Jonnala Narasimharao & Co. &
Ors Vs. State of Andhra Pradesh & Ors [1971] INSC 108 (5 April 1971)
REDDY, P. JAGANMOHAN REDDY, P. JAGANMOHAN
SIKRI, S.M. (CJ) MITTER, G.K.
HEGDE, K.S.
GROVER, A.N.
CITATION: 1971 AIR 1507 1971 SCR 367
ACT:
Andhra Pradesh General Sales Tax Act, 1957 as
amended by Act 9 of 1970-Past assessments under invalid law validatedAgents
selling jaggery on behalf of principals made liable under s. 11 as amended to
pay the tax collected by themAgents had no locus standi to challenge levy on
the basis of discrimination between principals inter se-Validity of s. 9 of
Amending Act-Classification between dealers who had collected tax and those who
had not collected is reasonable.
HEADNOTE:
The appellants carried on the business of
Commission Agents in Jaggery in Andhra Pradesh. They arranged for the sale of
jaggery charging a small commission for their service and rendering an account
to their Principals in respect of those sales. Every buyer was fully apprised
of the fact that he was purchasing jaggery of specified agriculturist
Principals and not that of the appellants. Till about 1963 under s. II of the
Andhra Pradesh General Sales Tax Act, 1957, commission agents were required to
obtain and were being issued licences and if they conformed to the conditions
of those licences, they were not subjected to tax. In 1963 the principal Act
was amended by Andhra Pradesh General Sales Tax Amendment Act 16of 1963. By the
new s. I I introduced by the Amending Act the Agentsof resident Principals were
made liable for assessment and collection of tax thoughthe liability of the
Agent was made co-extensive with that of the principal. The High Court held
that in assessing the Agent the turnover of those Principals whose turnover was
below the taxable limit of Rs. 10,000 could not be taken into account. As a
consequence of this decision the Andhra Pradesh General Sales Tax Amendment Act
5 of 1968 was enacted and a new s. I 1 substituted for the existing section.
This s. II was given retrospective effect from 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 the Principal was not liable to tax. This new section was also struck down
by the High Court, on the ground that it was violative of Art. 14 of the
Constitution.
In view of this judgment which restored the
legal position to that prevailing before the Amendment, large sums of money
which bad been collected as tax from the Agents became refundable. To meet this
situation the Andhra Pradesh Legislature enacted the Andhra Pradesh General
gales Tax Amendment Act 9 of 1970, Section 8 of which validated the assessments
already made. Under s. 9 Agents who had not collected the tax from their
Principals were exempted from tax. Under s. I I Agents who had collected the
tax were made liable to pay the same. In writ petitions under Art.
226 filed by Agents it was contended that s.
II as amended and s. 9 of the Amending Act were violative of Art. 14. The High
Court held that s. 1 1 was valid but s. 9 violated Art.
14. In appeal filed against the High Court's
judgment by certificate,
HELD:(i) The appeals filed by the agents were
not maintainable. What was sought to be recovered from the appellants was in
respect of a tax collected on past dealings and not with respect to the future
transactions.
The tax had already been collected, no doubt
at first illegally, but 368 due to the Amendment Act, that collection had
become legal and as dealers, the appellants were liable to pay that amount to
the State. As there was nothing to show that what was sought to be recovered
from the dealer was more than what he had collected he had not suffered any
loss nor any disadvantage which would entitle him to seek a remedy under Art.
226 of the Constitution [373B-C] (ii) Section 9 had been wrongly struck down by
the High Court as invalid. This section was enacted by the legislature with the
object of removing shortcomings in the principal Act which were found wanting
by judicial interpretation. The interregnum between the declaration by the High
Court of certain provisions 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 was certainly
reasonable and was related to the object which the Amendment Act sought to
achieve. The dealers who had not collected the tax could not have collected it
as the law stood and therefore the legislature thought it just or proper to
collect the tax from those who were not liable. . Even this exemption was given
to those who could establish that they had not in fact collected it, the burden
of which was upon those who claimed the exemption. [374D-E],
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 2116, 2217, 2218, 2126 to 2128 of 1970 , 33, 144 ,157, 159 to 163 and 164
to 166 of 1971.
