Case: Jonnala Narasimharao &amp; Co. &amp; Ors. Etc. Etc Vs. State Of Andhra Pradesh &amp; Ors

2. We will take the facts in Civil Appeal No. 2116 of 1970 as typical of the common question arising in all these Appeals. The Appellants carry on business of Commission Agent in jaggery in Anakapalli, Visakhapatnam and at various places in West Godavari. In the course of their business the Appellants arrange for the sale of jaggery charging a small commission for their services and renders an account to the respective principals in respect of these sales. In the pattis issued to the Agriculaturists the name of the persons to whom jaggery is sold is specifically mentioned. The baskets of each principal are separately marked. The stock register also indicates the number of baskets of jaggery held in the name of the Commission Agents. Every buyer is fully apprised of the fact that he is purchasing the jaggery of specified agriculturist principals and not that of the Appellants. This procedure it is said has been in vogue for a long time.3. Till about 1963 under S.11 of Madras General Sales Tax Act as well as under the Andhra Pradesh General Sales Tax Act 1957 (hereinafter called the "Principal Act") Commission Agents were required to obtain and were being issued licenses and if they conformed to the conditions of those licenses they were not subjected to tax. In 1963 the Principal Act was amended by Andhra Pradesh General Sales Tax Amendment Act 16 of 1963 which substituted a new Section 11 for that which was in force till then. The new Section 11 changed the pre-existing structure of assessment in that the Agents of Resident Principals were made liable for assessment and collection of Tax though the liability of the Agent was made co-extensive with that of the Principal. The Sales Tax Authorities however were making assessments of the turn-over of the Agents in respect of the purchase and sales of jaggery of several principals notwithstanding the fact that the turnover upto Rs.10,000/- of each was not exigible to tax.These assessments were challenged in a batch of writ Petitions in Irri Veera Raju v. Commercial Tax Officer, Tadepalligudem. (1967) 20 STC 501 (Andh Pra) in which the High Court of Andhra Pradesh held that the provisions of the Principal Act indicated that the Agent is a dealer in respect of each of the Principals, that he is deemed to be as many dealers as there are principals, and therefore, the total turn-over of the Agent in respect of the several principals could not be computed for assessing him when in fact the turn-over of each of the principals was below the limit i. e. Rs. 10,000/-. As a consequence of this decision the Andhra Pradesh General Sales Tax Amendment Act 5 of 1068 was enacted and a new Section 11 was substituted for the then existing section. This Section 11 was given retrospective effect from the 1st August 1963. The object of this Amendment was to enable the Taxing authorities to assess, levy and collect tax or penalty under the Sales Tax Act from the Agent irrespective of the fact that such principal is not liable to pay the tax or penalty in respect of that transaction on account of the turn-over of the principal being less than the minimum turn-over specified in sub-section (1) of Section 5. The proviso to the new Section 11 however authorised the Tax or penalty assessed or levied on or due from Agent to be recovered by the Assessing authorities from the principals instead of from the Agents, only if the principal is liable to pay tax or penalty. This new Section was also challenged on various grounds in a batch of Writ Petitions in Srikonathala Venkata Ramana and Budha Apparao v. State of Andhra Pradesh, (1969) 24 STC 367 (Andh Pra).The High Court held that even after the amendment the liability of the Agent continues to be based on the principle of representation and whether he is a dealer in respect of all the principals or only one principal, his liability is co-extensive with that of the principal. It also held that while there is no conflict between Section 5 and Section 11 of the Act. Section 11 which authorises the imposition of a tax independently of the liability of the principal or which takes away or limits the rights of the Agent to reimburse himself or withhold moneys due to the principal only where the principal is liable is discriminatory and is hit by Article 14.In view of this Judgment, which in fact restored the legal position to that prevailing prior to the Amendment, large sums of money in which assessments had been made and tax collected became refundable. To meet this situation the Legislature enacted the Andhra Pradesh General Sales Tax (Amendment Act) 9 of 1970. The effect of the Amendment made by Sections 2, 5, 8 and 9 of the Amendment Act is that a proviso was added to Sec. 5 (1), a new S. 11 was substituted for the old Section 11 with retrospective effect from 1-8-63. The amended Section 11 it may be noticed was identical with Section 11 as it stood on 1-8-63. The first schedule to the principal Act was also amended by adding jaggery as item 77 which was made taxable at the point of first sale at 5 poise in the Rupee. It was further provided that as soon as this entry came into force on the date fixed by a Notification the proviso to Section 5 (A) added by Sec. 2 of the Amending Act would cease to have effect. Section 8 of the Amending Act purported to validate the assessments already made while Sec. 9 granted exemption from liability to pay tax