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PETITIONER: M/S.  GEORGE OAKES (P.) LTD.

       Vs.

RESPONDENT: STATE OF MADRAS

DATE OF JUDGMENT: 28/04/1961

BENCH: DAS, S.K. BENCH: DAS, S.K. AIYYAR, T.L. VENKATARAMA KAPUR, J.L. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1962 AIR 1037            1962 SCR  (2) 570  CITATOR INFO :  F          1962 SC1352  (5,6)  R          1966 SC1738  (10)  RF         1967 SC1895  (24)  RF         1971 SC2216  (11)  RF         1975 SC 198  (13)  D          1975 SC1801  (2)  D          1977 SC1459  (17)  RF         1977 SC2279  (27)  R          1978 SC1496  (8)  RF         1981 SC 440  (13,14)  RF         1986 SC 649  (35,39)  F          1987 SC 611  (5,9)

ACT: Sales  Tax-Turnover-If  includes tax  collected  by  seller- Deeming  statute  Constitutionality Constitution  of  India, Entry 54, List II Seventh Schedule-Government of India  Act, 1935  (26 Geo. 5 & 1 Ed. 8 Ch. 2), Entry 48, List  11,  Sch. VII-Madras  General Sales Tax Act, (Mad.  Act IX  of  1939), SS.  2(i),  2(h),  8BMadras  General  Sales  (Definition  of Turnover  and  Validation of Assessments)  Act,  1954  (Mad. XVII  Of 1954), SS. 2, 3-Turnover and Assessment Rules,  rr. 4, 5, 6, 11.

HEADNOTE: Certain  amounts  collected by the appellants as  sales  tax were   included   in  their  turnover  by  the   sales   tax authorities.  They contested the constitutional validity  of the  Madras  General  Sales  (Definition  of  Turnover   and Validation  of Assessments) Act, 1954, on the  ground  inter alia  that the Sate Legislature went beyond its  legislative competence under entry 54 of List If of the Constitution  in enacting  by the impugned Act that the amounts collected  by the dealer by way of tax shall be deemed to have formed part of his turnover. Held,  that entry 54 of List II of the Seventh  Schedule  of the  Constitution is similar to entry 48 of List 11 of  Sch. Vil  of the Government of India Act, 1935 sales under  which have been held to be transactions passing title to the Goods

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from  the  seller  to the buyer and that  a  mere  executory agreement  was not a sale within the meaning of that  entry. The same meaning must be given to entry 54.                             571 State  of  Madras  v. Gannon Dunkerly &  Co.,  Ltd.,  [1959] S.C.R.  379 and Sales Tax Officer v. M/s.  Budh Prakash  jai Prakash, [1955] 1 S.C.R. 243, referred to. Under ss. 2(i) and 2(h) of the Madras General Sales Tax Act, 1939,  the expression "turnover" means the aggregate  amount for which goods are sold either for cash or deferred payment or  other Valuable consideration, and when a  sale  attracts purchase  tax  which is passed on to the consumer  what  the buyer  has to pay includes the tax and the aggregate  amount to  be  paid would fall under the  definition  of  turnover. When  the seller passes on the tax and the buyer  agrees  to pay  sales tax in addition to the price, the tax  is  really part of the entitle considerations. Papreka Ltd. v. Board of Trade, [1944] 1 All E.R. 372,  Love v.  Norman Wright (Builders) Ltd., [1944] 1 All E.  R.  618, followed. Asoka  Marketing Co. Ltd. v. The State of Bihar,  [1959]  IO S.T.C.  110  and  Tata Iron and Steel Co. v.  The  State  of Bihar, [1958] S.C.R. 1355, referred to. Although s. 8B of the Madras General Sales Tax Act, 1939 and the  Turnover and Assessment Rules separately mentioned  the amounts  collected  as tax for the purpose  of  paying  such amounts  to  the Government, no  immutable  distinction  was drawn  between the sale price and the tax nor was  any  such distinction  maintained  under  S. 2 of  the  impugned  Act. Assuming  that such a distinction did exist the  Legislature was  competent  to enact under entry 54 in List  II  of  the Constitution  that  the tax shall be deemed to  have  formed part of the turnover and obliterate the distinction for  the limited period during which the impugned Act operated.   The impugned Act was therefore valid. The  Deputy Commissioner of Commercial Taxes v. M.  Kyishna- swami Mudaliar, [1954] 5 S.T.C. 88, held not applicable. Sri  Sundararajan  & Co. v. The State of  Madras,  [1956]  7 S.T.C. 105, approved. The Government of Andhya v. East India Commercial Co., Ltd., [1957]  8 S.T.C. 114 and Bengal Immunity Co., Ltd. v.  State Of Bihar,[1955] 2 S.C.R. 603, referred to.

