# JONNALA NARASIMHARAO & CO. & ORS. ETC. ETC v. STATE OF ANDHRA PRADESH & ORS

- **Citation:** [1971] Supp. 1 S.C.R. 367
- **Court:** Supreme Court of India
- **Decided:** 1971-04-05
- **Case number:** Civil Appeals Nos. 2116. 2217, 2218, 2126 to 2128 of 1970
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jonnala-narasimharao-co-ors-etc-etc-v-state-of-andhra-pradesh-ors-5254
- **Pages:** 8

## Headnote

367
JONNALA NARASIMHARAO & CO. & ORS. ETC. ETC.
A
v.
STATE OF ANDHRA PRADESH & ORS.
April 5, 1971
IS. M. SIKRI, C. J., G. K. MITTER, K. S. HEGDE, A. N. GROVER AND
P. JAGANMOHAN REDDY, 1J.]
Andhra Pradesh General Sales Tax Act, 1957 as amended by Act 9 of
1910--Past assessments under invalid law validated-Agents selling jaggery
on behalf of principals made liable under s. 11 as amended to pay the
tax collected by them-Agents had no locus standi to challenge levy on
the basis of discrimination between principals inter se-Validity of s. 9 of
Amending A.ct-Classification between dealers who had collected tax and
those who had not collected is reasonable.
The appellan\s carried on the business of Commission Agents in Jag.
gery 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 appri•ed of
the fact that he was purchasing jaggery of specified agriculturist Principals
and not that of the appellants. Till about 1963 under s. 11 of the Andhra
Pradesh General Sales Tax Act, 1957, commission agents were required to
obtain and were bei~ 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. By the new s. 11 introduced by the Amending Act 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 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 1\.mendment Act 5 of I %8 was
enacted and a new s. 11 substitu"tCd for the existing section. This s. 11
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 had been collected as tax from the Agents became refundable. To
meet this situation the Andhra Pradesh Legislature enacted the Andhra
Pradesh General Sales 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. II 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. I 1 as amended and s. 9 of the Amending Act were violative
of Art. 14. The High Court held that s. 11 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. Th• tax had alre~_dy been collected, no doubt at first illegally, but
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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 wainothing to show that what was sought to be recovered from the dealer was
more tban 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

