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B. Badalachand and Co. and ors. Vs. the Agricultural Market Committee and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberW.A. Nos. 172 and 332 of 1973 and W.P. No. 2504 of 1973
Judge
Reported in[1975]35STC285(AP)
AppellantB. Badalachand and Co. and ors.
RespondentThe Agricultural Market Committee and ors.
Appellant Advocate P. Babul Reddy, Adv. in W.A. No. 172 of 1973, P. Rama Rao, Adv. in W.A. No. 332 of 1973 and ; P. Venkatarama Reddy, Adv. in W.P. No. 2504 of 1973
Respondent Advocate V. Lakshmi Devi, Adv. for respondent No. 1 in W.A. No. 172 of 1973, ;D.V. Reddipanthulu, Adv. for respondent No. 1 in W.A. No. 332 of 1973 and W.P. No. 2504 of 1973, The Government Pleader for Sales
DispositionAppeal allowed
Excerpt:
- - in the meanwhile, the market committee, kamareddy, at its meeting held on 16th december, 1972, passed a resolution directing the commission agents to collect sales tax on jaggery sold in the market area from the buyers alone, instead of the producers, with effect from 19th december, 1972. pursuant to the said resolution, the secretary of the market committee issued notices to the petitioner and the appellants herein as well as the other dealers instructing them to collect sales tax from the purchasers of jaggery instead of the sellers. it shall also manage its affairs having due regard always to the convenience and best interests of the trade in the notified agricultural produce, live-stock or products of live-stock. that apart on a close and careful consideration of the several.....kondaiah, j.1. as the question involved in these three cases is one and the same, it is convenient to dispose of the same by a common judgment.2. the petitioners in w. p. no. 2504 of 1973 and the appellants in w. a. nos. 172 and 332 of 1973 are commission agents who obtained licences under the andhra pradesh (agricultural produce and livestock) markets act (hereinafter referred to as the 'markets act') for carrying on business in the market area of kamareddy. these dealers mainly act as commission agents to the agriculturist-principals in selling their jaggery, pulses, etc., by open auction in the market area on payment of the prescribed percentage of commission for the services rendered by them. they at times advance monies to the agriculturists and facilitate the storage of the goods in.....
Judgment:

Kondaiah, J.

1. As the question involved in these three cases is one and the same, it is convenient to dispose of the same by a common Judgment.

2. The petitioners in W. P. No. 2504 of 1973 and the appellants in W. A. Nos. 172 and 332 of 1973 are commission agents who obtained licences under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act (hereinafter referred to as the 'Markets Act') for carrying on business in the market area of Kamareddy. These dealers mainly act as commission agents to the agriculturist-principals in selling their jaggery, pulses, etc., by open auction in the market area on payment of the prescribed percentage of commission for the services rendered by them. They at times advance monies to the agriculturists and facilitate the storage of the goods in their godowns. The commission agents used to collect sales tax on the turnover of sales of jaggery made by them in the market area, from their principals, the agriculturists. Some of the members of the market committee, Kamareddy, and some agriculturists preferred Writ Petition No. 17 of 1972 for the issuance of a writ of mandamus directing the State Government to frame appropriate rules whereunder the buyers of jaggery alone should be made liable to pay sales tax, and the same is still pending. In the meanwhile, the market committee, Kamareddy, at its meeting held on 16th December, 1972, passed a resolution directing the commission agents to collect sales tax on jaggery sold in the market area from the buyers alone, instead of the producers, with effect from 19th December, 1972. Pursuant to the said resolution, the secretary of the market committee issued notices to the petitioner and the appellants herein as well as the other dealers instructing them to collect sales tax from the purchasers of jaggery instead of the sellers. As the request made by the commission agents to the Director of Marketing, who is the re visional authority under the Markets Act, to issue necessary instructions to the market committee to cancel the impugned resolution as it is without jurisdiction, was not favourably considered, some of the commission agents have approached this court and filed W. P. Nos. 179 and 330 of 1973 questioning the validity of the impugned resolution of the market committee, Kamareddy. Our learned brother, Obul Reddi, J., has dismissed the writ petitions holding that 'the market committee, by its resolution, does not fix the liability to pay the sales tax' and 'the commission agents are to act under the instructions and directions of the market committee, which is also to be guided by such instructions as may be issued from time to time by the Director of Marketing or the Government, as the case may be' and that 'in this case, the Director of Marketing has advised the market committee to see that the sales tax is collected by the commission agents from the buyers''. The learned Judge also held that 'by the impugned resolution, the market committee has asked the commission agents to collect the sales tax from the buyers instead of debiting the sales tax to the account of the sellers' and 'by so asking the commission agents, I am unable to say that the market committee violated the provisions of the Markets Act or the Rules made thereunder or the provisions of the Andhra Pradesh General Sales Tax Act'. According to the learned Judge, the market committee has not exceeded its jurisdiction by passing the impugned resolution and it only amounts to regulating the transaction that go through the market area and by collecting sales tax from the buyers instead of debiting it to the account of the sellers, the profession or business of the commission agents would not be affected in any manner. Aggrieved by the decision of the learned Judge, W. A. Nos. 172 and 332 of 1973 have been filed. W. P. No. 2504 of 1973 by some other commission agents who deal in jaggery at Kamareddy is also filed for the same relief as in the other two cases.