JUDGMENT: CIVIL  APPELLATE, JURISDICTION: Civil Appeals Nos.  280  and 281 of 1960. Appeal from the judgment and order dated April 20, 1956,  of the Madras High Court, in T. R. C. Nos. 101 and 102 of 1956. B.   Ganapathy   Iyer   and  G.  Gopalakrishnan,   for   the appellant. M. M. Ismail and T. M. Sen, for the respondent. 572 D. V. Sastri and T. M. Sen, for Intervener No. 1. Naunit Lal, for Intervener No. 2. S.   M.  Sikri, Advocate-General, Punjab and D. Gupta,   for Intervener No. 3. S.   M. Sikri, Advocate-General, Punjab, N. S. Bindra and D. Gupta, for Intervener No. 4. G.   C.  Kasliwal, Advocate-General, Rajasthan, S. K.  Kapur and D. Gupta, for Intervener No. 5. 1961.  April 28.  The Judgment of the Court was delivered by S.   K.  DAS,  J.-These  are  two  appeals  on  certificates granted by the High Court of Madras and consolidated by  its

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orders dated March 22, 1957.  They are from the judgment and orders of the said High Court dated April 20, 1956 and  July 30, 1956 in two Tax Revision Cases, by which the High  Court dismissed two petitions filed by the appellants under s. 12- B  of  the Madras General Sales Tax Act (Madras  Act  IX  of 1939),  hereinafter  called the principal Act, in  the  fol- lowing circumstances. Messrs.  George Oakes (Private) Limited, appellants  herein, are dealers in Ford motor cars, spare parts and accessories. For  the  two  years  1951-52  and  1952-53  the  appellants submitted their returns under the relevant provisions of the principal Act and claimed exemption from tax with regard  to certain  amount realised on transactions of sales which  the appellants contended were inter-State sales and hence exempt from  tax under Art. 286 of the Constitution as it stood  at the  relevant  time.   The Deputy  Commercial  Tax  Officer, Madras, not only rejected the claim of exemption, but  added to  the  turnover certain amounts which the  appellants  had collected  by way of tax.  The amounts so added for  1951-52 were -(a) Rs. 8,000 to the    net  turnover assessable at  3 pies per rupee, and (b)  Rs.   4,30,000  to   the   turnover assessable at 9 pies per rupee.  For 1952-53 the amounts  so added were -(a) Rs. 30,132 odd and (b) Rs. 2,92,257 odd res- pectively. Aggrieved by the orders of the Deputy Commercial 573 Tax  Officer,  the appellants preferred two appeals  to  the Special Commercial Tax Officer, Appeals, Madras City.  These appeals  were dismissed.  The matter was then taken  to  the Sales  Tax Appellate Tribunal by means of two  appeals.   By this  time  the  Madras Legislature had  passed  the  Madras General  Sales  (Definition of Turnover  and  Validation  of Assessments)  Act, 1954, being Madras Act No. XVII of  1954. This  Act  we  shall refer to as the impugned  Act  in  this judgment,  because  its constitutional validity is  now  the only  question for decision in these appeals.  The  Tribunal negatived  the  claim of the appellants arising out  of  the contention  that  some  of  the  sale  transactions  in  the relevant years were in effect interState sales and therefore exempt from tax; the tribunal declined to go into the second question of the constitutional validity of the impugned Act. We may state here, though nothing now turns upon this,  that the  Tribunal held that when sales tax was included  in  the turnover,  it was proper to tax the amounts so  included  at the  minimum rate only, viz., 3 pies in the rupee  under  s. 3(1) of the principal Act. Thereafter  the appellants filed two revision  petitions  to the  High Court under s. 12-B of the principal  Act.   These were  dismissed  in limine.  By the orders dated  April  20, 1956  the High Court held that the contention as to some  of the  transactions being inter-State sales was  concluded  by one of its earlier decisions, which came before us in  Ashok Leyland Ltd. v. The State of Madras, Civil Appeal No. 446 of 1958.   In  that appeal we delivered judgment on  March  28, 1961 and held that the Sales Tax Laws (Validation) Act, 1956 applied  and it was unnecessary to consider the true  nature of  the  transactions which the  appellants  contended  were inter-State  sales.  Learned Counsel for the appellants  has conceded  before  us  that   decision  governs  the  present appeals, and the first question no longer survives. As  to the second question, the High Court by oversight  did not  deal with it in its orders dated April 20, 1956.   When the matter was brought to the notice of 73 574

