http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: JONNALA NARASIMHARAO & CO. & ORS.  ETC.  ETC.

       Vs.

RESPONDENT: STATE OF ANDHRA PRADESH & ORS.

DATE OF JUDGMENT05/04/1971

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN SIKRI, S.M. (CJ) MITTER, G.K. HEGDE, K.S. GROVER, A.N.

CITATION:  1971 AIR 1507            1971 SCR  367

ACT: Andhra Pradesh General Sales Tax Act, 1957 as amended by Act 9  of  1970-Past assessments under  invalid  law  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  Act-Classification  between  dealers  who  had collected tax and those who had not collected is reasonable.

HEADNOTE: The appellants carried on the business of Commission  Agents in Jaggery in Andhra Pradesh.  They arranged for the sale of jaggery  charging a small commission for their  service  and rendering an account to their Principals in respect of those sales.   Every buyer was fully apprised of the fact that  he was purchasing jaggery of specified agriculturist Principals and not that of the appellants.  Till about 1963 under s. II of   the  Andhra  Pradesh  General  Sales  Tax  Act,   1957, commission  agents  were required to obtain and  were  being issued  licences and if they conformed to the conditions  of those licences, they were not subjected to tax.  In 1963 the principal  Act was amended by Andhra Pradesh  General  Sales Tax Amendment Act 16of  1963.   By  the  new  s.  I   I introduced by the Amending Act the Agentsof     resident Principals were made liable for assessment and collection of tax 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 Amendment Act 5 of 1968 was  enacted and a new s. I 1 substituted for  the  existing section.  This s. II was given retrospective effect from 1st August 1963.  The object of this amendment was to enable the taxing authorities to assess levy and collect tax or penalty under  the Sales Tax Act from the Agent irrespective of  the fact  that  the Principal was not liable to tax.   This  new section  was  also  struck down by the High  Court,  on  the ground that it was violative of Art. 14 of the Constitution.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

In  view of this judgment which restored the legal  position to that prevailing before the Amendment, large sums of money which  bad  been  collected as tax from  the  Agents  became refundable.   To  meet  this situation  the  Andhra  Pradesh Legislature  enacted  the Andhra Pradesh General  gales  Tax Amendment  Act 9 of 1970, Section 8 of which  validated  the assessments  already  made.  Under s. 9 Agents who  had  not collected  the tax from their Principals were exempted  from tax.   Under  s. I I Agents who had collected the  tax  were made  liable to pay the same.  In writ petitions under  Art. 226  filed by Agents it was contended that s. II as  amended and s. 9 of the Amending Act were violative of Art. 14.  The High Court held that s. 1 1 was valid but s. 9 violated Art. 14.   In appeal filed against the High Court’s  judgment  by certificate, HELD:(i)  The  appeals  filed by the  agents  were  not maintainable.   What  was sought to be  recovered  from  the appellants  was  in  respect  of a  tax  collected  on  past dealings  and not with respect to the  future  transactions. The  tax  had  already been collected,  no  doubt  at  first illegally, but 368 due  to the Amendment Act, that collection had become  legal and  as  dealers,  the appellants were liable  to  pay  that amount to the State.  As there was nothing to show that what was  sought  to be recovered from the dealer was  more  than what  he had collected he had not suffered any loss nor  any disadvantage which would entitle him to seek a remedy  under Art. 226 of the Constitution [373B-C] (ii) Section  9  had been wrongly struck down  by  the  High Court   as  invalid.   This  section  was  enacted  by   the legislature with the object of removing shortcomings in  the principal   Act  which  were  found  wanting   by   judicial interpretation.  The interregnum between the declaration  by the  High  Court of certain provisions of the Act  as  being unconstitutional  and  the  attempt of  the  legislature  to remedy the defects and to give retrospective effect  thereto created  two distinct categories between the same  class  of dealers namely those who had collected the  tax whether they were  assessed  or not and those who had not  collected  the tax.   This classification was certainly reasonable and  was related  to  the object which the Amendment  Act  sought  to achieve.   The dealers who had not collected the  tax  could not  have  collected it as the law stood and  therefore  the legislature  thought  it just or proper to collect  the  tax from  those who were not liable. . Even this  exemption  was given to those who could establish that they had not in fact collected it, the burden of which was upon those who claimed the exemption. [374D-E],