3. Mr. P. Rama Rao, the learned counsel appearing for the appellants in W. A. No. 332 of 1973, contended that the impugned resolution passed by the market committee, Kamareddy, is in direct conflict with the provisions of Section 11 of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as 'the Sales Tax Act') which invests in his clients, the commission agents, a right to have the sales tax paid by them on the turnover of the sales in respect of jaggery made by them, reimbursed from their principal-producers. According to the counsel, there is no provision in the Markets Act or the Rules made thereunder which authorises the market committee to pass any resolution regulating the mode or manner of levy or collection of sales tax on the turnover of the sales of agricultural produce that take place in the market area, and, therefore, the market committee is not competent to direct the commission agents to collect sales tax from the purchasers instead of their principal-sellers and hence, the impugned resolution is illegal, without jurisdiction and liable to be quashed.

4. Mr. Babul Reddy, the learned counsel appearing for the appellants in W. A. No. 172 of 1973 and Mr. Venkatarama Reddy, the learned counsel appearing for the petitioners in W. P. No. 2504 of 1973, adopted the arguments of Mr. P. Rama Rao.

5. Mr. Reddipanthulu, the learned counsel appearing for the Market Committee, Kamareddy, resisted the claim advanced on behalf of the commission agents contending, inter alia, that the market committee is empowered to pass the impugned resolution as it only amounts to regulating the mode and manner of the sales of agricultural produce in the market area.

6. Mr. Subhashana Reddy, the learned counsel appearing for some of the producer-agriculturists, reiterated the submission of Mr. Reddipanthulu and referred to the intendment of the Markets Act and the provisions of Sections 5, 7, 27 and 32 thereof and Rules 26, 27(v) and (viii), 64 and 73 of the Andhra Pradesh (Agricultural Produce and Livestock) Market Rules, 1969 (hereinafter referred to as 'the Rules'), in support of his plea that what is sought to be achieved by the impugned resolution is nothing but a kind of control and regulation of the sales of agricultural produce envisaged in Chapter IV of the Rules. According to him, the impugned resolution does not violate the provisions of the Sales Tax Act, which is silent on the point as to from whom the sales tax in respect of the goods sold by the seller to the purchaser has to be collected and the seller is at liberty to pass on the incidence of sales tax to the purchasers. He further urged that the commission agents would not suffer any injury or loss if the sales tax is added to the sale price and collected from the buyers.

7. The question that falls for determination is whether the market committee of Kamareddy has jurisdiction or is competent to pass the impugned resolution dated 16th December, 1972, directing the commission agents who deal in jaggery in that market area, to charge and collect sales tax on the turnover of sales of jaggery in the market area, from the purchasers instead of the agriculturist-sellers, who are their principals.

8. The answer to the question largely depends upon the intendment and scheme of the Markets Act and the Rules, and upon the provisions of Sections 5 and 11 of the Sales Tax Act read with item No. 77 of the First Schedule to that Act, and their application to the facts of the present cases.

9. The Markets Act which was passed by the State Legislature and received the assent of the President on 18th November, 1966, came into force on 29th November, 1966. The intendment of the Act is to consolidate and amend the law relating to the regulation of purchase and sale of agricultural produce, live-stock and products of live-stock and the establishment of markets in connection therewith in the State of Andhra Pradesh.