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the  High Court, it said in its orders dated July  30,  1956 that the second question was also concluded by its  decision in Sri Sundararajan and Co., Ltd. v. The State of  Madras(’) where the validity of the impugned Act was upheld. When we heard these appeals along with Ashok Leyland Ltd. v. The  State  of  Madras, Civil Appeal No.  446  of  1958,  we expressed the view that there was some divergence of opinion in   the  High  Courts  on  the  second  question  and   the substantial  point for consideration before us  was  whether the  impugned  Act was validly made under entry  54  of  the State List in the Seventh Schedule to the Constitution: thus the  question raised was one of legislative  competence  and affected all the States.  The State of Madras was already  a party respondent to these appeals.  Accordingly, we directed the  issue of notices to the Advocates-General of all  other States   also.   In  pursuance  of  the  said  notices   the Advocates-General  of  Andhra Pradesh, Assam,  West  Bengal, Gujarat,  Maharashtra,  Punjab and Rajasthan  have  appeared before  us.   They have unanimously supported the  State  of Madras  in  its submission that the impugned Act  is  valid; some  of them have added supplementary arguments in  support of that submission. For convenience and brevity we shall refer in this  judgment to  the main arguments as representing two differing  points of  view;  firstly, there is the argument on behalf  of  the appellants that the several provisions of the principal  Act as also s. 2 of the impugned Act make a distinction  between the sale price of goods sold and the amount collected by way of  tax  and  in view of that  distinction  made,  What  the impugned  Act  seeks  to impose is a ’tax  on  Sales-tax’  a subject which does not come within the ambit of entry 54  of List  II  which at the relevant time read as "Taxes  on  the sale  or  purchase of goods other than newspapers."  On  the other side, the argument is that what the impugned Act seeks to  do  is  to  enlarge  the  scope  of  the  definition  of ’turnover’  so as to include the amount collected by way  of tax in the turnover by a deeming (1)  (1956) 7 S.T.C. 105. 575 provision,  and this the State Legislature was competent  to enact under entry 54 of the State List.  These are the  main arguments  on  two sides; but there are  several  subsidiary points in support of the main argument on each side, and  it would be an over simplification to ignore these  altogether. We  shall, therefore, consider them also when  dealing  with the main argument on each side. We  shall  first  refer to the relevant  provisions  of  the principal  Act  and of the impugned Act, in so far  as  they bear  on  the points debated before us.  Under s. 3  of  the principal Act which is the charging section, every dealer is liable  to  pay, subject to the provisions of the  Act,  for each  year  a  tax  on his  total  turnover  for  that  year calculated  at  a particular percentage  of  such  turnover. What  is ’turnover’ is defined in s. 2(i).   The  definition substantially states-"’turnover’ means the aggregate  amount for  which  goods  are either bought or  sold  by  a  dealer whether  for cash or for deferred payment or other  valuable consideration....... ’Sale’ is defined in s. 2(h) and  means (we  are  reading  so  much of the  definition  only  as  is material  for  our purpose) "every transfer of  property  in goods  by  one person to another in the course of  trade  or business  for  cash or deferred payment  or  other  valuable consideration."  It  is  worthy of note here  that  the  tax imposed by the principal Act is a tax on total turnover, and turnover  means  the aggregate amount for  which  goods  are