Appeals from the judgments and orders dated
the September 5, 1970 of the Andhra Pradesh High Court in Writ Petitions Nos.
2720 of 1970 etc.
S. V. Gupte and G. Narayana Rao for the
appellants (in 2116 of 1970). C.A. No.
M. Natesan and G. Narayana Rao for the
appellants (in C.A. No. 2217 of 1970).
G. Narayana Rao for the appellants (in C. As.
Nos. 2218 of 1970, 144, 157, 159 to 163 and 164 to 166 of 1971).
M. C. Setalvad and W. C. Chopra, for the
appellants (in C.As. No. 2126, of 1970).
Polesseti Ramachandra Rao and W. C. Chopra
for the appellants (in C.As. Nos. 2127 and 2128 of 1970).
S. T. Desai and K. Rajendra Chowdhary, for
the appellants, (in C.A. No. 33 of 1971).
P. Ram Reddy and P. Parameshwara Rao, for the
respondents (in all the appeals).
369 The Judgment of the Court was delivered
by p. Jaganmohan Reddy, J.--This batch of Appeals is by Certificate against a
common Judgment of the Andhra Pradesh High Court dismissing the Writ Petitions
filed by several dealers in jaggery who challenged the vires and
constitutionality of Sections 2, 5, 8 and 9 of the Andhra Pradesh, General
Sales Tax Amendment Act 9 of 1970 (hereinafter called the "Amendment
Act"). The Appellants are Commission Agents carrying on trade in jaggery.
Agriculturists who prepare jaggery out of
surplus sugarcane which they are unable to sell to the Sugar factories employ
the Appellants as their Commission Agents to sell that jaggery.
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 varies 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 Agriculture 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.
Till about 1963 under Section 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 licences and if they conformed to the
conditions of those licences 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 II for that which was in force fill
then. The new Section II changed the preexisting structure of assessment in
that, the Agents of Resident Principals were made liable for assessment and collection
of Tax through 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. 10000/of each was not exigible to tax. These assessments were
challenged in a batch of writ petitions in Irri Raju & Ors. v. The
Commercial Tax Officer, Tedeplalligudem & Anr.(1) in which the, High Court
of Andhra Pradesh hold that the (1) Sales Tax Cases-Vol. XX (1967) p. 501.
24-1 SC India/71 370 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 turnover 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 1968 was enacted and a new Section 1 1 was substituted
for the then existing Section. This Section II 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 turnover specified
in sub-section of section 5. The proviso to the new Section II however
authorised the Tax or penalty assessed or levied on or due from the 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
Sri Konathala Venkata Ramana & Budha Apparao v. State of Andhra Pradesh
& Anr.(1).
The High Court held that even after the
amendment the liability of the Agent continues to be based on the principal of
representation and whether he is a dealer in respect of an 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 II
of the Act, Section II 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. Amendments made
by Sec. 2. 5, 8 and 9 of the Amendment Act is that a proviso was added to
Section 5(1), a new Section II was substituted for the old Section II with
retrospective effect from 1-8-63. The, amended Section 11 it may be noticed (1)
Sales Tax Cases-Vol. 24 (1969) P. 367.
371 was identical with Section 1 1 as it
stood on 1-8-1963. 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 paise 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 Section 2 of the Amending Act would cease to have effect. Section 8 of
the Amending Act purported to validate the assessments already made while
Section 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 1-2-6o and
31-7-63 but by reason of the Amendment introduced by Act 16 of' 1963 a multiple
point tax on safe subject to an exemption of a turn-over of Rs. 10000/became
leviable at 2 paise pet Rupee from 1-8-63 which rate was enhanced to 3 paise
from 1-4-1966 by Amendment Act 7 of 1966. A single point taxation was however
levied on items in Schedule 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 II read with the new
proviso to Section 5 (1) makes an invidious distinction between dealers in
jaggery on the one hand and 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 Section 11 substituted by the Amendment
Act. If so read the new proviso to Section 5(1) and the new Section II 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 bit by Article 14 of the Constitution.
The 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 372
contended that that provision which granted an, exemption from. payment of tax
to, dealers who bad not, in fact collected the tax from their principal was,
valid and did, not suffer from the vice of discrimination under Art. 14 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.
