# JOINT COMMERCIAL OFFICER, DIVISION II, MADRAS-2 ETC v. SPENCER & CO. ETC. ETC

- **Citation:** [1975] Supp. 1 S.C.R. 439
- **Court:** Supreme Court of India
- **Decided:** 1975-05-02
- **Case number:** Civil Appeals Nos. 2005 to 2016 H of 1970
- **Bench:** V. R. Krishna Iyer, R. S. Sarkaria, A. C. Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/joint-commercial-officer-division-ii-madras-2-etc-v-spencer-co-etc-etc-6533
- **Pages:** 4

## Headnote

Madras General Safes Tax Act, 1959, Sections 2(q), 2(r) and 3(1)---:-
an Dealer in foreign liquor and other goods-Tax paid under s. 21-A of Madras
Prohibitiaft Act, 1937 by purchaser if part oj taxable turnorer of the dealer .
•
439
A
B
The respondents-assessees are dealers in foreign liquor, among other goods.
They have been assessed to, sales tax as dealers on sales or purchases of other
C
goods under s. 3(1) of the Madras General.Sales Tax Act, 1959. They filed
Writ Petitions in the High Court challenging certain orders (relating to. diffe·
rent assessment years, ranging from 1959 to 1964-65) made by the assessing authority under the Madras General Sales Tax Act, 1959 proposing to re·
determine the taxable turnover of the respondents by including the sale-price
of foreign liquor which, it was alleged, had escaped · assessment. The High
Court Cirected the sales tax authorities not to include in the. assessable turnover the tax paid by the respondents under s. 21-A of the Madras Prohibition
D
Act, 193i. These appeals have been filed on the basis of the certificate of fitness granted by the High Court,
·
It was contended for the appellants that the amount coilected by the assessees by way of sales tax from· the purchasers were part of their total turnover
and as much liab1e to be taxed under s. 3(1) of the Act.
Rejecting the contention and dismissing the appeals,
HELD: It is clear from s. 21-A of the Madras Prohibition Act. 1937 that
the sales tax which the section requires the seller of Foreign liquof to collect
from the purchaser is a
tax on the
purchaser and not on the
seIJer.
Jt is a tax on the price of the liquor and
that tax is to be
paid
by
the purchaser. Section 21-A makes the seller a collector of tax for the Government, and the amount collected by him as tax under this
section cannot
therefore be a part of bis turnover. Under the Madras General Sales Tax Act,
1959 tb.e dealer has a statutory duty to collect the sales tax- payable by him
from his customer, and when the dealer passes on to the customer the amount
of tax which the former is liable to pay, the said amount does not cease to be
the price for the goods altho"Qgh "the price is expressed as X -plus purchase
tax". Bnt the amounts collected by the. assessees concerned in these appeals
unde4' a statutory obligation cannot be a part of their taxable turnover under
the Act. [442A-D] .
M/s. George Oakes (P) Ltd., v. State of Madras, [1962] 2 S.C.R. 57Q,
State of Kera/a v. Ramaswamy Iyer and Sons, [1966] Suppl. S.C.R. 582· and
Delhi Cloth and General Mills Ltd. v. Commissioner of Sales Tax, Indore,
[19711 Suppl. S.C.R. 945, held not applicable.
Paprica Ltd. and Anr. v. Board of Trade, [1944] 1 All. E.R. 372, referred to.
E
F
G
CML APPELLATE JURISDICTION : Civil Appeals Nos. 2005 to 2016 H
of 1970.
From the Judgment and Order dated the 10th April, 1969 of the
Madras High Court in W.Ps. Nos. 2787 to 2790 of 1966 and 2988 to
2991 of 1966 and T.C. Nos. 102, 104 & 195 of 1967.
!OSC/75-29
440
SUPREME COURT REPORTS
[1975] SUPP· S.C.R.
A
S. Govind Swaminathan, K. Venkataswami. N. S. Sivam, A. V.
B
Rangam and A. Subhashini, for the appellants.
T. A. Ramachandran, for the respondents (In C.As. Nos. 20052008 & 2013-2016/70).
Vineet Kumar, for respondent No. 1 (Jn C.A. Nos. 2009-2012/
70).