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either  bought or sold by a dealer.  Therefore, one  of  the questions which fall for consideration is whether the  State Legislature  went  beyond  its  legislative  competence   in enacting  by the impugned Act that the amounts collected  by the dealer by way of tax shall be deemed to have formed part of  his turnover.  This brings us to s. 8B of the  principal Act, which provides in sub-s. (1) that no person who is  not a registered dealer shall collect any amount by way of  tax; nor  shall  a  registered dealer make  any  such  collection except in accordance with such conditions and  restrictions, if any, as may be prescribed; sub-s. (2) provides inter alia that  every person who has collected or collects by  way  of tax any amounts shall pay 576 over the same to the State Government.  Section 15  provides for penalties for a, contravention of some of the provisions of the principal Act including the provisions of s. 8B. In  The Deputy Commissioner of Commercial Taxes,  Coimbatore Division  v. M. Krighnaswami Mudaliar & Sons (1) the  Madras High  Court held that the amount collected by  a  registered dealer  from the consumer by way of sales tax and paid  over to -Government should not be included in the turnover of the registered  dealer  as part of the sale price of  the  goods sold and it was not liable to be taxed again.  This decision was given on January 7, 1954.  In July 1954 was enacted  the impugned  Act sections 2 and 3 whereof need only be set  out here.               "S. 2. Sales Tax Collections by dealers to  be               deemed part of turnover.-In the case of  sales               made  by a dealer before the 1st  April  1954,               amounts collected by him by way of tax under               the Madras General Sales Tax Act, 1939               (Madras Act IX of 1939) (hereinafter  referred               to  as the principal Act), shall be deemed  to               have formed part of his turnover.               3.    Validation  of  certain  assessment  and               collections.-               (1)   All  assessments, and collections  made,               all  orders passed, all actions taken  by  any               officer in the exercise or purported  exercise               of  jurisdiction  or power  conferred  by  the               principal  Act, and all judgments, decrees  or               orders pronounced by any Tribunal or Court  in               the  exercise  of its jurisdiction  or  powers               with respect to matters in the principal  Act,               on  the  basis  that amounts  collected  by  a               dealer  by way of tax under the principal  Act               before the 1st April 1954, formed part of  the               turnover of the dealer are hereby declared  to               have  been  validly  made,  passed,  taken  or               pronounced,  as  the  case  may  be;  and  any               finding  recorded by any officer, Tribunal  or               Court  to  a contrary effect  and  any  order,               judgment  or decree in so far as  such  order,               judgment or decree embodied or is based on any               such finding and does not relate merely to the               costs  of the proceeding which result  in  the               judgment, decree or order shall be void and of               no effect:               (2)   [1954] 5 S.T.C. 88.                                    577               Provided  that no act or omission on the  part               of  any  person  shall  be  punishable  as  an               offence   which   would  not  have   been   so               punishable if this Act had not been passed.

