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PETITIONER: CARDAMOM PLANTERS ASSOCIATIONBODINAYAKANUR

       Vs.

RESPONDENT: DEPUTY COMMISSIONER OF SALES TAX (LAW)BOARD OF REVENUE (TAXE

DATE OF JUDGMENT07/08/1989

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. MUKHARJI, SABYASACHI (J)

CITATION:  1989 AIR 2202            1989 SCR  (3) 719  1989 SCC  (4) 179        JT 1989 (3)   398  1989 SCALE  (2)233

ACT:     The Kerala (Surcharge on Taxes) Act 1957--Section 3-Levy of  surcharge  on Sales Tax--Society  composed  of  Cardamom growers-Whether  liable for levy of Surcharge in respect  of sales effected on behalf of members of society.

HEADNOTE:     The appellant--assesse is a Society registered under the Societies Registration Act. Its members are Cardamom growers in the State of Kerala. The Society conducts the business as an auctioneer under a licence issued to it under the  Carda- mom  Act (Act 42 of 1965) read with the Cardamom  (Licensing and  Marketing) Rules, 1977, one of the Conditions  of  this licence being that as an auctioneer it shall not charge more than  one  percent of the sale price as commission  for  the services rendered by it. It is common ground that the socie- ty  has  obtained the relevant licence  and  the  individual members/growers of Cardamom had no such licence. The mode of the  business was that planters left their produce with  the Society and the Society after mixing the produce of all  the growers,  put the same to auction. The Society collected  1% as  commission  out of the sale proceeds from  each  of  the planters.  Besides  cardamom, the Society sold  other  goods also.     The Kerala General Sales Tax Act 1963 imposes sales  tax on every dealer whose total turnover for any year exceeds  a specified sum which differed from year to year. In 1957  the Kerala  Legislature  introduced a surcharge  on  sales  tax. Section  3  of the Kerala Surcharge on taxes Act  1957  pre- scribes that the tax payable under the Kerala General  Sales Tax Act 1963, shall, in the case of a dealer whose  turnover exceeds Rs.30,000 a year, be increased by a surcharge at the rate of 5% of the tax payable for that year. The  provisions of the Kerala General Sales Tax Act were made applicable  to the levy and collection of the said surcharge. Kerala Act 40 of  1976  stepped up the .rate of surcharge.  The  important feature  of the latter Act is that unlike sales  tax,  which the dealer was entitled to get reimbursed from the purchaser of  the goods sold by him, the surcharge had to be borne  by the dealer himself, as 720

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Sub-Section (2) of Section 3 of the Surcharge Act prohibited the  dealer  from collecting the surcharge payable  by  him. Further the dealer might be liable for sales tax at  differ- ent rates on the turnover of the different goods dealt  with by him, he was to pay surcharge calculated on the amount  of the  sales tax payable by him in respect of his total  deal- ings throughout the year.     The  assessee’s  contention was that  the  Society  sold goods only in its capacity as a commission agent for various principals  and that on the general principle of agency,  an agent like the assessee could be liable to surcharge only to the  same  extent as the principal whom it  represented.  On this plea, it could not be made liable for any surcharge  in respect of the sales effected by it on behalf of the princi- pals  whose  sales through the Society did  not  exceed  the limits set out in Sec. 3(1) of the Surcharge Act.     The  Tribunal had accepted the above contention  of  the appellant  in  the appeals against the  assessment  for  the assessment  years 1967-68 to 1969-70. The sales Tax  assess- ments  of the appellant for the assessment years 1973-74  to 1976-77  were completed by the Sales Tax  Officer  following the aforesaid order of the Tribunal. These assessments  were set aside by the Dy. Commissioner of Sales Tax who took  the view  that  the Society was liable to pay surcharge  on  its aggregate  turnover  in each of the  assessment  years.  The appellant-assessee preferred appeals to the Appellate Tribu- nal  against  the  orders of the  Deputy  Commissioner.  The Tribunal allowed the appeals following its order relating to the  earlier assessment years. It accordingly set aside  the orders of the Dy. Commissioner and restored the  assessments made  by  the  Sales Tax Officer for  the  assessment  years 1973-74 to 1976-77. The Department moved revision  petitions before  the  High Court against the order of  the  Appellate Tribunal.  The High Court accepted the revision of  the  De- partment  and  set aside the order of  the  Tribunal.  Hence these appeals by the assessee.     It was contended by the appellant (i) that the liability of  an agent is co-extensive with that of principal and  its liability cannot be higher than that of principal; (ii) that it is contrary to the principle underlying rule 9(k) of  the Kerala  General  Sales Tax Act whereunder  the  turnover  of sales  or  purchases made by a dealer through his  agent  in respect of which tax has been paid by the agent, is excluded from  his taxable turnover and (iii) that the  assessee  has been placed in a financial predicament in that it has to pay he surcharge from out of the meagre commission of 1% limited by the statute. 721 Dismissing the appeals, this Court,     HELD: The Surcharge Act does not envisage a fresh deter- mination  of the assessee’s turnover at all.  It  prescribes nothing  more than a simple arithmetical calculation of  the prescribed percentage on the sales-tax determined as payable by the assessee for that year. It does not permit the compu- tation of the surcharge, for whatever reason, on a part only of  the  tax determined as payable by the assessee  for  the year in question. It does not contemplate any dissection  of the turnover into transactions on behalf of various  princi- pals  by  reference  to their individual  liability  to  pay either  sales  tax or surcharge. The  contentions  urged  on behalf of the petitioner create a number of difficulties and or about a very simple procedure, evolved by the statute  to meet the present situation- It brought the Commission  agent within  the  definition of a dealer and made  his  aggregate turnover  liable  to tax. But it provided at the  same  time