We shall however deal with last mentioned
aspect presently but before we do so on the threshold of the argument of them
Appellants there is a valid objection to the maintainability of the Writ
Petitions filed by the dealers who as Agents of the Principals had collected
tax from the purchasers which as a consequence of the two decisions, of the
High Court referred to earlier was illegal. After the, amendment Act the levy
and collection by the dealers became prima facie legal. In so, far as jaggery
is concerned there was also no question of any, exemption of the minimum
turnover of the principal of Rs. 10,000, so That the hardship which a Corn-mission
Agent dealer had to undergo in trying to determine whether the, turn-over of
each of his principals was below Rs. 10,000 before he could collect Sales Tax
was no longer there. After the Amendment by removing the exemption of Rs 10,000
on sale of jaggery which was given retrospective -effect, the dealer agents
could not now complain, which complaint had been held by the High Court to be
justified, that while the principals were exempted from tax upto Rs.
10,000 the tax is being levied on the agents
turn-over irrespective of that exemption. In any case whatever objections the
principals may have to the constitutional validity of the provisions introduced
by the amending Act under Article 14 the Agent dealers certainly have no locus
standi to complain about discrimination between Principals inter-se. That apart
the dealers are not expected to and in fact do not pay any money of their own
towards the tax which is levied. The tax so levied and paid to the assessing
authorities by the dealer agent is, under the provisions of the Act, not
returnable nor can the principal under the provisions of the Act make any claim
against such dealer Agents.
Shiri Gupte on behalf of the Appellants was
unable to tell us that there were among the Appellants any principals who had a
direct interest in challenging the validity of the provisions on the ground of
discrimination. Shri Motilal Setalvad on behalf of the Appellants in Civil
Appeals Nos.
2126 to 2128 of 1970 strenuously contended
that the Appellants have an interest and can maintain the Writ Petitions
because they were dealers within the meaning of Section 2(e) and are persons
who are aggrieved because of the assessment made or likely to be made and tax
recovered from them. He has further contended that this Court has in several
cases hold that even a notice issued to any person under the provisions of an
impugned Act which is likely to cause prejudice will 373 entitle him to
challenge the Constitutional Validity of the law under which the notice is
given. If 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 Art. 14 and an attack under Art. 19 it overlooks the fact that what is
sought to be recovered from the Appellant is in respect of a tax collected on
the past 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 has also dealer be is liable to pay that amount
to the State la. 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 hits
collected, he 'has not suffered any loss or any disadvantage which would
entitle him to seek a remedy under Art. 226 of the Constitution. Shri P.
Ramchandra Rao in Civil Appeal No. 2127 of 1970 had nothing now to add to the
arguments advanced by the learned Advocates for the Appellants. On this short
ground alone we dismiss all the Appeals except Civil Appeal No. 33 of 1971 but
in the circumstances without costs.
Appeal in Civil Appeal No. 33 of 1971:
In this Appeal Shri S. T. Desai contends that
the High Court had erroneously struck down Sec. 9 of the Amendment Act.
Sec. of the Amendment Act is as follows:
"9(1) where any sale of jaggery has been
effected during the period between the 1st August 1963 and the commencement of
Section 5 of this Act in so far as it relates to item 77, and the dealer
effecting such sale has not collected ally amount by way of tax under the
principal Act ,on the ground that no such tax could have been levied or
collected in respect of such sale, or any portion of the turnover relating to
such sale, and where no such tax could also have been levied or collected if
the amendments made in the principal Act by this Act had not been made, then,
notwithstanding anything contained in Section 8 or the said amendments, the
dealer shall not be liable to pay any tax under the principal Act, as amended
by this Act, in respect of such sale or such part of the turnover relating to
such sale.
(2)For the purposes of sub-section (1), the
burden of proving that no amount by way of tax was collected under the
principal Act in respect of any sale referred to in sub-section (1) or in
respect of any portion of the 374 turnover relating to such sale, shall be on
the dealer effecting such sale".
This Section is enacted by the legislature
with the object of removing short-comings in the principal Act which were found
wanting by judicial interpretation. 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. In this view we set aside the Judgment of the High Court
declaring Section 9 as unconstitutional and allow the appeal, but in the
circumstances without costs.
G. C. Appeal allowed.
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