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             (2)  Nothing  in  sub-section  (1)  shall   be               construed  as  authorising  any  officer,   in               assessing  any  dealer in s  the  exercise  or               purported  exercise of jurisdiction or  powers               conferred by the principal Act, to include  in               the  turnover of the dealer amounts  collected               by him after the 1st April 1954 by way of  tax               under the principal Act." The validity of the impugned Act was then questioned in  the Madras  High Court and in Sri Sundararajan and Co., Ltd.  v. The  State of Madras (1) it was held that the  impugned  Act was  valid.   The High Court pointed out  that  the  earlier decision  in Krishnaswami Mudaliar’s case (2) was  not  that the  State Legislature could not make the amounts  collected by a registered dealer by way of tax under s. 8B part of the assessable turnover, but that the principal Act as it  stood at  the relevant time did not make such amounts part of  the assessable turnover.  It held that in pith and substance the impugned  Act validated the assessments already made  before April  1,  1954 and that -even where the  registered  dealer collected any amount by way of tax under the authority of s. 8B, the payment by the purchaser was on the occasion of  the sale  by  the  dealer and vis-a-vis the  latter  it  was  in reality part of the price the purchaser paid the seller  for purchasing the goods.  The same view was also expressed  -by the Patna High Court in Ashoka Marketing Company Ltd. v. The State  of  Bihar  (3) with regard to  the  Bihar  Sales  Tax (Definition of Turnover and Validation of Assessments)  Act, 1958.  The question before us is whether the aforesaid  view is correct. The relevant legislative entry, as we have said earlier,  is entry 54 of List II-"Taxes on the sale or purchase of  goods other than newspapers." A similar entry (no. 48) in List  11 of Schedule VII to the Government of India Act, 1935 read as "Taxes on the (1) [1956] 7 S.T.C. 105.       (2) [1954] 5 S.T.C. 88.                  (3) [1959] 10 S.T.C. 110, 578 sale of goods." The true scope and effect of that entry  was considered  by this Court in the State of Madras  v.  Gannon Dunkerley  and  Co.  (Madras) Ltd. (1) and on  a  review  of several decisions bearing on the subject it       held  that the expression "sale of goods" was a term of well-recognised legal  import in the general law relating to sale  of  goods and in the, legislative practice relating to that topic  and must  be  interpreted as having the same meaning as  in  the Sale  of Goods Act, 1930; in other words, it was  held  that sales  contemplated by entry 48 of the Government  of  India Act,  1935  were transactions in which title  to  the  goods passed  from the seller to the buyer, and in The  Sales  Tax Officer,  Pilibhit v. Messrs.  Budh Prakash Jai Prakash  (2) it  was held that a mere executory agreement was not a  sale within  the meaning of that entry.  We think that  the  same meaning must be given to entry 54 of List 11 of the  Seventh Schedule  to  the Constitution.  The question before  us  is that giving that meaning to the entry, is the impugned Act a valid piece of legislation by a competent Legislature? Now,  learned  Counsel  for the appellants  has  not  raised before  us the extreme contention that in no case could  the State Legislature validly make a law which would include the amount  collected by way of tax as part of the  turnover  of the dealer.  He has submitted that it is unnecessary for him in   this  case  to  press  into  service  any   such   wide proposition.  His argument is that the principal Act by  ss. 8B and 15 and the impugned Act by s. 2 thereof having made a

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distinction between what he calls the sale price and what is collected  by way of tax by the dealer, the question of  the validity of the impugned Act must be determined on the basis of that distinction and so determined, what the impugned Act does is to impose what learned Counsel calls "a tax on  tax" and therefore not covered by the relevant legislative entry. His  submission further is that what is collected by way  of tax  being  distinct  from sale  price  and  therefore  from turnover,  it  must  be necessarily  held  that  the  amount collected by way of tax is not essentially (1) [1959] S.C.R. 379. (2) [1955] 1 S.C.R. 243.                             579 connected  with  the transaction of sale and  therefore  the imposition  of  "a tax on tax" has no  necessary   connexion with  the transaction of sale as understood in  the  general law relating to sale of goods. We are unable to accept this argument as correct.  First  of all,  we do not think that either the principal Act  or  the impugned  Act proceeds,on any immutable distinction  between sale  price  and  tax  such  as  learned  Counsel  for   the appellants  has  suggested.   The  principal  Act  does  not contain  any  separate definition of sale  price.   We  have already   referred   to  the  definitions  of   ’sale’   and ’turnover’;   those  definitions  do  not  show   any   such distinction.   On  the contrary, the  expression  ’turnover’ means  the  aggregate amount for which goods are  bought  or sold,  whether  for cash or for deferred  payment  or  other valuable  consideration, and when a sale  attracts  purchase tax and the tax is passed on to the consumer, what the buyer has  to pay for the goods includes the tax as well  and  the aggregate amount so paid would fall within the definition of turnover.  In Paprika Ltd. and Another v. Board of Trade (1) Lawrence,  J. said "Whenever a sale attracts  purchase  tax, that  tax presumably affects the price which the seller  who is liable to pay the tax demands but it does not cease to be the  price which the buyer has to pay even if the  price  is expressed  as x plus purchase tax." The same view was  again expressed in Love v. Norman Wright (Builders), Ltd. (2) when Goddard, L. J. said:               "Where   an  article  is  taxed,  whether   by               purchase  tax, customs duty, or  excise  duty,               the  tax  becomes  part  of  the  price  which               ordinarily  the buyer will have to  pay.   The               price  of  an ounce of tobacco is what  it  is               because  of  the rate of tax, but  on  a  sale               there is only one consideration though made up               of cost plus profit plus tax.  So, if a seller               offers goods for sale, it is for him to  quote               a  price which includes the tax if he  desires               to  pass  it on to the buyer.   If  the  buyer               agrees  to  the price, it is not  for  him  to               consider  how  it is made up  or  whether  the               seller has included tax or not."               (1) [1944] 1 All E.R. 372.    (2) [1944] 1 All               E.R. 618.               580 We think that these observations are apposite even     in the context of the provisions of the Acts we are considering now,  and there is nothing in those provisions  which  would indicate that when the dealer      Collects  any  amount  by way  of tax, that cannot be part of the sale price.  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

