Case: Konduri Buchirajalingam Vs. State of Hyderabad &amp; Others

2. In Warangal in Hyderabad State there was an Association of oil mill owners called the Warangal Subha Oil Mill Owners Association. The appellant was a member and the Vice-President of that Association. The members of the Association in the course of their business purchased ground-nuts for the purpose of converting them into oil and trading in the same3. The Hyderabad General Sales Tax Act came into force on 1st May 1950. The members of the Association who were "dealers" as defined in the Act, got themselves registered under its provisions. Soon after the Act came into force the Sales Tax Officer, Warangal verbally informed the members of the Association that they would have to pay tax on the purchase of ground-nuts made by them. Thereafter certain correspondence ensued between the Association and the taxing authorities in which the Association took up the position that the members should collect tax that they were called upon to pay, from the persons from whom they bought the ground-nuts including the actual growers thereof whom we shall hereafter refer to as the agriculturists. The Association requested the Market Superintendent at Warangal to assist its members in collecting the tax from the agriculturists according to the practice prevailing in Hyderabad. The Market Superintendent informed the Association that the members should not collect any tax from the agriculturists. The Association carried on further correspondence with the higher Sales Tax Authorities insisting that its members should be allowed to collect from the agriculturists the tax on the purchases made from them and requested that the collection of tax from the members should be suspended till a decision of the question of their right to collect the tax from the agriculturists, was arrived at. On 23rd December 1950, the Commissioner of Sales Tax, Hyderabad, wrote to the Association stating that a dealer had no right to collect the tax from an agriculturist and that the sale of agricultural produce by an agriculturist did not attract the liability to tax under the Act, and therefore the members of the Association could not collect any tax from the agriculturists and that the sale of agricultural produce by an agriculturist did not attract the liability to tax under the Act, and therefore the members of the Association could not collect any tax from the agriculturists. He added that under R. 5 (2) of the Rules framed under the Act, the turnover on which the tax was payable in respect of sales of ground-nuts was the amount for which the goods were bought and therefore the sellers of ground-nuts were not liable to pay any tax. He also intimate that a dealer in ground-nuts was at liberty to collect the tax paid by him on his purchases of ground-nuts, from the person to whom he subsequently sold the ground-nuts and in the cases in which he converted the ground-nuts into oil, he was entitled to include the tax in the price of the oil sold by him. The Association then addressed the Finance Minister of the Government of Hyderabad on the same question, on 9th January 1951. Before a reply was received from the Finance Minister the members of the Association were pressed by the local Tax Authorities to submit their returns and this they thereupon did, claiming in such returns a deduction of tax on ground-nuts purchased by them from the agriculturists. Assessments were duly made on these returns but the deductions claimed were not allowed. Demands for payment of tax were thereafter made on the members of the Association in terms of the orders of assessment. The assesses preferred appeals from the orders of assessment but these appeals had not been disposed of on the date when the petition for the issue of writs, out of which the present appeals arises, was filed. On 5th June 1951, the Finance Minister replied to the Associations representation stating that sales tax in respect of ground-nuts was to be collected on the total turnover of the purchaser and therefore the turnover of the sellers of the commodity was exempt from the tax; that the dealers could not be exempted from payment of sale tax for the period for which permission had been refused to them to collect tax from the agriculturists because the agriculturists could have refused to pay the tax as the had no liability to pay and there was nothing to show that the agriculturists would have agreed to accept a reduction of the price to the extent of the tax, if asked to do so. On 19th June 1951 the Sales Tax Officer made fresh demands for the payment of the tax in terms of the orders of assessment. In these circumstances the petitioner on 5th July 1951, filed the petition asking for the issue of a writ of certiorari quashing the orders contained in the letters of 5th June 1951 and 19th June 1951 and a writ of prohibition restraining the Government from proceeding further in the matter of levying the tax and lastly and in the alternative, a writ ofmandamusdirecting the Government of Hyderabad to withdraw or cancel the orders contained in the letters of 23rd December 1950 and 5th June 1951. He made the State of Hyderabad, the Commissioner of Sales Tax, Hyderabad, the Sales Tax Officer, Warangal and the Sales Tax Officer, Kareemangar, the respondents to the petition. The respondents appeared to oppose the petition and as we have earlier stated it was dismissed on 11th September 1953. From that judgment the present appeal has come to this Court.