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that the turnover so included and taxed in the hands of  the agent should he excluded from the turnover of the principal, where he is separately assessed. [726C-D, 727E-F, 728C]     Rule  9(k)  confers an exemption not on  the  Commission agent  but on the Principal and does not help the  assessee. [728D]     The  rate  of  tax on any type of  goods  being  uniform irrespective of the turnover, the turnover in regard to that item  will  get assessed only at one place:  either  in  the hands of the principal or in the hands of the agent but  not both. [728D]     A  suggestion was mooted before us that the hardship  to the  assessee  on this account is so substantial  that  this requirement should be held to he an unreasonable restriction violating  Article  19. This is a new  contention  involving investigation into facts which this Court is not inclined to permit  the  assessee  to raise here  for  the  first  time. [728G-H]

JUDGMENT:      CIVIL  APPELLATE JURISDICTION: Civil Appeal No.  326164 of 1988.      From  the  Judgment  and Order dated  3.7.1987  of  the Kerala High. Court in T.R.C. Nos. 54 to 57 of 1983.               A.K. Ganguli and C.N. Sreekumar for the Appel-               lant.               A.S. Nambiar and K.R. Nambiar for the Respond-               ents.               The Judgment of the Court was delivered by 722     RANGANATHAN,  J.  M/s. Cardamom  Planters’  Association, Bodinayakanur,  (hereinafter referred to as  ’the  society’) appeals  from orders of the Kerala High Court upholding  its liability  to the levy of surcharge under the  Kerala  (Sur- charge on Taxes) Act, 1957, as amended in 1970.     The  Kerala General Sales Tax Act, 1963,  imposes  sales tax  on every dealer whose total turnover for any  year  ex- ceeds  a specific sum. The sum prescribed was initially  Rs. 10,000  but was gradually stepped up to Rs.20,000  in  1971, Rs.25,000  in  1976, Rs.35,000 in 1980, Rs.50,000  in  1981, Rs.75,000  in  1982 and Rs.1 lakh in 1984.  The  expressions ’dealer’,  ’taxable turnover’, ’total turnover’  and  ’turn- over’  are  defined in section 2 of the  Act.  The  relevant portions of these definitions read as follows:               Section 2 (viii)               "Dealer"  means any person who carries on  the               business  of  buying,  selling,  supplying  or               distributing goods, executing works  contract,               transferring  the  right to use any  goods  or               supplying by way of or as part of any service,               any  goods directly or otherwise, whether,  or               for  cash  or  for deferred  payment,  or  for               commission,  remuneration  or  other  valuable               consideration and includes.               (b)           XX                            XX               XX               (c)  a  commission agent, a broker  or  a  del               credere  agent or an auctioneer or  any  other               merchantile  agent, by whatever  name  called,               who  carries on the business of buying,  sell-               ing, supplying or distributing goods  (execut-               ing works contract, transferring the right  to               use  any  goods or supplying by way of  or  as