10. The Markets Act consists of 37 sections. Section 1 refers to the short title, extent and commencement of the Act. Section 2 provides for definitions of various terms such as 'agricultural produce', 'grower', 'live-stock', 'market', 'market committee', 'notified area', 'notified market area' and 'products of live-stock', etc. Section 3 empowers the State Government to publish a draft notification declaring their intention of regulating the purchase and sale of any specified agricultural produce, live-stock or products of live-stock in any area as may be specified therein and calling for objections or suggestions within a specified period. After the expiration of the period specified in the draft notification and after considering such objections and suggestions as may be received by it before such expiration, the State Government may publish in the prescribed manner a final notification declaring the area or any portion thereof, specified in the draft notification, to be a notified area for purposes of the Act, in respect of any agricultural produce, live-stock and products of live-stock specified in the notification. Under Section 4 the Government shall constitute a market committee for every notified area and declare the notified market area. It is the duty of the market committee to enforce the provisions of the Act and the Rules and also the bye-laws of the market committee in the notified area. The composition of the market committee shall be as indicated in Section 5 of the Act. The market committee shall consist of not less than twelve and not more than sixteen members, as may be fixed for it by the Government. It shall be constituted by not less than one half of the members to be appointed by the Government from among the growers of agricultural produce and the owners of live-stock and products of live-stock in the notified area, one elected non-official, one representative of the agricultural department or the animal husbandry department to be appointed by the Government and two representatives one each of the municipality within which the office of the market committee is located and of the gram panchayats comprised in the notified area. The remaining members will have to be elected in the manner prescribed by the persons licensed under Sub-section (1) of Section 7 in the notified area from among themselves. Section 6 deals with reconstitution of market committees. Section 7, which is a material provision, prohibits any person from setting up, establishing or using any place for the purchase, sale, storage, weighment, curing, pressing or processing of any notified agricultural produce or products of live-stock or for the purchase or sale of livestock except under and in accordance with the conditions of a licence granted to him by the market committee. The first proviso to Section 7(1) empowers the market committee to exempt from the provisions of Section 7(1) any person who carries on the business of purchasing or selling any notified agricultural produce or live-stock or products of live-stock not exceeding such value as may be prescribed. The second proviso further exempts a person from obtaining a licence from the market committee, if he sells agricultural produce or live-stock grown, reared or produced by himself. But, however, the Government may for special reasons to be recorded in writing, withdraw such exemption in respect of any person. Under this proviso, a producer of an agricultural produce or a person who grows or rears live-stock need not obtain any licence to sell his produce, live-stock or products of live-stock in the market area. To put it differently, the provisions of Section 7(1) do not apply to the case of a person who intends to sell his own agricultural produce and live-stock. Section 8 refers to appointment of sub-committees and delegation of powers, whereas Section 9 deals with the calling of meetings of the market committee. Section 10 provides for appointment and salaries of officers of market committee whereas Section 11 deals with the execution of contracts. Section 12 deals with levy of fees by the market committees whereas Section 13 refers to levy of subscription for market reports, etc. Section 14 provides for market committee fund whereas Section 15 indicates the purposes for which the market committee fund may be expended. Section 16 refers to central market fund. Section 18 empowers the market committee to borrow. Section 22 refers to supersession of market committees. Section 27 provides for a revision to the Director of Marketing against any orders passed by the market committee. Section 28 makes the Act inapplicable to markets established by or on behalf of the State Government. Section 30 makes the provisions of the Act to override other laws providing for the establishment, maintenance or regulation of a market or levy of fees therein. Section 32 empowers the Government to regulate or prohibit the commission agents operating in the market. Section 33 empowers the State Government to make rules for carrying out the purposes of the Act. Under Section 34, every market committee may subject to any rules made by the State Government under Section 33 and with the previous sanction of the Director of Marketing, make bye-laws for the regulation of the business and the conditions of trading therein in respect of the notified area for which it was constituted. The Government under Section 35 is empowered to exempt by notification and for reasons to be specified therein, either permanently or for any specified period, any market committee, any person or class of persons from all or any of the provisions of the Act. Section 36 refers to repeal and saving whereas Section 37 provides for validation of all contributions made by the market committee constituted under the Act to the fund which was called central market fund and all expenditure incurred therefrom before the commencement of the present Act.