in certain cases.We have already noticed that jaggery was being taxed at the point of the first purchase of its sale between 1-2-60 and 31-7-63 but by reason of the Amendment introduced by Act 16 of 1963 a multiple point tax on sale subject to an exemption of a turn-over of Rs. 10,000/- became leviable at 2 paise per Rupee from 1-8-63 which rate was enhanced to 3 paise from 1-4-66 by Amendment Act 7 of 1966. A Single point taxation was however levied on items in Schedules 1 and 2 of the Act which became chargeable as such under Section 5 (2). We are not concerned with schedule 3 which deals with declared goods but schedule 4 specified the goods which are exempt in terms of Section 8. All other sales which do not fall within the schedules are as earlier stated exigible to multiple point tax under Section 5 (1) of the Act, subject to the minimum of Rs. 10,000/-.The Appellants had before the High Court of Andhra Pradesh raised several contentions but the principal attack was confined to 3 aspects of the Amendment Act, Firstly that Section 11 read with the new proviso to Section 5 (1) makes an invidious distinction between dealers in jaggery on the one hand the dealers in other commodities on the other by perpetuating an unreasonable classification which is based on no intelligible differentia nor can any reasonable nexus be discerned with the object that the Amendment seeks to achieve. Secondly that Section 9 has to be read as part of Section 2 of the Amendment Act by which a new proviso is added to Section 5 (1) of the Principal Act and is a part of Sec. 11 substituted by the Amendment Act. If so read the new proviso to Section 5 (1) and the new S. 11 would be violative of Art. 14 inasmuch as the dealers in jaggery similarly situated have been invidiously discriminated by levying tax from those dealers who have collected the tax and the dealers who have not collected the tax. Thirdly that the basis of the amendment is an imposition of a tax not on the transaction of sale or purchase of jaggery but on the collection or non-collection of the tax by the dealers, as such it is also hit by Article 14 of theThe High Court rejected all these contentions except the one relating to the validity of Section 9. The State of Andhra Pradesh as well as the Appellants in Civil Appeal No. 33 of 1971 had contended that that provision which granted an exemption from payment of tax to dealers who had not in fact collected the tax from their principals was valid and did not suffer from the vice of discrimination under Article14 because not only was the classification reasonable but that it was based on an intelligible differentia having a nexus with the object of the impugned Act.

Reasoning:
so, where an assessment has been made the assessee has a right to challenge the provisions of the Amendment Act under which the levy and collection of tax have been given retrospective validity. Apart from the question that this argument does not take into account the distinction between an attack under Article 14 and an attack under Article 19 it overlooks the fact that what is sought to be recovered from the Appellant is in respect of a tax collected on the post dealings and not with respect to the future transactions. We had pointed out that tax had already been collected, no doubt at first illegally, but due to the amendment Act that collection has become legal and as a dealer he is liable to pay that amount to the State in respect of the assessments made. As there is nothing to show that what is sought to be recovered from the dealer is more than what he has collected, he has not suffered any loss nor any disadvantage which would entitle him to seek a remedy under Article 226 of the Constitutions. Shri P. Ramchandrao in Civil Appeal No. 2127 of 1970 had nothing new to add to the arguments advanced by the learned Advocates for thesection is enacted by the legislature with object of removing shortcomings in the principal Act which were found wanting by judicial interpretations. The interregnum between the declaration by the High Court of certain provision of the Act as being unconstitutional and the attempt of the legislature to remedy the defects and to give retrospective effect thereto created two distinct categories between the same class of dealers namely those who had collected the tax whether they were assessed or not and those who had not collected the tax. This classification is certainly reasonable and is related to the object which the Amendment Act seeks to achieve. The dealers who had not collected the tax could not have collected it as the law stood and therefore the legislature did not think it just or proper to collect tax from those who were not liable. Even this exemption as can be seen is given to only those persons who can establish that they have not in fact collected it, the burden of which is upon those who claim the exemption. It is unnecessary to deal with hypothetical cases. The mere fact that in many cases it was not collected because the assessment could not be completed cannot be a valid ground nor can it even now be made in regard to those assessments which are now pending (a matter upon which we do not pronounce) cannot be valid grounds to declare the classification as arbitrary or unreasonable, which reason seems to have weighed with the High Court. We think not only the classification reasonable but there is an intelligible differentia furnishing a nexus with the object, the Amendment Act seeks to achieve