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2116, 2217, 2218,  2126 to 2128 of 1970 , 33, 144 ,157, 159 to  163  and 164 to 166 of 1971. Appeals from the judgments and orders dated the September 5, 1970 of the Andhra Pradesh High Court in Writ Petitions Nos. 2720 of 1970 etc. S.   V.  Gupte  and G. Narayana Rao for the  appellants  (in 2116 of 1970). C.A. No. M.   Natesan and G. Narayana Rao for the appellants (in C.A. No. 2217 of 1970). G.   Narayana  Rao for the appellants (in C. As.  Nos.  2218 of 1970, 144, 157, 159 to 163 and 164 to 166 of 1971).

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

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  appel- lants (in C.As. Nos. 2127 and 2128 of 1970). S.   T. Desai and K. Rajendra Chowdhary, for the appellants, (in C.A. No. 33 of 1971). P.   Ram  Reddy  and P. Parameshwara Rao,  for  the  respon- dents (in all the appeals). 369 The Judgment of the Court was delivered by p.  Jaganmohan 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 dealers in   jaggery  who  challenged   the   vires   and constitutionality  of Sections 2, 5, 8 and 9 of  the  Andhra Pradesh,   General  Sales  Tax  Amendment  Act  9  of   1970 (hereinafter  called the "Amendment Act").   The  Appellants are   Commission  Agents  carrying  on  trade  in   jaggery. Agriculturists who  prepare jaggery out of surplus sugarcane which they are unable to sell to the Sugar factories  employ the  Appellants  as  their Commission Agents  to  sell  that jaggery. We  will take the facts in Civil Appeal No. 2116 of 1970  as typical of the common question arising in all these Appeals. The  Appellants  carry on business of  Commission  Agent  in jaggery in Anakapalli, Visakhapatnam and at varies places in West  Godavari.   In  the  course  of  their  business   the Appellants arrange, for the sale of jaggery charging a small commission for their services and renders    an  account  to the respective principals in respect of these sales. In  the pattis issued to the Agriculture the name of the persons  to whom jaggery is sold is specifically mentioned. The baskets    of each  principal are separately marked.  The  stock  register also indicates the number of baskets of jaggery held in  the name  of  the Commission Agents.  Every buyer is  fully  ap- prised  of  the fact that he is purchasing  the  jaggery  of specified  agriculturist  principals  and not  that  of  the Appellants.  This procedure it is said has been in vogue for a long time. Till about 1963 under Section 11 of Madras General Sales Tax Act  as well as under the Andhra Pradesh General  Sales  Tax Act 1957 (hereinafter called the "Principal Act") Commission Agents  were  required  to  obtain  and  were  being  issued licences  and if they conformed to the conditions  of  those licences  they  were  not subjected to  tax.   In  1963  the Principal  Act was amended by Andhra Pradesh  General  Sales Tax Amendment Act 16 of 1963 which substituted a new Section II  for that which was in force fill then.  The new  Section II changed the preexisting structure of assessment in  that, the  Agents  of  Resident Principals were  made  liable  for assessment  and collection of Tax through the  liability  of the Agent was made co-extensive with that of the  Principal. The Sales Tax authorities however were making assessments of the  turn-over of the Agents in respect of the purchase  and sales  of jaggery of several principals notwithstanding  the fact  that  the turnover upto Rs. 10000/- of  each  was  not exigible  to  tax.  These assessments were challenged  in  a batch  of  writ  petitions  in  Irri  Raju  &  Ors.  v.  The Commercial  Tax Officer, Tedeplalligudem & Anr.(1) in  which the, High Court of Andhra Pradesh hold that the (1) Sales Tax Cases-Vol.  XX (1967) p. 501. 24-1 SC India/71 370 provisions of the principal Act indicated that the Agent  is a  dealer in respect of each of the principals, that  he  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