## Text

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•
...
JOINT COMMERCIAL OFFICER, DIVISION II,
MADRAS-2 ETC.
v.
SPENCER & CO. ETC. ETC.
May 2, 1975
(V. R. KRISHNA IYER, R. S. SARKARIA AND A. C. GUPTA, JJ.J
Madras General Safes Tax Act, 1959, Sections 2(q), 2(r) and 3(1)---:-
an Dealer in foreign liquor and other goods-Tax paid under s. 21-A of Madras
Prohibitiaft Act, 1937 by purchaser if part oj taxable turnorer of the dealer .
•
439
A
B
The respondents-assessees are dealers in foreign liquor, among other goods.
They have been assessed to, sales tax as dealers on sales or purchases of other
C
goods under s. 3(1) of the Madras General.Sales Tax Act, 1959. They filed
Writ Petitions in the High Court challenging certain orders (relating to. diffe·
rent assessment years, ranging from 1959 to 1964-65) made by the assessing authority under the Madras General Sales Tax Act, 1959 proposing to re·
determine the taxable turnover of the respondents by including the sale-price
of foreign liquor which, it was alleged, had escaped · assessment. The High
Court Cirected the sales tax authorities not to include in the. assessable turnover the tax paid by the respondents under s. 21-A of the Madras Prohibition
D
Act, 193i. These appeals have been filed on the basis of the certificate of fitness granted by the High Court,
·
It was contended for the appellants that the amount coilected by the assessees by way of sales tax from· the purchasers were part of their total turnover
and as much liab1e to be taxed under s. 3(1) of the Act.
Rejecting the contention and dismissing the appeals,
HELD: It is clear from s. 21-A of the Madras Prohibition Act. 1937 that
the sales tax which the section requires the seller of Foreign liquof to collect
from the purchaser is a
tax on the
purchaser and not on the
seIJer.
Jt is a tax on the price of the liquor and
that tax is to be
paid
by
the purchaser. Section 21-A makes the seller a collector of tax for the Government, and the amount collected by him as tax under this
section cannot
therefore be a part of bis turnover. Under the Madras General Sales Tax Act,
1959 tb.e dealer has a statutory duty to collect the sales tax- payable by him
from his customer, and when the dealer passes on to the customer the amount
of tax which the former is liable to pay, the said amount does not cease to be
the price for the goods altho"Qgh "the price is expressed as X -plus purchase
tax". Bnt the amounts collected by the. assessees concerned in these appeals
unde4' a statutory obligation cannot be a part of their taxable turnover under
the Act. [442A-D] .
M/s. George Oakes (P) Ltd., v. State of Madras, [1962] 2 S.C.R. 57Q,
State of Kera/a v. Ramaswamy Iyer and Sons, [1966] Suppl. S.C.R. 582· and
Delhi Cloth and General Mills Ltd. v. Commissioner of Sales Tax, Indore,
[19711 Suppl. S.C.R. 945, held not applicable.
Paprica Ltd. and Anr. v. Board of Trade, [1944] 1 All. E.R. 372, referred to.
E
F
G
CML APPELLATE JURISDICTION : Civil Appeals Nos. 2005 to 2016 H
of 1970.
From the Judgment and Order dated the 10th April, 1969 of the
Madras High Court in W.Ps. Nos. 2787 to 2790 of 1966 and 2988 to
2991 of 1966 and T.C. Nos. 102, 104 & 195 of 1967.
!OSC/75-29
440
SUPREME COURT REPORTS
[1975] SUPP· S.C.R.
A
S. Govind Swaminathan, K. Venkataswami. N. S. Sivam, A. V.
B
Rangam and A. Subhashini, for the appellants.
T. A. Ramachandran, for the respondents (In C.As. Nos. 20052008 & 2013-2016/70).
Vineet Kumar, for respondent No. 1 (Jn C.A. Nos. 2009-2012/
70).
The Judgment of the Court was delivered by
GUPTA, J.-These twelve appeals arise out of a common judgment
of •the Madras High Court disposing of the writ petitions filed by the
respondents in which they challenged certain orders of the assessing
C authority under the Madras General Sales Tax Act, 1959 proposing
to redetermine the taxable turnover of the respondents by including
the sale-price of foreign liquor which, it was alleged, had escaped assessment.
The High Court directed the sales tax authorities not to
include in the assessable turnover the tax paid by the respondents under
sec. 21-A of the Madras Prohibition Act, 1937.
In these appeals,
D brought on certificate .of fitness, the correctness of the High Court's
decision is questioned by the sales tax authorities. The appeals have
three different assessees as respondents and relate to different assessment years conceniing each assessee, ranging from 1959-60 to 196465.
E
F
The assessees are dealers in foreign liquor, among other goods.
They have been assessed to sales tax as dealers on sales or purchases
of other goods under sec. 3(1) of the Madras General Sales Tax Act,
1959. Sec. 3(1) is the charging section providing generally that a
dealer whose total turnover for a year is not less than the specified
amount, shall pay a tax for each year at the specified rate. 'Turnover'
is defined in sec. 2(r) ofl the Act. The relevant part of the definition
is as follows :
" 'turnover' means the aggregate amount for which goods
are bought or sold, or supplied or distributed, by a dealer,
either directly or through another, on his own account or on
account of others whether for cash or for deferred payment
or other valuable consideration, ......... "
G
'Total turnover' is defined in sec. 2(q) of the Act as "the aggregate turnover in all goods of a dealer at all places of business in the