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             part  of any service, any goods) on behalf  of               any principal."               Section 2 (xxiv)               "taxable turnover" means the turnover on which               a dealer shall be liable to pay tax as  deter-               mined  after making such deductions  from  his               total  turnover and in such manner as  may  be               prescribed   ...               Section 2 (xxvi)               723               "total turnover" means 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  .........               Section 2 (xx vii)               "turnover"  means  the  aggregate  amount  for               which  goods  are either bought  or  sold,  or               supplied  or distributed, by a dealer,  either               directly  or through another, on his  own  ac-               count  or, on account of others,  whether  for               cash or for deferred payment or other valuable               consideration,  provided that the proceeds  of               the sale by a person of agricultural or horti-               cultural produce grown by himself or grown  on               any  land in which he has an interest  whether               as  owner, usufructuary mortgagee,  tenant  or               otherwise,,  shall be excluded from his  turn-               over.               Explanation (i)"Agricultural or  horticultural               produce" shall not include--               XXX                                        XXX               XXX               (ii) tea, coffee, rubber, cardamom or timber.               XXX                                        XXX               XXX                   In 1957, the Kerala Legislature introduced               a  surcharge  on sales tax. Section 3  of  the               Kerala  Surcharge on Taxes Act, 1957 reads  as               follows:               "The  tax  payable under  the  Kerala  General               Sales  Tax Act, 1963, shall, in the case of  a               dealer  whose  turnover  exceeds  Rs.30,000  a               year, be increased by a surcharge at the  rate               of five per centum of the tax payable for that               year and the provisions of the Kerala  General               Sales Tax Act, 1963 shall, as the case may be,               apply  to the levy and collection of the  said               surcharge."               Kerala  Act 40 of 1976 stepped up the rate  of               surcharge by amending section 3(1) to read  as               follows:               (1)  The tax payable under the Kerala  General               Sales  Tax Act, 1963, shall, in the case of  a               dealer whose turnover--               724               (a) is not less than one lakh rupees but  does               not  exceed  ten lakhs rupees in  a  year,  be               increased by a surcharge at the ,rate of  five               per centum, and               (b)  exceeds  ten lakhs rupees in a  year,  be               increased by a surcharge at the rate of  eight               per centum,               of  the  tax  payable for that  year  and  the               provisions  of  the Kerala General  Sales  Tax

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             Act, 1963, shall apply in relation to the said               surcharge as they apply in relation to the tax               payable under the said Act.     We  may note here two important features of  the  latter Act. the first is that, unlike sales tax which the dealer is entitled  to get reimbursed from the purchaser of the  goods sold  by  him, the surcharge has to be borne by  the  dealer himself,  for sub-section (2) of section 3 of the  Surcharge Act  prohibits  the  dealer from  collecting  the  surcharge payable by him under sub-section (1) on pain of  prosecution under  sub-section  (3). The second is that while  a  dealer might  be  liable  to sales tax at different  rates  on  the turnover  of the different goods dealt in by him, he has  to pay  a surcharge calculated on the amount of the  sales  tax payable  by him in respect of his total dealings  throughout the year.     The  assessee is a society registered under  the  Socie- ties’ Registration Act. Its members are cardamom growers  in the  State  of  Kerala. Under the Cardamom Act  (Act  42  of 1965), read with the Cardamom (Licensing & Marketing) Rules, 1977, no person is entitled to carry on business as auction- eer,  dealer  or exporter of cardamom except  under  and  in accordance with the terms and conditions of a licence issued under the Act and Rules. One of the conditions of the  grant of  licence to a person as an auctioneer is that  he  "shall not  charge  more  than one per cent of the  sale  price  as commission  for the services rendered by him". It is  common ground that it is the society that has obtained the relevant licence  for this purpose and that the  individual  cardamom growers who are members of the society have no such licence.     The  society conducts weekly cardamom auction  sales  at two  places,  Santhanpara and  Bodinayakanur.  The  planters leave their produce with the society. The produce of all the growers is mixed together and put to auction. It is open  to the  planters to be present at the auction. If  any  planter desires  to  sell  at a specific price he  can  express  his opinion in advance to the association. If he wants to  with- draw  his  lot  put up for sale he could  do  so.  Stitching charges and miscellaneous 725 charges are to be paid to the society. The society  collects 1%  as commission out of the sale proceeds from each of  the planters.  Besides sale of cardamom, which  constitutes  the major  part of its turnover, the society also  sells  other- goods such as gunnies, pesticides, sprayers, manure and  the like.     It  is  contended on behalf of the appellants  that  the society has sold the goods only in its capacity as a commis- sion  agent for various principals and that, on the  general principles  of  agency, an agent like the  assessee  can  be liable to surcharge only to the same extent as the principal whom  it represents. Hence it cannot be made liable for  any surcharge in respect of the sales effect by it on behalf  of principals whose sales through the society do not exceed the limits set out in s. 3(1) of the Surcharge Act.     The above contention was accepted by the Tribunal in the appeals against the assessments made on the society for  the assessment  years 1967-68 to 1969-70. The sales tax  assess- ments  of the society for 1973-74 to 1976-77 were  completed by  the  ’Sales Tax Officer on the basis of  the  Tribunal’s order.  These  assessments were, however, set aside  by  the Deputy Commissioner of Sales tax who was of the opinion that the  society  was liable to pay surcharge on  its  aggregate turnover in each of these years and he directed accordingly. The  assessee  preferred appeals to the  Appellate  Tribunal