deemed  to  be as many dealers as there are  principals  and therefore the total turn-over of the Agent in respect of the several  principals could not be computed for assessing  him when  in  fact the turnover of each of  the  principals  was below the limit i.e. Rs. 10.000/-. As a consequence of this. decision, the Andhra Pradesh General Sales Tax Amendment Act 5 of 1968 was enacted and a new Section 1 1 was  substituted for  the then existing Section.  This Section II  was  given retrospective  effect from the 1st August 1963.  The  object of  this Amendment was to enable the ’Taxing authorities  to assess, levy and collect tax or penalty under the Sales  Tax Act  from  the  Agent irrespective of  the  fact  that  such principal is not liable to pay the tax or penalty in respect of  that  transaction  on account of the  turn-over  of  the principal being less than the minimum turnover specified  in sub-section of section 5. The proviso to the new Section  II however authorised the Tax or penalty assessed or levied  on or  due  from the Agent to, be, recovered by  the  Assessing authorities from the Principals instead of from the  Agents, only if the principal is liable to pay tax or penalty.  This new  Section  was also challenged on various  grounds  in  a batch  of writ petitions in Sri Konathala Venkata  Ramana  & Budha Apparao v. State of Andhra Pradesh & Anr.(1). The  High  Court  held that even  after  the  amendment  the liability  of  the  Agent  continues  to  be  based  on  the principal  of representation and whether he is a  dealer  in respect  of  an the principals or only  one  principal,  his liability  is co-extensive with that of the  principal.   It also held that while there is no conflict between Section  5 and Section II of the Act, Section II which authorises the imposition  of a tax independently of the liability  of  the principal  or which takes away or limits the rights  of  the Agent  to  reimburse himself or withhold moneys due  to  the principal   only   where   the  principal   is   liable   is discriminatory and is hit by Article 14. In  view of this Judgment, which in fact restored the  legal position  to that prevailing prior to the  Amendment,  large sums  of  money in which assessments had been made  and  tax collected  became  refundable  To meet  this  situation  the Legislature  enacted  the Andhra Pradesh General  Sales  Tax Amendment  Act  9 of 1970.  The effect of  the.   Amendments made  by Sec. 2. 5, 8 and 9 of the Amendment Act is  that  a proviso  was  added to Section 5(1), a new  Section  II  was substituted for the old Section II with retrospective effect from 1-8-63.  The, amended Section 11 it may be noticed (1) Sales Tax Cases-Vol. 24 (1969) P. 367. 371 was identical with Section 1 1 as it stood on 1-8-1963.  The first  schedule  to the principal Act was  also  amended  by adding  jaggery  as item 77 which was made  taxable  at  the point of first sale at 5 paise in the Rupee.  It was further provided  that as soon as this entry came into force on  the date  fixed by a Notification the proviso to Section  5  (A) added  by Section 2 of the Amending Act would cease to  have effect.  Section 8 of the Amending Act purported to validate the  assessments  already  made  while  Section  9   granted exemption from liability to pay tax in certain cases. We have already noticed that jaggery was being taxed at  the point  of the first purchase of its sale between 1-2-6o  and 31-7-63 but by reason of the Amendment introduced by Act  16 of’  1963  a  multiple  point tax  on  safe  subject  to  an exemption of a turn-over of Rs. 10000/- became leviable at 2 paise  pet  Rupee from 1-8-63 which rate was enhanced  to  3 paise  from 1-4-1966 by Amendment Act 7 of 1966.   A  single point taxation was however levied on items in Schedule 1 and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