State, whether or not the whole or any portion of such· turnover is
liable to tax".
The question is whether the 'sales tax' collected by
these assessees under sec. 21-A of the Madras Prohibition Act, 1937
can be treated as part of their total turnover. Sec. 21-A, so far as it
is relevant for the present purpose, is in these terms :
H
"Every person or institution which sells foreign liquor-
( a)
x
x
x
(b)
x
x
x
shall collect from the purchaser and pay over to the Government at such intervals and in such manner as may be pres-
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4i
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JT. COMMERCIAL OHICER v. SPENCER & co. (Gupta, J.)
441
cribed, a sales tax calculated at the rate of eight anuas in
A ·
the rupee, or at such other rate as may be notified by the
Government from time to time, on the price of the liquor
so sold."
Counsel for the appellants contended relying on several decisions of
this Court to which we shall presently refer, that the amount collected
B
by the assessees by way of sales tax from the purchasers were part
of their total turnover anct as such liable to be taxed under sec. 3 (1)
of the Madras General Sales Tax Act, 1959. In M/s. George Oakes
(P) Ltd. v. State of Madras,(') this Court considered the question
whether inclusion of the amounts collected by the appellants in that
case as sales tax under the Madras General Sales Tax Act, 1939 wa~
valid. The expression 'turnover' in the 1939 Act meant, as it does in
the 1959 Act, aggregate amount for which goods are bought or sold,
whether for cash or for deferred payment or other valuable consideration. This Court observed :
c
" ........ when a sale attracts purchase tax and the
tax is passed on to the consumer, what the buyer has to
D
pay for the goods includes the tax as well and .the aggregate
amount so paid would fall within the definition of turnover
......... so far as the purchaser is concerned, he pays for
the goods what the seller demands, viz., price even though it
may include tax.
That is the whole consideration for the
sale and there is no reason why the whole amount paid to
E
the seller by the purchaser should not be treated as the
consideration for the sale and included in the turnover."
A similar view was taken by this Court in State of Kera/a v. Ramaswamy Iyer & Sons.( 2 ) This wa§_il case under the Travancore Cochin
General Sales Tax Act, 1958. Here also the decision turned on lite,
definition of 'turnover' which is similar to the definition of the term I'
in the Madras General Sales Tax Act, 1959. The position was further
explained in Delhi Cloth and General Mills Ltd. v. Commissioner of
Sales Tax, Indore,( 3 ) which. was a case under the Madhya Pradesh
General Sales Tax Act, 1958.
The relevant provisions of this Act
appear to be similar to those of the Madras General Sales Tax Act,
1959. Stating that the liability to pay tax under the Act is that of
G
the dealer, Hegde J. speaking for the Court said that the Act did not
confer "any statutory power on the dealer to collect sales tax as such
from any class of buyers. . . . Unless the price of an article is con.
trolled, it is always open to the buyer and the seller to agree upon
the price to be payable. While doing so it is open to the dealer_ to
include in the price the tax payable by him to the Government. If
he does so, he cannot be said to be collecting the tax payable by him
H
from his buyers. .The levy and collection of tax is regulated by law
and not by contract. So long as there is no law empowering the
dealer to collect tax from his buyer or seller, there is no legal basis for
(') [1962] 2 S.C.R. 570.
(') [1966] 3 S.C.R. 582.
(') [1971] Supp. s.C.R. 945.
442
SUPREME COURT REPORTS
[1975] SUPP· s.c.R.
A saying that the dealer is entitled to collect the tax payable by
him
fronr his buyer or seller.
Whatever collection that may be made by
the dealer from his customers same can only be considered as valuable consideration for the goods sold".
It is clear from sec. 21-A of the Madras Prohibition Act, 1937
B
that the sales tax which the section requires the seller of foreign liquor
to collect from the purchaser is a tax on the purchaser and not on
the seller.
This is what makes the authorities on which counsel for
the appellants relied inapplicable to the cases before us. Under sec.
21-A the tax payable is on the price of the liquor and that tax is to
be paid by the purchaser, the sell~r is required to collect the tax from
fhe purchaser which he has to pay over to the Government.
Sec.
C 21-A makes the seller a collector of tax for the Government, and the
amount collected by him as tax under this section cannot therefore
be a part of his turnover.
Under the Madras General Sales Tax
Act, 1959 the dealer has no statutory duty to collect the sales tax
payable by him from his customer, and when the dealer passes on
to the customer the amount of tax which the former is liable to pay,
D the said amount does not cease to be the price for the goods although
"the price is expressed as X plus purchase tax".(1 )
But the amounts
collected by the asscssees concerned in these appeals under a statntory
obligation cannot be a part of their taxable turnover under the Madras
General Sales Tax Act, 1959.
The appeals are dismissed with costs : one hearing fee.
E
Appeals dismissed.
V.M.K.
('~Ltd. and Anr. v. Board of Trade, [194411 All. E.R. 372.
I