Central
Wines, Hyderabad Vs. Special Commercial Tax Officer
[1987] INSC 7 (9
January 1987)
Thakkar,
M.P. (J) Thakkar, M.P. (J) Singh, K.N. (J)
CITATION:
1987 AIR 611 1987 SCR (1) 945 1987 SCC (2) 371 JT 1987 (1) 127 1987 SCALE (1)15
ACT:
Andhra
Pradesh General Sales Tax Act, 1957. section
2(s)--"Turnover"--Whether it includes sales tax charged from the
buyer and shown in the Bill, by virtue of the expression 'any other sum charged
by the dealer whatever be the description, name or object thereof' occurring in
the said definition in section 2(s) and as such the amount of Sales Tax either
shown in the Bill or by Debit Voucher is includable in the turnover for the
purposes of computing the sales tax liability of assessees.
HEAD NOTE:
In
Andhra Pradesh, Sales tax is levied under the authority of sections 5 and 5A of
the A.P. General Sales Tax Act, 1957 on the 'turnover' of a dealer. The
expression 'turnover' has been defined in section 2(s) inter alia to include
the total amount set out in the bill of sale or the total amount charged as
consideration for the sale or purchase of goods whether such sales includes any
other sum charged by the dealer whatever be the description, name or object
thereof. Whether or not sales tax collected by the dealers from the buyers
would fall under the inclusive part of aforesaid definition is the question
raised in these appeals. It has arisen in the context of two categories of
cases, namely:
(i) wherein
the sales tax has been separately set out in the bill of sale and is collected
by the seller at the time of sale immediately after or at the time of delivery
of the goods.
(ii) wherein
the sales tax is not mentioned in the bill at all but simultaneously collected
with the delivery of the goods separately under debit notes whereby the exact
amount of sales tax due is collected from the purchaser by the seller but the
said amount is kept in the suspense account.
The
submissions urged by the appellants before the High Court in their Writ
Petitions were:
1.
That where the amount is collected specifically as 'tax', it cannot be deemed
to be a part of the consideration for the sale of 946 the goods and as such it
cannot form part of the turnover within the meaning of section 2(s) of the Act.
2.
Inasmuch as the Act does not prohibit the dealer to pass on the sales tax
component of the sale price to the purchaser, the dealer should he deemed to he
an agent, of the Government for collecting the sales tax amount.
The
High Court repulsed the plea of the assessees that the amount of sales tax so
collected from the buyers was not includible in the turnover for the purposes
of computing the sales tax liability of the assessees. The concerned assessees
have approached the Supreme Court by way of the present group of appeals by
Special Leave.
Dismissing
the appeals, the Court,
HELD:
1.1 The sales tax component of the sale price charged by the vendor to the
vendee is not collected by him as an agent of the Revenue (State Government). [
953D-E]
1.2
Some of the salient features of the A.P. General Sales Tax, 1957 are:(1) There
is no provision in the Act which imposes a legal obligation on the vendor of
the goods to recover sales tax on the goods sold to the vendee. For instance
the vendor is not prohibited from selling the goods withont recovering the
sales tax from the vendee. The seller may not charge or recover the sales tax
from the buyer. He will not he violating any provision of the Act or incurring
any penal consequence by doing so. In other words the collection of the sales
tax from the buyer is a matter of his choice. He may or may not do so. If he
does not do so he does not expose himself to any penal consequence or legal
liability.
(2)
There is no legal obligation imposed by the Act on the buyer of the goods to
pay sales tax at the time of the purchase of the goods. If the vendor does not
insist on such payment and if the buyer does not pay the tax he does not
violate any provision of the law or incur any legal liabilty.
(3)
There is no provision in the Act which casts any legal duty on the vendor to
mention in the bill or the voucher issued to the buyer that sales tax has been
recovered from the buyer. Nor 947 is then any obligation on him to show that
sales tax is included in the price charged or to specify the amount of sales tax
separately in the bill or voucher.
(4)
Nothing in the Act requires the dealer to set apart the amount recovered from
the vendee by way of sales tax. He is neither bound to keep a separate account
of the amount so recovered nor to keep it in a separate cash box. He can treat
it as his own money, keep it in his own cash box, and use it as flit were his
own property. If the amount is stolen or is misappropriated by his employee it
is he who loses his own money and it is not the Revenue which has to bear the loss.