2  of the Act which became chargeable as such under  Section 5(2).  We are not concerned with schedule 3 which deals with declared goods but schedule 4 specified the goods which  are exempt  in terms of Section 8. All other sales which do  not fall within the schedules are as earlier stated exigible  to multiple point tax under Section 5(1) of the Act subject  to the minimum of Rs. 10,000/-. The  Appellants had before the High Court of Andhra  Pradesh raised  several  contentions but the  principal  attack  was confined  to 3 aspects of the Amendment Act.   Firstly  that Section II read with the new proviso to Section 5 (1)  makes an  invidious distinction between dealers in jaggery on  the one  hand and dealers in other commodities on the  other  by perpetuating  an unreasonable classification which is  based on no intelligible differentia nor can any reasonable  nexus be  discerned  with the object that the Amendment  seeks  to achieve.  Secondly that Section 9 has to be read as part  of Section  2  of the Amendment Act by which a new  proviso  is added to Section 5(1) of the Principal Act and is a part  of Section 11 substituted by the Amendment Act.  If so read the new proviso to Section 5(1) and the new Section II would  be violative  of  Art. 14 inasmuch as the  dealers  in  jaggery similarly  situated have been invidiously  discriminated  by levying  tax from those, dealers who have collected the  tax and  the  dealers who have not collected the  tax.   Thirdly that  the basis of the amendment is an imposition of  a  tax not on the transaction of sale or purchase of jaggery but on the, collection or non-collection of the tax by the dealers, as such it is also bit by Article 14 of the Constitution. The High Court rejected all these contentions except the one relating, to the validity of Section, 9. the State of Andhra Pradesh as well as the Appellants in Civil Appeal No. 33  of 1971 had 372 contended  that that provision which granted an,  exemption from.  payment  of  tax to, dealers who  bad  not,  in  fact collected  the tax from their principal was, valid and  did, not  suffer  from the vice of discrimination under  Art.  14 because not only was the classification reasonable but  that it  was based on an intelligible differentia having a  nexus with- the object of the impugned Act. We  shall however deal with last mentioned aspect  presently but before we do so on the threshold of the argument of them Appellants there is a valid objection to the maintainability of the Writ Petitions filed by the dealers who as Agents  of the  Principals had collected tax from the purchasers  which as  a  consequence of the two decisions, of the  High  Court referred  to earlier was illegal.  After the, amendment  Act the  levy and collection by the dealers became  prima  facie legal.  In so, far as jaggery is concerned there was also no question  of any, exemption of the minimum turnover  of  the principal of Rs. 10,000, so That the hardship which a Corn-- mission  Agent dealer had to undergo in trying to  determine whether  the, turn-over of each of his principals was  below Rs.  10,000 before he could collect Sales Tax was no  longer there.  After the Amendment by removing the exemption of  Rs 10,000  on  sale of jaggery which  was  given  retrospective -effect,  the  dealer agents could not now  complain,  which complaint  had been held by the High Court to be  justified, that  while the principals were exempted from tax  upto  Rs. 10,000  the  tax  is being levied on  the  agents  turn-over irrespective  of  that  exemption.   In  any  case  whatever objections  the  principals may have to  the  constitutional validity  of the provisions introduced by the  amending  Act under  Article 14 the Agent dealers certainly have no  locus