Reasoning:
We will for the purpose of this appeal assume that an agriculturist is not a dealer. We say assume, because it is conceivable that a producer of crops may also engage in the business of selling or supplying and become a dealer within the ActWe think that this is a misapprehension of the proviso. The proviso leaves the main portion of the definition intact and it only says that certain things shall be excluded from a persons turnover. The main portion of the definition, however, shows that "turnover" only refers to the turnover of a dealer and not of an agriculturist. Therefore, the proviso deals with a person who is both an agriculturist and a dealer and it excludes the proceeds of the sale by him of his own agricultural produce from his turnover as a dealer in goods. It is not necessary to discuss the proviso further, for we have assumed that an agriculturist is not a dealer within the meaning of the Act7. We are however unable to agree that Ss. 3 and 4 do not impose a tax on a purchase by a dealer from an agriculturist. Under these sections the tax is on the turnover, that is to say, the aggregate amount for which the goods are either bought or sold.The sections no doubt limit the taxable turnover to transactions in goods which are not exempted goods. But this only means that the buying or selling, whichever is taxed, is not to be of the exempted goods. It may be pointed out here that under S. 5 of the Act the tax is made payable at every point in a series of sales by successive dealers but the buyer and the seller are not both to be taxed in respect of the same transaction of sale, and where a dealer is taxed as the buyer of goods he shall not be taxed in respect of a subsequent sale by him of the same goods, and under R. 5(2) of the Rules framed under the Act, in the case of ground-nuts the turnover shall be the amount for which they were bought by the dealer. The result therefore is that under the Act tax is leviable on a sale either on the seller or on the buyer but not on both and it has been provided by R. 5 (2) that in the case of sale of ground-nuts the buyer shall pay the tax provided of course he is a dealer. In respect of ground-nuts therefore tax is payable by a dealer on his turnover of purchases of these goods. The seller of these goods, whether he is an agriculturist or not, is not, in any case, as the Act and the Rules stand, liable to pay tax. For the purposes of the Act an agriculturist, not being a dealer, has no turnover.That being so, no question of exemption of the transactions by an agriculturist from the liability to pay the tax arisesWe think it enough to say in regard to this contention that S. 11 authorises a dealer only to collect a tax payable under the Act and where no such tax is payable, a dealer has no right to collect anything under that section.Now under the Act a dealer is liable to pay the tax and an agriculturist not being a dealer, has no such liability. It follows that no tax can be collected from the latter. A dealer therefore has no right to collect any tax from an agriculturist under the Act.The respondents view that the appellant had not right to collect any tax from the agriculturist was right and the appellant can make no grievance on that accountWe do not think it necessary to go into the question whether the respondents were right in informing the appellant that he could recoup himself of the amount paid by him as tax by collecting the tax from the persons to whom he in his turn sold the ground-nuts or if he converted them into oil, by adding the amount of the tax to the price of the oil, for the primary liability for the tax was on the appellant and it made no difference whether he was able to recoup himself the amount paid or notThe contention of the learned Advocate for the appellant is, in our view, unsustainable. The law declaring goods to be essential for the life of the community contemplated by Art. 286 (3) is a law of the "Parliament" and therefore a law passed after the Constitution came into force. Act XXIV of 1946 was passed before the Constitution had been promulgated and is therefore not such a law. But it is said that it was applied to Hyderabad by a Parliamentary law, namely, Act LII of 1950 and therefore as applied to Hyderabad it became a Parliamentary law. We are not sure that this argument is correct but we think it unnecessary to discuss it here.We will assume for the purposes of the present case that it is correct. Even then it does not seem to us that Act XXIV of 1946 is a Parliamentary law declaring goods to be essential contemplated by Art. 286 (3). The law of Parliament declaring goods to be essential contemplated by cl. (3) of Art. 286 is a law making a declaration for the purposes of that clause.An Act like the Essential Supplies (Temporary Powers) Act of 1946, which declares certain goods essential for its own purposes is not a law within the meaning of the provision in the Constitution. Section 3 (1) of Act XXIV of 1946 shows why the Act declared certain goods to be essential commoditiesThe object of the declaration by the Act of goods as essential was not to prevent sales tax being levied on them. The Act had nothing to do with Art. 286 (3) of the Constitution and in fact did not declare any goods to be essential for the life of the community at all. It therefore seems to us that Act XXIV of 1946 was not an Act declaring any commodity essential for the life of the community within the contemplation of Art. 286 (3). In our view, any Act of Parliament declaring certain goods to be essential of its own purposes, as Act XXIV of 1946 does, is not an Act within the contemplation of Art. 286 (3). The Parliamentary Act, there contemplated, has to be passed in exercise of the powers contained in it and must clearly be referable to it. In fact such an Act was later passed by Parliament. That was "The Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, LII of 1952 which came into force on August 9, 1952. Its preamble states it to be an Act to declare in pursuance of cl. (3) of Art. 286 of the Constitution, certain goods to be essential of the life of the community and S. 3 sets out substantially the provisions of that clause of Art. 286 of the Constitution. It cannot therefore be contended that in view of Art. 286 (3) no tax can be levied on the sale of a commodity declared essential by Act XXIV of 1946.We may add that Act LII of 1952 is not available to the appellant either, for it had not been passed at the date when the levy of the tax objected to in this case was made.