(5)
His liability to pay sales tax is analogous to his liability to pay the
Municipal taxes or the Income tax etc.
The
liability is to pay from his own property and not from any property earmarked
for that purpose from out of the collection of tax made from the buyers.
(6)
The dealer is no doubt required to deposit along with sines tax return
periodically the amount of tax due on the sales effected by him. But that is
merely a convenient mode of discharging his liability at the intervals as
enjoined by the Act. It is neither linked nor dependent on recovery if any made
by him from the buyer (which he may or may not make).
(7)
The dealer is not paid any remuneration or reward for collecting the sales tax.
If he was acting as an Agent, the State would he obliged to pay him some
remuneration or reward, for, the State cannot oblige him to work as its agent
gratis. It would amount to forced labour if it were otherwise. [951C-H; 952A-D]
The
aforesaid factors, viewed cumulatively, make it evident that a dealer who sells
the goods does not act as an agent for the State in collecting the sales tax
from the persons to whom he sells the goods. If he was acting as an Agent he
would be required to take reasonable care of the sale proceeds as a bailee. He
would also he required to set apart the same without intermingling with his own
money, for, he cannot use the monies belonging to the State for his own private
purposes. If the intention of the legislature was to make him an agent, the
legislature would have imposed penal liability on the vendor if he were not to
collect the taxes. He would he obliged to maintain separate accounts of the
collection made by him as also to treat the collections as the collec948 tions
made by the agent on behalf of the principal. [952D-F]
2.1
The sales tax component included in the sale price is includable in making the
aggregate for the purpose of the 'turnover' within the meaning of section 2(s),
even though it is recovered as a tax from the purchaser and not as the price of
the goods charged to the vendee. [953F]
2.2
Recovery of tax from the purchasers is not under a statutory obligation, in the
instant case. Even if therefore the bill or the voucher issued to the purchaser
indicates the amount of sales tax separately what is collected by the vendor
from the vendee is not tax but is merely a part of the sale price charged by
the vendor to the vendee. So far as the statute is concerned it does not cast
any obligation on the purchaser of the goods to pay any tax and therefore what
is collected by the vendor from the vendee by way of consideration for passing
the property in the goods to the vendee is the price charged by him and not tax
collected by him from the purchaser. The amount of money which goes from the
pocket of the vendee to the pocket of the vendor as a condition or
consideration for passing of the property in the goods is thus the sale price
and not the tax. It is the amount, but for the payment of which, the vendor
would not transmit his title to the goods in favour of the vendee, and not any
amount paid by the vendee towards any taxability incurred by him on making the
purchase of the goods. Nothing would turn on whether the bill or voucher issued
to the vendee is so made out to show that the sales tax is charged separately.
If he does so he would be doing so only for the sake Of his accounting purposes
and convenience. The consideration obtained by him from the vendee would in the
eye of law be the sale price regardless of what nomenclature is given to a part
of the price charged by him, [952F-H; 953AE]
2.3
The amount includible in the turnover on the true interpretation of the
relevant provisions cannot become excludible merely by reason of the
accountancy device adopted by the assessee concerned. [956D-E] M/s George Oakes
(P) Ltd. v. State of Madras, [1961] 12 STC 476, followed.
McDowel
& Company v. Commercial Tax Officer, AIR 1977 SC 1459 and Anand Swarup
Mahesh Kumar v. The Commissioner of Sales Tax, [1980] 4 SCC 451, distinguished.
Government
of Andhra Pradesh v. East India Commercial Company Ltd., [1957] 8 STC 114 and
State of Andrha Pradesh v. Bujranga Jute Mills Ltd., [1955]
6 STC 376, referred to.
948
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1118 of 1981 etc.
From
the Judgment and Order dated 17.11.1980 of the Andhra Pradesh High Court in
W.P. No. 5468 of 1979.
A. Subba
Rao for the Appellants.
Dr.
Y.S. Chitate and T.V.S.N. Chari for the Respondents.
The
Judgment of the Court was delivered by THAKKAR, J. In a batch of Writ Petitions
and T.R.C.
cases
before the High Court the question raised in substance was formulated as under:"The
question, therefore, that arises in both these cases, is whether the amount
collected by the seller from the buyer which comprises of the two components
the actual sale price and the sale tax is a part of the "turnover"
and comes within the expression "any other sum charged by the dealer
whatever be the description, name or object thereof" occurring in the
definition in Section 2 (s)1 of the Act. In the former case it is shown expressly
as sales tax and in the latter case it is shown in the form of debit notes. But
in both the cases it is collected by the seller from the buyer at the time of
the sale or rather as a condition of sale."