## Text

367
JONNALA NARASIMHARAO & CO. & ORS. ETC. ETC.
A
v.
STATE OF ANDHRA PRADESH & ORS.
April 5, 1971
IS. M. SIKRI, C. J., G. K. MITTER, K. S. HEGDE, A. N. GROVER AND
P. JAGANMOHAN REDDY, 1J.]
Andhra Pradesh General Sales Tax Act, 1957 as amended by Act 9 of
1910--Past assessments under invalid law validated-Agents selling jaggery
on behalf of principals made liable under s. 11 as amended to pay the
tax collected by them-Agents had no locus standi to challenge levy on
the basis of discrimination between principals inter se-Validity of s. 9 of
Amending A.ct-Classification between dealers who had collected tax and
those who had not collected is reasonable.
The appellan\s carried on the business of Commission Agents in Jag.
gery 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 appri•ed of
the fact that he was purchasing jaggery of specified agriculturist Principals
and not that of the appellants. Till about 1963 under s. 11 of the Andhra
Pradesh General Sales Tax Act, 1957, commission agents were required to
obtain and were bei~ 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. By the new s. 11 introduced by the Amending Act 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 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 1\.mendment Act 5 of I %8 was
enacted and a new s. 11 substitu"tCd for the existing section. This s. 11
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 had been collected as tax from the Agents became refundable. To
meet this situation the Andhra Pradesh Legislature enacted the Andhra
Pradesh General Sales 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. II 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. I 1 as amended and s. 9 of the Amending Act were violative
of Art. 14. The High Court held that s. 11 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. Th• tax had alre~_dy been collected, no doubt at first illegally, but
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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 wainothing to show that what was sought to be recovered from the dealer was
more tban 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 wantir1g
by jud1cfa.I interpretation.
The interregn_um between the declaration by
the High Court of !=CTtain provisions of the Act as being unconstitutional
and the attempt of the legislature to remedy the defects and to give retros·
pectiv: effect thereto created two distinct. categories between the same class
of dealers namely those who had coUected the tax
whether they were
assessed or not and those who had not collected the tax. This classifi.:a·
tion 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 Jaw stood and therefore the legislature thought it just or proper to collect the tax from those who were not
liable. E\'en 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. [3740-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.
E
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
C.A. No. 2116 of 1970).
F
M. Natesan and G. Narayana Rao for the appellants (in
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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 Gn 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 respon·
dents (in all the appeals).
'· N. & co. '·A. P. iTATE (Jaganmohan Reddy,!.)
Tbe 1 udgment of the Court was delivered by
P. J"ipniiiohm Reddy, J.-this batch of Appeals is by Cer·
tificate against a common Judgment of the Andhra Pradesh High
Court dismissing the Writ Petitions filed by several dehlers in
jaggery who challenged the vires and constitutionality of Sections
2, 5, 8 and 9 of the Andhra Pradesh, General Sales Tax Amend-,
ment Act 9 of 1970 (hereinafter called the "Amendment Act").
The Appellants are Commission Agents carrying on trade in jaggery.
Agriculturists woo prepare jaggery out of surplus sugarcane which they are unable to sell to the Sugar faotories employ
the Appellants as their Commission Agents to seJI. that jaggery.
We w'ill take the f~ts in Gvil 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 bus'iness 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 Agriculturists the name of
the persons to whom jaggery is sold is specifically mentioned.
The baskets of each principal are separaJtely 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 "Princi'pal 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 wb.icli 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 through the
· tiability 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 lrri
Raju & Ors. v. The Commercial Tax Officer, Tedeplal/igudem &
A nr.(') in which the High Court of Andhra Pradesh held that the
(I) Sales Tax Cases-Vol. XX (1967) p, SOI.
24-1 SC lndia/71
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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 .resp~t of the .several principals could not be computed
for assessmg him when m 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 1968 was enacted and a new Section 11 was substituted
for the then existing Section.
This Section 11 was given retrospective effect from the !st August 1963.
The object of this
Amendment was to enable the Taxing authorities
to assess,
levy l!nd 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 I of Section 5. The proviso to the new
Section 11 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 Konatha/a Venkota Ramana & Budha Apparao v. State of
Andhra Pradesh & Anr.(').
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 all the principals or only one principal, his liability is co-extensive with that ot
the principal. It also held that while there is' no contlict 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 f gent 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 bad been made and tax collected became refundable.
To meet this situation the Legislature enacted
the Andbra 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 11 was substituted for the old Section 11 with retrospective
effect from 1-8-63. The amended Section 11 it may be noticed
(!) Sales Tax C•S••-Vol. 24 (1969) p. 367.
J. N. & co. v. A. P. STATE (Jaganmohan Reddy, J.)
was identical with Section 11 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 Nollfication 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 1-2-60 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. 10000 /- became Jeviable at 2 paise per 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 I 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 a<e 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 (!) makes an invidious distiqction 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 (!)
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 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 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
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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 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 iast mentioned aspect presently
but before we do so on the threshold of the argument of the
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 Commission Agent dealer had to undergo in trying to determine whe·
ther the tum-over of each of his principals was below Rs. 10,000
before he could collect Sales Tax was na 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 tum-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.
Shri 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 prov'isions 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 witbin 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 Canrt has in several
cases held that even a notice issued to any person under the provisions of an Impugned Act which is likely to cause prejudice will
J. N. & co. v. A. P. STATB (Jaganmohan Reddy, J.)
entitle him to challenge the Constitufional validity of the· Jaw
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
baYe 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 over·
looks the fact that what is sought to be recovered from the Appell·
ant 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'collccted 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 Assess·
ments 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 Art. 226 of the Constitution. Shri P.
Ramchandrarao in Civil Appeal No. 2127 of 1970 had nothing new
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.
9 of the Amendment Act is as follows:
"9(1) Where any sale of jaggery has been effected during the period between the !st 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 any 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 pav any tax under the principal Act, as
amended by this Act, in respect of such sale or such part
of the turnovet relating to such sale.
(2) For the purposes of sub-section (!), 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
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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~mings 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 cain it even now be maide 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,
o.c.
Appeal allowed.