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is no reason why the whole amount paid to the seller by  the purchaser should not be treated as the consideration for the sale and included in the turnover. But,  argues learned Counsel for the appellants, s.  8-B  of the  principal  Act and Turnover and Assessment  Rules  made under s. 19 show that under the scheme of the principal  Act a  distinction is drawn between the amount collected by  way of tax and the amount of purchase price.  It is indeed  true that in s. 8-B the amount collected by way of tax is separa- tely  mentioned,  and  while sub-s. (1)  thereof  is  merely enabling  in the sense that a registered dealer may pass  on the tax, sub-s. (2) imposes an obligation on the  registered dealer  to  pay over the amount of tax collected by  him  to Government.  The position under the Turnover and  Assessment Rules is correctly summarised in the following extract  from the judgment in Krishnaswamy Mudaliar’s case (1):               "Rule 4 provides that the gross turnover of  a               dealer  for the purposes of the rules  is  the               amount for which goods are sold by the dealer.               Provision  is  made  in  rule  5  for  certain               deductions,  and the mode or manner  in  which               the  tax  to be levied has to be  arrived  at.               The  object of these rules is to assess.,  the               net turnover on which the tax is to be  levied               under  the charging section.  It is  therefore               clear that under the charging section, tax  is               to  be paid on the turnover which is  assessed               according to the rules.  Rule 11 requires that               every dealer should submit a return under rule               6  every  year to the assessing  authority  in               Form  A  in which he has to  show  the  actual               gross and net turnover for the preceding               (1)   [1954] 5 S.T.C. 88.                                    581               year  and the amounts by way of tax  or  taxes               actually collected during that year.  In  Form               A columns 1 to 10 relate to the gross turnover               and  the deductions to be made from the  gross               turnover; column 10 requires the net  turnover               liable  to tax to be shown.  In column 11  the               amount  actually  collected by way of  tax  or               taxes under s. 8-B has to be shown." The   question  however  still  remains-do   the   aforesaid provisions  show such a distinction under the scheme of  the two  Acts that the amount collected by way of tax cannot  be part  of the turnover of the dealer and if the impugned  Act makes  it a part of the turnover by a deeming provision,  it must  be  struck  down  as  being  outside  the  legislative competence  of  the State Legislature?  It is  necessary  to emphasise  here that no question of  legislative  competence arose in Krishnaswamy Mudaliar’s case(’) the decision  being based  on  a  construction of s. 8-B and  the  Turnover  and Assessment Rules only. We  do not think that the distinction drawn in  Krishnaswamy Mudaliar’s  case(’) whether right or wrong on a question  of construction   only,   is  material  to  the   question   of legislative competence.  In The Tata Iron & Steel Co.,  Ltd. v. The State of Bihar (2) this Court dealt with a  provision in  the Bihar Sales Tax Act, 1947 similar to s. 8-B  of  the principal Act.  Das, C.  J., delivering the majority opinion said:               "The circumstance that the 1947 Act, after the               amendment,  permitted  the seller  who  was  a               registered dealer to collect the sales tax  as               a tax from the purchaser does not do away with