1.
Section 2(s) of the Andhra Pradesh General Sales Tax Act 1957
"turnover" means the total amount set out in the bill of sale or if
there is no bill of sale, the total amount charged as the consideration for the
sale or purchase for the sale or purchase of goods whether such consideration
be cash, deferred payment or any other thing of value including any sums
charged by the dealer for anything done in respect of goods sold at the time or
before the delivery to the goods and any other sums charged by the dealer,
whatever, be the description, name, object thereof:
Provided
that in the case of a sale by a person whether by himself or through an agent
of agricultural or horticultural produce grown by himself or grown on any land
in which he has an interest whether as owner, usufructuary mortgage, tenant or
otherwise the amount of the consideration relating to such sale shall be
excluded from his turnover when such produce is sold in the form in which it
was produced, without being subjected to any physical chemical or other process
for being made fit for consumption save mere cleaning grading or sorting.
X X X X
X X X X X X X X" 950 The High Court repulsed the plea of the assessees
that the amount of sales tax so collected from the buyers was not includible in
the turnover for the purposes of computing the sales tax liability of the assessees.
The concerned assessees have approached this Court by way of the present group
of appeals by Special Leave.
Sales
tax is levied under the authority of Section 5 and Section 5-A on the
'turnover' of a dealer. The expression 'turnover' has been defined by Section
2(s) inter alia to include the total amount set out in the bill of sale or the
total amount charged as consideration for the sale or purchase of goods whether
such sales includes any other sum charged by the dealer whatever be the
description, name or object thereof. Whether or not sales tax collected by the
dealers from the buyers would fail under the inclusive part of aforesaid
definition is the question raised in these appeals. It has arisen in the context
of two categories of cases, namely:
(i) wherein
the sales tax has been separately set out in-the bill of sale and is collected
by the seller at the time of sale immediately after or at the time of delivery
of the goods.
(ii) wherein
the sales tax is not mentioned in the bill at all but simultaneously collected
with the delivery of the goods separately under debit notes whereby the exact
amount of sales tax due is collected from the purchaser by the seller but the
said amount is kept in the suspense account.
The
submissions which were unsuccessfully urged before the High Court and are
reiterated before us on behalf of the assessees are:
1.
That where the amount is collected specifically as 'tax', it cannot be deemed
to be a part of the consideration for the sale of the goods and as such it
cannot form part of the turnover within the meaning of Section 2(s) of the Act.
2.
Inasmuch as the Act does not prohibit the dealer to pass on the sales tax
component of the sale price to the purchaser, the dealer should be deemed to be
an agent of the Government for collecting the sales tax amount.
In
repelling the aforesaid contentions, strong reliance was placed by the High
Court on its full bench decision in Government of Andhra Pradesh v. East India
Commercial Company Ltd., [1957] 8 STC 114 951 wherein an cartier decision of a
Division Bench State of Andhra Pradesh v. Bujranga Jute Mills Ltd., [1955] 6
STC 376 to the effect that sales tax collected by the dealer from the buyers
cannot be included in his turnover and is not liable to be taxed again was over
ruled. It may incidentally be mentioned that the aforesaid full bench judgment
of the High Court was noted with approval by this Court in M/s George Oakes (P)
Ltd. v. State of Madras., [1961] 12 S.T.C. 476.
Some
salient features require to be underscored in order to test the merits of these
submissions:(1) There is no provision in the Act which imposes a legal
obligation on the vendor of the goods to recover sales tax on the goods sold to
the vendee. For instance the vendor is not prohibited from selling the goods
without recovering the sales tax from the vendee. The seller may not charge or
recover the sales tax from the buyer. He will not be violating any provision of
the Act or incurring any penal consequence by doing so. In other words the
collection of the sales tax from the buyer is a matter of his choice. He may or
may not do so. If he does not do so he does not expose himself to any penal
consequence or legal liability.
(2)
There is no legal obligation imposed by the Act on the buyer of the goods to
pay sales tax at the time of the purchase of the goods. If the vendor does not
insist on such payment and if the buyer does not pay the tax he does not
violate any provision of the law or incur any legal liabilty.