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

standi  to complain about discrimination between  Principals inter-se.  That apart the dealers are not expected to and in fact do not pay any money of their own towards the tax which is  levied.   The tax so levied and paid  to  the  assessing authorities by the dealer agent is, under the provisions  of the  Act,  not returnable nor can the  principal  under  the provisions  of  the Act make any claim against  such  dealer Agents. Shiri  Gupte on behalf of the Appellants was unable to  tell us  that there were among the Appellants any principals  who had  a  direct interest in challenging the validity  of  the provisions  on the ground of discrimination.   Shri  Motilal Setalvad  on behalf of the Appellants in Civil Appeals  Nos. 2126  to  2128  of  1970  strenuously  contended  that   the Appellants  have  an  interest and  can  maintain  the  Writ Petitions  because they were dealers within the  meaning  of Section  2(e) and are persons who are aggrieved  because  of the  assessment made or likely to be made and tax  recovered from them.  He has further contended that this Court has  in several  cases hold that even a notice issued to any  person under  the provisions of an impugned Act which is likely  to cause prejudice will 373 entitle him to challenge the Constitutional Validity of  the law  under  which  the notice is given.   If  so,  where  an assessment  has  been  made  the assessee  has  a  right  to challenge  the provisions of the Amendment Act under  which the   levy and  Collection  of  tax   have   been   given retrospective validity.  Apart from the question that  ’this argument does not take into account the distinction between an  at tack  under Art. 14 and an attack under  Art.  19  it overlooks the fact that what is sought to be recovered  from the  Appellant is in respect of a tax collected on the  past dealings  and not with respect to the  future  transactions. We  had pointed’ out that tax had already been collected  no doubt  at  first  illegally but due  to  the  amendment  Act that collection has become legal and has also dealer be  is liable  to pay that amount to the State la. respect  of  the Asses sments made.  As there is nothing to show that what is sought to be recovered from the dealer is more than what  he hits  collected,  he  ’has not suffered  any  loss  nor  any disadvantage which would entitle him to seek a remedy  under Art.  226  of the Constitution.  Shri  P.  RamchandraTao  in Civil Appeal No. 2127 of 1970 had nothing now to add to the arguments  advanced  by  the  learned  Advocates  for the Appellants.   On this short ground alone we dismiss all  the Appeals  except  Civil  Appeal No. 33 of  1971  but  in  the circumstances without costs. Appeal in Civil Appeal No. 33 of 1971: In this Appeal Shri S. T. Desai contends that the High Court had  erroneously  struck down Sec. 9 of the  Amendment  Act. Sec. of the Amendment Act is as follows:               "9(1)  where  any  sale of  jaggery  has  been               effected  during  the period between  the  1st               August 1963 and the commencement of Section  5               of  this Act in so far as it relates  to  item               77, and the dealer effecting such sale has not               collected ally amount by way of tax under  the               principal Act ,on the ground that no such  tax               could have been levied or collected in respect               of  such sale, or any portion of the  turnover               relating  to such sale, and where no such  tax               could  also have been levied or  collected  if               the  amendments made in the principal  Act  by               this   Act   had   not   been   made,    then,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

             notwithstanding anything contained in  Section               8 or the said amendments, the dealer shall not               be  liable to pay any tax under the  principal               Act,  as  amended by this Act, in  respect  of               such  sale  or  such  part  of  the   turnover               relating to such sale.               (2)For  the purposes of sub-section  (1),  the               burden of proving that no amount by way of tax               was  collected  under  the  principal  Act  in               respect of any sale referred to in sub-section               (1) or in respect of any portion of the 374 turnover  relating  to  such sale, shall be  on  the  dealer effecting such sale". This  Section is enacted by the legislature with the  object of  removing short-comings in the principal Act  which  were found  wanting by judicial interpretation.  The  interregnum between  the  declaration  by  the  High  Court  of  certain provision  of  the  Act as being  unconstitutional  and  the attempt of the legislature to remedy the defects and to give retrospective effect thereto created two distinct categories between  the  same  class of dealers namely  those  who  had collected  the  tax whether they were assessed  or  not  and those who had not collected the tax.  This classification is certainly reasonable and is related to the object which  the Amendment  Act  seeks to achieve.  The dealers who  had  not collected  the  tax could not have collected it as  the  law stood and therefore the legislature did not think it just or proper to collect tax from those who were not liable.   Even this exemption as can be seen is given to only those persons who  can establish that they have not in fact collected  it, the  burden of which is upon those who claim the  exemption. It is unnecessary to deal with hypothetical cases.  The mere fact  that  in many cases it was not collected  because  the assessment  could not be completed cannot be a valid  ground nor  can it even now be made in regard to those  assessments which  are  now  pending  (a matter upon  which  we  do  not pronounce)   cannot   be  valid  grounds  to   declare   the classification  as arbitrary or unreasonable,  which  reason seems  to  have weighed with the High Court.  We  think  not only   the  classification  reasonable  but  there   is   an intelligible differentia furnishing a nexus with the  object the  Amendment  Act seeks to achieve.  In this view  we  set aside the Judgment of the High Court declaring Section 9  as unconstitutional   and   allow  the  appeal,  but   in   the circumstances without costs. G. C.                                                 Appeal allowed. 375