11. By virtue of the rule-making powers conferred on the State Government under Section 33, the Governor of Andhra Pradesh has made the Andhra Pradesh (Agricultural Produce and Livestock) Market Rules, 1969 (hereinafter called the Rules), which came into force on 17th October, 1969. As many as 177 rules comprised in 12 Chapters have been framed. Rules 1 and 2 comprised in Chapter I are preliminary in nature. Chapter II comprising of Rules 3 and 4 relates to publication, etc., of notifications relating to notified areas. Chapter III refers to composition of and elections to market committees. Rules 26 to 47 comprised in Chapter IV relates to powers and functions of the market committees and the conduct of business at their meetings, etc. Rule 26 empowers the market committee to have absolute control over the market. It shall also manage its affairs having due regard always to the convenience and best interests of the trade in the notified agricultural produce, live-stock or products of live-stock. The power of management of the committee shall be subject to the Rules made under the Act, the orders of the State Government and to such control as is by the Rules or by any other law invested in the Director, District Collector or the Government. The power of the market committee is only to control the market and manage its affairs. The market shall be opened for trading at such hours as the market committee may from time to time fix. Sub-rules (3), (4) and (5) of Rule 26 refer to certain instances relating to the management. Rule 27 empowers the market committee to implement the provisions of the Act and of the Rules and bye-laws made thereunder in the market area, to implement the directions given by the Government from time to time in the establishment and development of markets and to maintain and manage the market yards. It also provides for the powers specified in Clauses (iv) to (xx). None of the powers specified in Clauses (i) to (xx) of Rule 27 relates to the levy or collection of sales tax. Nor does Rule 28, which provides for the powers and duties of the chairman and vice-chairman, indicate any power in them to levy or collect sales tax. Rule 27(v) and (viii) reads as follows :

27. The market committee shall-

(v) supervise the conduct of the market functionaries....

(viii) regulate the making, execution and enforcement or cancellation of agreements of sales, the weighment, delivery, payment and all other matters relating to the marketing of notified agricultural produce, live-stock or products of live-stock.

Rule 64 requires the commission agent to pay the sale proceeds of the notified agricultural produce, live-stock or products of live-stock from his own account to the seller, his principal, on the same day of the sale after deducting charges payable by him as permissible under the bye-laws of the market committee and recover the same from the buyer. The proviso to Rule 64, whereunder the buyer of notified agricultural produce, live-stock or products of live-stock is required to pay the sale proceeds to the seller immediately on the same day applies to a case where the sale is made directly by the producer-seller to the buyer instead of through a commission agent. Rule 73 reads as follows : 'Market charges.-No charges other than those specified by the Government either by a general or special order shall be payable by the seller or the buyer in a market.' Rule 74 provides for the levy of market fees and collection thereof. It is not necessary to state the other Rules as they have no bearing to the question involved in the present cases. This, in short, is the scheme and intendment of the Act and the Rules made thereunder.

12. We shall now turn to the provisions of the Sales Tax Act applicable to the sale of jaggery by commission agents. Under Section 5(2) of the Sales Tax Act read with item No. 77 of the First Schedule thereof, the transaction of sale of jaggery is exigible to sales tax at the first point of sale. To put it differently it is the seller who is liable to pay sales tax at the first point of sale within the market area. The purchaser of jaggery is therefore not liable for payment of sales tax to the State. Section 11 of the Sales Tax Act makes the dealers liable to pay sales tax to the State on the turnover of the transactions of sales effected by them for and on behalf of their principals. The primary liability to pay sales tax is undoubtedly on the principals for and on whose behalf the commission agents act. But the State Legislature in its wisdom thought it fit and proper to have a hold on the commission agents and prescribed the aforesaid procedure with a view to facilitate easy collection of sales tax, as often it is found difficult to trace the individual growers or purchasers of marketable commodities. The relevant provisions of the Sales Tax Act, i. e., Section 5(2) read with Section 11 and item No. 77 of the First Schedule, make it abundantly clear that the commission agents, who are dealers and who sell jaggery belonging to their principals within the market area, would be liable to pay sales tax on the transactions of sale entered into by them with the purchasers. But, however, they are entitled to have the tax paid by them reimbursed from their principals.