(3)
There is no provision in the Act which casts any legal duty on the vendor to
mention in the bill or the voucher issued to the buyer that sales tax has been
recovered from the buyer. Nor is there any obligation on him to show that sales
tax is included in the price charged or to specify the amount of sales tax
separately in the bill or voucher.
(4)
Nothing in the Act requires the dealer to set apart the amount recovered from
the vendee by way of sales tax. He is neither bound to keep a separate account
of the amount so recovered nor to keep it in a separate cash box.
He can
treat it as his own money, keep it in his own cash box, and use it as if it
were his own property. If the amount is stolen or is misappropriated by his
employee it is he who loses his own money and it is not the Revenue which has
to bear the loss.
952
(5) His liability to pay sales tax is analogous to his liability to pay the
Municipal taxes or the Income-tax etc.
The
liability is to pay from his own property and not from any property earmarked
for that purpose from out of the collection of tax made from the buyers.
(6)
The dealer is no doubt required to deposit along with salestax return
periodically the amount of tax due on the sales effected by him. But that is
merely a convenient mode of discharging his liability at the intervals as
enjoined by Act. It is neither linked nor dependent on recovery if any made by
him from the buyer (which he may or may not make).
(7)
The dealer is not paid any remuneration or reward for collecting the sales tax.
If he was acting as an Agent, the State would be obliged to pay him some
remuneration or reward for the State cannot oblige him to work as its agent
gratis. It would amount to forced labour if it were otherwise.
The
aforesaid factors, viewed cumulatively, make it evident that a dealer who sells
the goods does not act as an agent for the State in collecting the sales tax
from the persons to whom he sells the goods. If he was acting as an Agent he
would be required to take reasonable care of the sale proceeds as a bailee. He
would also be required to set apart the same without intermingling with his own
money, for, he cannot use the monies belonging to the State for his own private
purposes. If the intention of the legislature was to make him an agent, the
legislature would have imposed penal liability on the vendor if he were not to
collect the taxes. He would be obliged to maintain separate accounts of the
collection made by him as also to treat the collections as the collections made
by the agent on behalf of the principal. It is therefore futile to contend that
the sales tax component of the sale price charged by the vendor to the vendee
is collected by him as an agent of the State Government. Even if therefore the
bill or the voucher issued to the purchaser indicates the amount of sales tax
separately what is collected by the vendor from the vendee is not tax but is
merely a part of the sale price charged by the vendor to the vendee. So far as
the statute is concerned it does not cast any obligation on the purchaser of
the goods to pay any tax and therefore what is collected by the vendor from the
vendee by way of consideration for passing the property in the goods to the
vendee is the price charged by him and not tax collected by him from the
purchaser. The amount of money which goes from the pocket of the vendee to the
pocket of the vendor as a 953 condition or consideration for passing of the
property in the goods is thus the sale price and not the tax. It is the amount,
but for the payment of which, the vendor would not transmit his title to the
goods in favour of the vendee, and not any amount paid by the vendee towards
any tax liability incurred by him on making the purchase of the goods. It is no
doubt true that a dealer as a prudent businessman would pass on the burden in'
the context of the sales tax liabilty to the buyer. But then he would be doing
so in order that he may not make a loss on the transaction. Inasmuch as no
businessman Carries on business with a view to incur loss, that he would take
into account this factor at the time of collecting the sale price from the
vendee stands to reason.
That
however does not mean that he is collecting the tax from the purchaser (for
which in fact he has no authority in law under the Act). Just as a businessman
would take into account the expenses that he would have to incur for the
running of the business such as rent, salary, and other establishment charges,
just as he would keep a reasonable profit margin in the context of the
investment made by him, he would also take into account the factor that he
would have to pay sales tax on the turnover having regard to the statutory
liability imposed on him by the Act. That however does not mean that what he is
charging from the vendee is the tax and not a part of the sale price. So also
it would not mean that he has been acting as an agent for Revenue.
Nothing
would turn on whether the bill or voucher issued to the vendee is so made out
to show that the sales tax is charged separately. If he does so he would be
doing so only for the sake of his accounting purposes and convenience. The
consideration obtained by him from the vendee would in the eye of law be the
sale price regardless of what nomenclature is given to a part of the price
charged by him.
