesaid observations correctly give the true effect of section 2 of the impugned Act, and section 3 of the impugned Act is merelyconsider it unnecessary to examine these decisions, because the validity of the impugned Act must be determined on its own terms in the context of the provisions of the principal Act. Reading the impugned Act in the light of the provisions of the principal Act, it seems clear to us that the impugned Act cannot be held to be bad on the ground of legislative incompetence. Under the definition of turnover the aggregate amount for which goods are bought or sold is taxable. This aggregate amount includes the tax as part of the price paid by the buyer. The amount goes into the common till of the dealer till he pays the tax. It is money which he keeps using for his business till he pays it over to Government. Indeed, he may turn it over again and again till he finally hands it to Government. There is thus nothing anomalous in the law treating it as part of the amount on which tax must be paid by him. This conception of a turnover is not new. It is found is England and America and there is no reason to think that when the legislatures in India defined "turnover" to include tax also, they were striking out into something quite unknown and unheard of before.The only question which has been raised in these appeals is regarding the validity of the impugned Act. That question having been decided against the appellants,