13. This brings us to examine whether the market committee has jurisdiction or is competent- to pass the impugned resolution. On a close and careful reading of the provisions of the Markets Act and the Rules made thereunder, we do not find any provision empowering the market committee to regulate the mode and manner of levy or collection of sales tax in respect of transactions of sale within the notified area. But instead the Markets Act and the Rules provide only for the levy of market fees and its collection. The market committee is authorised to supervise the conduct of the market functionaries. The plea advanced on behalf of the respondents that what has been done by the market committee in passing the impugned resolution is nothing but a kind of regulation in the conduct of business within the notified area and, therefore, the impugned resolution is valid, cannot be sustained. The Markets Act, as pointed out earlier, has been enacted for the purpose of regulating the purchase and sale of agricultural produce, live-stock and products of live-stock and to establish markets in connection therewith. The provisions of the Markets Act and the Rules made thereunder pertain only to the regulation of purchase and sale of notified agricultural produce, live-stock and products of live-stock within the notified market area. Admittedly, there is no provision in the Markets Act or the Rules made thereunder authorising the market committee to interfere with the levy or collection of sales tax in respect of any transactions of sale that take place within the market areas to which the provisions of the Markets Act are applicable. In fact, to a pointed question put by us, the respondents' counsel expressed their inability to point out any specific provision of the Markets Act or the Rules made thereunder under which the impugned resolution could be passed. We may add that the learned single Judge also stated :

It is true that there is no specific provision either in the Act or in the Rules regarding the collection of sales tax.

Having held so, the learned Judge, in our considered opinion, has erred in thinking that the impugned resolution is not in any way offending the provisions of Section 11 of the Sales Tax Act. According to the learned Judge, the market committee, by its resolution did not fix the liability to pay the sales tax but the commission agents have been made to act under the directions or instructions of the market committee, which is guided by the instructions issued by the Director of Marketing or the Government. With great respect to the learned Judge, we are unable to subscribe to his view for reasons more than one. Firstly, the levy and collection of sales tax even in respect of transactions of sale conducted by the commission agents in jaggery for and on behalf of their principals, the producers, within the market area are governed by the provisions of the Sales Tax Act and the Rules made thereunder. Secondly, there is no specific provision affecting the incidence of tax in a statute. Thirdly, it is not the province of the market committee to regulate the mode and collection of sales tax. Further, the impugned resolution is undoubtedly opposed to the provisions of Section 11 of the Sales Tax Act and, therefore, it must be held to be without jurisdiction.

14. We shall presently examine the submission of Mr. Subhashana Reddy that Rules 27 (v) and (viii), 64 and 73 of the Rules made under the Markets Act would support his plea. Clause (v) of Rule 27 simply refers to the general supervision of the market committees over the conduct of the market functionaries. Market functionaries are those who are entrusted with the duties or functions of the market committee. Clause (v) does not, therefore, refer to the power of the market committee in respect of levy or collection of sales tax. Clause (viii) of Rule 27 authorises the market committee to regulate the making, execution and enforcement or cancellation of agreement of sales. There may be disputes relating to weighment, delivery, payment or any other matter pertaining to the marketing of notified agricultural produce. The term 'payment' in Clause (viii) of Rule 27 may take in the mode and time of payment. Hence the regulation of payment with regard to the marketing or sale of notified agricultural produce cannot be construed to be regulation of levy or collection of sales tax in respect of transactions of sale of notified agricultural produce, live-stock or products of live-stock within the notified area from the purchaser or seller. We may add that neither Rule 64 nor Rule 73, which were referred to earlier, supports the respondents' claim. That apart on a close and careful consideration of the several provisions of the Markets Act and the Rules made thereunder, we are satisfied that the market committee has no jurisdiction or authority to regulate the mode and manner of levy or collection of sales tax in respect of transactions of sale held within the notified area and, therefore, the impugned resolution is without jurisdiction and unenforceable.