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from  the  orders of the Deputy Commissioner.  The  Tribunal allowed  the appeals by a common order dated  3rd  November, 1982  following its order for the earlier assessment  years. It  set  aside the revisional orders passed  by  the  Deputy Commissioner and restored the assessments made by the  Sales Tax Officer for the assessment years 1973-74 to 1976-77. The High Court, on revision by the Department, has set aside the orders of the Tribunal and restored the orders of the Deputy Commissioner. Hence these appeals.     We  are unable to see any flaw in the High Court’s  rea- soning. The present assessee is clearly a dealer within  the meaning  of the statute, particularly in view of the  inclu- sive part of the definition contained in clause (c). This is also the finding of the Tribunal and  is also  admitted by the assessee. Likewise, the provisions  of S.  5  of the Sales Tax Act and S. 3 of the  Surcharge  Act, read  with the definitions of the words ’turnover’  ’taxable turnover’  and  ’total turnover’, leave no  doubt  that  the assessee’s  taxable turnover has to be determined by  taking the aggregate price of all the goods sold by it. There is no statutory warrant for breaking-up the sales turnover of  the assessee by reference to 726 the  turnover  of the principals on whose behalf  it  deals. Also,  a logical corollary of the assessee’s argument  would be that, even in respect of tax, the society can be assessed to  sales  tax only on the aggregate  turnover  relating  to those of its principals who are liable to tax under  section 5  of the Act. The High Court has rightly pointed  out  that the  assessee  had not claimed, for purposes of  sales  tax, that  the  turnover of goods dealt with by it on  behalf  of principals  who  did not have a taxable turnover  should  be excluded. If this be so, the High Court observes rightly, it is difficult to see on what principle the assessee can seek, in  the matter of surcharge, the exclusion from its  taxable turnover,  of the turnover of principals who would not  have been subjected to a surcharge if they had directly sold  the goods  entrusted by them to the assessee for sale.  This  is particularly so because the Surcharge Act does not  envisage a fresh determination of the assessee’s turnover at all.  It prescribes nothing more than a simple arithmetical  calcula- tion  of the prescribed percentage on the sales  tax  deter- mined as payable by the assessee for that year. There can be no doubt about this figure. The statute does not permit  the computation of the surcharge, for whatever reason, on a part only  of the tax determined as payable by the  assessee  for the year in question.     On  behalf of the assessee, objection has been taken  to the  levy  of surcharge in the manner in which it  has  been levied on three grounds:               1.  The general principle of law is  that  the               liability  of  an agent is  co-extensive  with               that of the principal and his liability to tax               or  surcharge, in respect of transactions  put               through  on behalf of a principal,  cannot  be               higher  than  that which the  principal  would               have himself incurred had he directly sold the               goods;                      2.  It  is contrary  to  the  principle               underlying  rule 9(k) of the Kerala Sales  Tax               Rules  under which "the turnover of  sales  or               purchases  made by a dealer through his  agent               in  respect of which tax has been paid by  the               agent" is excluded from his taxable turnover;                      3.  The assessee has been placed  in  a