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             the primary liability of the seller to pay the               sales tax.  This is further made clear by  the               fact  that the registered dealer need not,  if               he so pleases or chooses, collect the tax from               the  purchaser  and  sometimes  by  reason  of               competition  with other registered dealers  he               may  find it profitable to sell his goods  and               to  retain  his  old  customers  even  at  the               sacrifice  of the sales tax.  This also  makes               it clear that the sales tax need not                (1)  [1954] 5 S.T.C. 88.               (2) [1958] S.C.R. 1355.               74               582               be  passed on to the purchasers and this  fact               does  not  alter the real nature  of  the  tax               which,  by the express provisions of the  law,               is  cast upon the seller.  The buyer is  under               no  liability to pay sales tax in addition  to               the  agreed  sale price  unless  the  contract               specifically provides otherwise.  See Love, v.               Norman Wright (Builders), Ltd.  L. R. [1944] 1               K. B. 484." These  observations show that when the seller passes on  the tax and the buyer agrees to pay sales tax in addition to the price,  the tax is really part of the  entire  consideration and  the distinction between the two amounts-tax and  price- loses all significance from the point of view of legislative competence.   The matter is not in any way  different  under the  Turnover  and  Assessment Rules.  It is  true  that  in column 11 of Form A the amount collected by way of tax under s. 8-B has to be shown; that does not, however, mean that an immutable  distinction  such  as  will go  to  the  root  of legislative  competence  has been drawn and must  be  always maintained.  It appears to us that the true effect of s. 8-B and  the  Turnover  and  Assessment  Rules  is  that  (a)  a registered  dealer  is enabled to pass on the  tax,  (b)  an unregistered  dealer  cannot  do  so,  and  (c)  the  amount collected  by way of tax is to be shown separately,  for  it has to be paid over to Government.  This does not mean  that it  is incompetent to the legislature  enacting  legislation pursuant  to  entry 54 in List 11 by suitable  provision  to make  the tax paid by the purchaser to the  dealer  together with  the sale price in consideration of the goods  sold,  a part of the turnover of the dealer; nor does it mean that in law  the tax as imposed by Government is a tax on the  buyer making  the dealer a mere collecting agency so that the  tax must always remain outside the sale price. There  is  another  aspect from which the  question  may  be considered.  We shall assume that -under the ,scheme of  the principal  Act  a distinction is drawn  between  the  amount collected by way tax and the sale price other than the  tax. Is  such  a  distinction continued  and  maintained  by  the impugned  Act?   Learned  Counsel  for  the  appellants  has referred us to                             583 s.   2  of the impugned Act where the expression  "collected by him by way of tax under the Madras General Sales Tax Act, 1939" occurs.  It is argued that the aforesaid expression in the  impugned Act has to be read with the provisions of  the principal Act and so read, B. 2 maintains and continues  the distinction  made  under the principal Act.  Again,  we  are unable to agree.  The expression "collected by him by way of tax  etc."  is  merely  descriptive  of  the  "amounts"   so collected;  the  essential and operative part of s.  2  says

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that the amounts so collected shall be deemed to have formed part  of the turnover of the dealer.  Therefore, in  express terms  s.  2  states that the tax shall be  deemed  to  have formed part of the turnover and obliterates the distinction, if any, between ’tax’ and ’turnover’ for the limited  period during  which the impugned Act operates.  To hold  that  the distinction  is maintained and continued under the  impugned Act is to go against the express terms of s. 2. This  aspect of the question was adverted to in The Government of  Andhra v. East India Commercial Co. Ltd. (1) where the Andhra  High Court had occasion to consider the question from a  somewhat different  point of view, namely, an amendment made  by  the Andhra   Pradesh  Legislature  in  the  definition  of   the expression  ’turnover’ in the principal Act.  Section  2  of the  amending  Act substituted the following  definition  of ’turn-over’:-               Turnover means the total amount set out in the               bill of sale (or if there is no bill of  sale,               the total amount charged) as the consideration               for   the  sale  or  purchase  of  goods   ...               including  any sums charged by the dealer  for               anything done in respect of the goods sold  at               the  time  of or before the  delivery  of  the               goods  and  any  other  sums  charged  by  the               dealer,  whatever be the description, name  or               object thereof."               Section 4 of the amending Act repeated ss. 8-B               and  8-C of the principal Act.   Dealing  with               the effect of these amendments, the High Court               of Andhra Pradesh said,               (1)   [1957] 8 S.T.C. 114.               584               "The ultimate economic incidence of the  sales               tax  is on the consumer or the last  purchaser               and  whatever  he pays for the goods  is  paid               only   as   price,   that  is   to   say,   as               consideration for the purchase.  The statutory               liability,  however, for payment of sales  tax               is laid on the dealer on his total  ’turnover’               whether  or not he realises the tax  from  the               purchasers.   Generally  speaking,  the  price               charged  by the dealer would be  inclusive  of               sales tax, for, it is to his interest to  pass               the  burden of the tax to the  purchaser.   So               far as the dealer is concerned, the payment of               a sum covering the tax made by a purebaser  on               the  occasion of sale, is really part  of  the               price which the purchasers pay for the goods." Later,  it  referred with approval to the  decision  in  Sri Sundararajan  and Co., Ltd. v. The State of Madras (1).   In this  latter decision the validity of the impugned  Act  was questioned  and dealing with s. 2 of the impugned  Act,  the High Court said:               "Section 2 only enacted that such amount shall               be deemed’ to be part of the turnover and  for               a limited period.  It may not be necessary  to               set  out  authorities  for  the   well-settled               principle of what the effect is of the use  of               the expression ’deemed’ in a statute.  Was the               legislature  competent  to  enact  section   2               including  the deeming provision, is the  real               question.  If the validity of section 2 of the               impugned  Act is established there  should  be               little difficulty in upholding the validity of               section  3,  which gave effect  to  the  legal