Thus
there is no substance whatever in the contention that the sales tax component
included in the sale price is not includible in making the aggregate for the
purpose of the turnover, it being a tax recovered from the purchaser and not
the price of the goods charged to the vendee.
What
is more, in George Oakes (Pvt.) Ltd. v. State of Madras, [1961] 12 STC 476 this
Court had an occasion to consider a similar challenge made in the context of
the constitutional validity of Section 8 B of Madras General Sales Tax Act 1939
wherein this Court has repelled this very argument in no unclear terms: ''Obviously.
it is not the name the legislature accords to a payment by a purchaser to a
seller, who is a dealer as 954 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
principle that was re-stated in Bengal Immunity Co. Ltd. v. State of Bihar. 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." Reliance was placed by the
appellants on McDowel & Company v. Commercial Tax Officer AIR 1977 SC 1459 in
support of the plea that the amount collected from the buyers if kept apart
cannot be included in computing the turnover of the dealer. In our opinion,
this submission is clearly misconceived. In McDowel's case this Court was
dealing with the question as regards the includibility of excise duty and
countervailing duty in the aggregate turnover of the dealer.
This
court has taken that view inasmuch as the excise duties and countervailing
duties were paid directly by the purchasers to the excise authorities before
removing the same from the distilleries or the bonded warehouses and
accordingly the same were not includible in the turnover of the dealers.
Since
the amount was not charged or paid by the dealers but by the manufacturers,
this Court upheld the contention of the assessees (vide paragraph 12 of the
judgment).
This
decision can be of no avail to the appellants because in the present case the
amount in question is charged or recovered by the sellers from the buyers
whether it is mentioned as Sales tax or not. The principle laid down in McDowel's
case cannot be applied to the factsituation in the present case. In fact in McDowel's
case the full Bench decision of the Andhra Pradesh High Court Govt. of Andhra
Pradesh v. East India Commercial C. Ltd., AIR 1967 Andhra Pradesh 83 has been
noted with approval in paragraph 17 of the judgment.
It was
further argued by learned counsel for the appellants draw955 ing inspiration
from Anand Swarup Mahesh Kumar v. The Commissioner of Sales Tax, [1980] 4 SCC
451 that the matter requires reconsideration in the light of the observations
made therein. We are unable to accede to this submission. In Anand Swarup
Mahesh Kumar's case this Court was concerned with the market fee' collected by
a dealer from the purchaser for being passed on to the market committee under
U.P.
Act
No. XXV of 1964. It was an amount which the statute authorised the dealer to
collect from the purchaser separately and directly under the authority of
Section 17 (iii) (b)(1) of the said Act and to pass it on or make it over to
the Market Committee. It is evident that it was an amount collected by the
dealer underthe statutory authority as an agent of the Market Committee for
being passed on to the Management Committee and therefore could not be treated
as a component of the sale price of the goods which were sold to the purchaser.
It was in this context that this Court came to the conclusion that the Market
fee so collected could not be included in the turnover as is evident from the
pertinent passage: "From the observations made in the decisions referred
to above, it follows that where a dealer is authorised by law to pass to any
tax payabIe 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 provsion authorising 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-1 v. Spencer & Co. (1975 Supp SCR 439) 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 956 liquor--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 the other rate as may be notified by the government
from time to time, on the price of the liquor so sold." It will thus be
seen that this Court has again reaffirmed the position that the includibility
must turn on the question as to whether or not the tax is recoverable from the
purchasers under a statutory obligation. This decision cannot therefore be of
any avail to the appellants inasmuch as there is no such statutory provision in
the Act with which we are concerned.
Lastly
it was argued that in the second category of cases where the sales tax was not
included in the bill and was kept in the suspense account by the seller, it
could not be included in the total turnover. This fallacious argument was
rightly negatived by the High Court for the obvious reason that the amount
includible in the turnover on the true interpretation of the relevant
provisions cannot become excludible merely by reason of the accountancy device
adopted by the assessee concerned.
There
is no substance in any of the contentions urged on behalf of the appellants.
The view taken by the High Court is unexceptionable. The appeals fail and are
dismissed. The interim orders shall stand vacated. The appellants assessees
will be liable to pay the amount due as sales tax along with interest thereon @
12% as per the condition imposed by this Court at the time of granting the
interim stay. The sales tax authorities may recover the amount due by encashing
Bank Guarantee as also by effecting recovery in accordance with law.
S.R.
Appeals dismissed.
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