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             financial  predicament because .all  that  the               assessee  can  get  out of the  sales  is  the               commission which cannot exceed 1% of the turn-               over and, since the statute has prohibited  it               from collecting any part of the surcharge from               the purchasers or the principals the  society,               has to meet the surcharge liability out of its               meagre commission earnings.               We are unable to see how these contentions can               help the assessee 727 to overcome the surcharge levy. The general principle of the law  of  agency, as rightly pointed out by the  High  Court, cannot prevail in the face of the statutory provisions.  The assessee’s contention, upheld by the Tribunal in its earlier order, is this:               "  .....  an agent is as many dealer as he has               principals  ... an agent can be  assessed  ...               only on the aggregate of the turnover relating               to  principals  who are liable  to  tax  under               section 5 and surcharge can likewise be levied               only in respect of the turnover of the princi-               pals  where  total turnover is not  less  than               Rs.30,000." This will also mean that, after the amendment of s. 3 of the Surcharge  Act  in 1976 that the agent will be liable  to  a surcharge  at  8% in respect of the turnover  on  behalf  of principals whose total turnover exceeds Rs. 10 lakhs, at  5% in  respect of the turnover on behalf of  principals  having turnover  of between Rs.1 lakh and Rs. I0 lakhs and no  sur- charge  in respect of the turnover on behalf  of  principals with turnovers of less than Rs. 1 lakh. This may be  equita- ble  but  it  clearly amounts to running a  coach  and  pair through  the statutory provisions. As already  pointed  out, these  provisions  clearly  treat a commission  agent  as  a dealer and make him liable to sales tax as well as surcharge in respect of his entire turnover. The Act does not  contem- plate  any dissection of this turnover into transactions  on behalf of various principals by reference to their individu- al liability to pay either sales tax or surcharge.     The question of statutory interpretation apart, it  will easily  be  seen that the assessee’s  contention,  which  is equally  applicable to the levy of both sales tax  and  sur- charge,  would make the whole Act unworkable.  A  commission agent will be dealing on behalf of hundreds of  constituents and each of his constituents may be dealing not only through him but also through several other agents. The  transactions may not be confined to the territories of one State and  may be  spread over the entire Indian sub-continent.  The  sales through different agents may be of different goods  attract- ing  liability to tax at different rates. It may be  that  a principal  whose sales through one commission agent may  not come  upto  the limits of turnover for levy of tax  or  sur- charge  may have been dealing through other agents  and,  if assessed  directly,  may  have a  turnover  exceeding  those limits.  In  this state of affairs, it  will  be  absolutely impracticable,  if not impossible, for a Sales  Tax  Officer having jurisdiction over one particular commission agent  to make his sales tax assessment on the basis suggested 728 by the assessee. That would require the collection of  data, in  the assessment of every commission agent, regarding  the entire sales turnover of each of his constituents who may or may not be assessed by the officer assessing the  particular commission  agent.  The assessment order on  the  commission

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agent  would then have to be split up, as it were ,  into  a number  of parts each containing the determination of  turn- over, tax and surcharge qua each of the constituents.  These determinations require exercises which cannot be practically undertaken  by an officer assessing a commission  agent  but can easily be undertaken by the different officers assessing the  principals.  That  is why the statute  evolved  a  very simple  procedure  to  meet the situation.  It  brought  the commission agent within the definition of a dealer and  made his aggregate turnover liable to tax. But it provided at the same  time  that the turnover so included and taxed  in  the hands  of the agent should be excluded from the turnover  of the principal, where he is separately assessed. This is rule 9(k).  Rule 9(k) confers an exemption not on the  commission agent  but on the principal and does not help the  assessee. So  far as sales tax is concerned, this rule  provides  com- plete protection against double taxation. The rate of tax on any  type of goods being uniform irrespective of  the  turn- over, the turnover in regard to that item will get  assessed only  at one place: either in the hands of the principal  or in the hands of the agent but not both. The treatment of the commission  agent as a dealer no doubt means that  an  agent will be taxed where his turnover exceeds the relevant limits even though some or all the principals who sold through  him may have turnovers below those limits. But he is not  really affected as he can collect the sales tax from the purchasers and thus reimburse himself.      The  difficulty that has arisen in regard to  the  sur- charge  stems  principally  from the  requirement  that  the society has to pay it out of its funds and cannot  reimburse itself  either  from  its vendees or  its  principals.  This difficulty has been further accentuated by the fact that, in regard  to  cardamom, its earnings are limited  to  a  small commission which cannot be varied by it at its desire. These considerations cannot however justify a different  interpre- tation as the statutory provisions are clear.      A suggestion was mooted before us that the hardship  to the  assessee  on this account is so substantial  that  this requirement should be held to be an unreasonable restriction violating  article  19. This is a new  contention  involving investigation into facts which we are not inclined to permit the assessee  raise here for the first time. We may,  howev- er, mention that during, the hearing of these appeals, we 729 adjourned  the  appeals to enable the assessee to  move  the State in this behalf but we were told that its efforts  were unsuccessful.  We need hardly say that the assessee will  be at  liberty to pursue the matter, put forward its  difficul- ties  and  seek to persuade the State Government  to  either reduce or dispense with the surcharge in regard to  cardamom sales  or to sanction an increase in the rate of  commission chargeable by the assessee on its cardamom sales and,  fail- ing such efforts, to challenge the validity of the levy  for the future, if so advised, in appropriate proceedings.     In  the circumstances, we affirm the view taken  by  the High  Court and dismiss these appeals. We, however, make  no order as to costs. Y.    Lal                                            Appeals dismissed. 730