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             fiction enacted by section 2.               Obviously, it is not the name the  legislature               accords  to  a  payment by a  purchaser  to  a               seller, who is a dealer as defined by the Act,               that   determines   the   question   of    the               legislative  competence.  No doubt section  8B               called  the payment as amount  (collected)  by               way  of  tax.   It is equally  true  that  the               statutory  liability to pay the sales  tax  is               laid  on the dealer.  What is taxable  is  not               each   transaction  of  sale  but  the   total               turnover of the dealer, computed in accordance               with the provisions of the               (1)   (1956) 7 S.T.C. 105.                                    585               Act and the Rules.  But it is  well-recognised               that  whatever  be the form of  the  statutory               provisions, the ultimate economic incidence of               the tax is on the consumer, the purchaser.  It               was  that well-settled principle that was  re-               stated  in Bengal Immunity Co. Ltd. v.  State,               of  Bihar (1).  Even if the registered  dealer               collects  the amount by way of tax  under  the               authority  of  section  8B  of  the  Act,  the               payment is by the purchaser on the occasion of               the sale by the dealer.  Vis-a-vis the  dealer               it  is  in  reality  part  of  the  price  the               purchaser has to pay the seller for purchasing               the  goods.  A tax on such a payment,  in  our               opinion, is well within the ambit of Entry  54               of  List 11, Schedule VII, read  with  Article               246(3) of the Constitution." We are of the view that the aforesaid observations correctly give  the true effect of s. 2 of the impugned Act, and s.  3 of the impugned Act is merely consequential. Mr. Sikri appearing on behalf of. the States of  Maharashtra and  Punjab  has  drawn our attention  to  certain  American decisions  which show that treating tax as part of the  sale price  in cases where the tax is passed on to the buyer,  is well-recognised  and  is  not unknown  to  law  (see  Lash’s Products Company v. United States, 73 L. Edn. 251; Pure  Oil Company v. State Of Alabama, 148 American Law Reports  260). We  consider  it  unnecessary to  examine  these  decisions, because the validity of the impugned Act must be  determined on  its  own terms in the context of the provisions  of  the principal Act.  Reading the impugned Act in the light of the provisions  of the principal Act, it seems clear to us  that the  impugned Act cannot be held to be bad on the ground  of legislative incompetence.  Under the definition of  turnover the  aggregate amount for which goods are bought or sold  is taxable.  This aggregate amount includes the tax as part  of the  price  paid  by the buyer.  The amount  goes  into  the common till of the dealer till he pays the tax.  It is money which  he keeps using for his business till he pays it  over to Government.  Indeed, (1)  [1955] 2 S.C.R. 603. 586 he may turn it over again and again till he finally hands it to  Government.  There is thus nothing anomalous in the  law treating it as part of the amount on which tax must be  paid by  him.  This conception of a turnover is not new.   It  is found in England and America and there is no reason to think that  when the legislatures in India defined  ’turnover’  to include  tax  also, they were striking  out  into  something quite unknown and unheard of before.

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The only question which has been raised in these appeals  is regarding  the validity of the impugned Act.  That  question having been decided against the appellants, the appeals fail and are dismissed with costs.  One hearing fee. Appeals dismissed.