15. It is next urged by Mr. Subhashana Reddy, the counsel for the growers, that the impugned resolution must be upheld as just and proper as it was passed with a view to put an end to the illegal practice of the commission agents indulging in collection of sales tax both from the growers and their purchasers and making fraudulent profits for themselves, ignoring the individual requests of the producers. This submission must be held to have no legs to stand. The individual producers or growers, who are the owners of the produce and the principals of the commission agents can always insist upon their terms of sale. In other words, it is open to them to fix a particular price for their commodity and direct their commission agents to sell the produce only for that price exclusive or inclusive of the sales tax. A producer can also make it clear to his agent that the sales tax payable on the transaction of sale of his goods must be included only in the sale price and the same should be collected from the purchaser. The commission agent, who only acts for and on behalf of his principal, cannot disobey his principal's instructions. He is not concerned with the profit or loss that results from the transactions. For the trouble he takes in selling the goods for and on behalf of his principal, he would be entitled to certain commission. Except that he has no other interest. Even the sales tax as referred to above is payable primarily by the seller, i. e., the principal himself. The commission agent is made liable to pay sales tax to the State by virtue of the amended provisions of Section 11 of the Sales Tax Act as the legislature thought it fit to make the commission agents also liable for it with a view to facilitate ea.sy collection. Hence, the principal, i. e., the producer or agriculturists, need not have any complaint or grouse in this regard. Nor is it necessary for them to go and approach the market committee for any help. They themselves are competent to dictate terms to their commission agents and if the commission agents are not heeding their advice, they are always entitled either to change their agents or sell directly their produce within the notified market area. Further they can save the commission that would be payable to the commission agents. In the circumstances, the commission agents are bound to carry out the instructions of their principals and, therefore, it cannot be said that the growers are in anyway helpless or that they are aggrieved.

16. The problem may be looked from another angle. It admits of no doubt that the market committee is also not helpless in punishing the commission agents who indulge in collection of sales tax both from the producers and the purchasers and making a fraudulent gain. It is really the market committee that grants licences to the commission agents for doing business within the notified market area. The market committee must be deemed to know the antecedents and particulars of a dealer who applies for the grant of a licence. It is always open to the market committee to refuse to grant licences to undesirable persons. That apart, the market committee can suspend or cancel the licences granted to such undesirable persons for any such malpractices noticed or found by it. The market committee, which is empowered to regulate the business within the market area, can limit the number of commission agents and select only such persons who are reputed to be honest, efficient and business-like. The dishonest and fraudulent persons or applicants can always be kept out of the list of licensed dealers who are permitted to have their commission business within the notified market areas.

17. Even assuming, without admitting, that some of the commission agents are not doing their business or job properly, it cannot be a valid or good ground for passing the impugned resolution which would affect all the commission agents. In such an event, the proper course that should be adopted by the market committee is to weed out the commission agents who indulged in illegal and fraudulent practices b}r invoking the powers vested in it under the Act and the Rules.

18. The contention of Mr. Subhashana Reddy that the impugned resolution would be beneficial to the interests of the producers or agriculturists as a class and, therefore, it should be sustained, cannot be given effect to. We are not now required to adjudicate upon the question whether or not the impugned resolution is equitable or beneficial to the interests of the producers or agriculturists as a class. The pertinent question that has fallen for determination is whether the market committee has jurisdiction to pass the impugned resolution. Where the question of jurisdiction or competency has been raised and has to be determined, the party who asserts that the resolution is valid and enforceable must establish that any provision of the Markets Act or the Rules made thereunder would empower the market committee to pass, the impugned resolution.

19. The next submission advanced on behalf of the respondents is that it would be fair, proper and equitable for the commission agents to collect sales tax from the purchasers instead of from the growers and such practice is in vogue in important centres like Anakapalle, Tadepalligudem and Chittoor. There is no evidence on record with regard to the practice prevalent in Anakapalle, Tadepalligudem and Chittoor. Hence, it is not possible for us to give a specific finding on this aspect. But, however, the trade practice prevalent in a particular business centre or place cannot be said to be a law or custom enforceable in a different place. It admits of no doubt that no such practice is prevalent either in Kamareddy or Nizamabad. Hence, the practice if any, that is prevalent in the markets of Anakapalle, Tadepalligudem and Chittoor cannot be enforced as a law or practice in the market area of Kamareddy with which we are concerned in these cases.

20. Lastly, it is urged on behalf of the respondents that the incidence of sales tax is really on the consumer or the last purchaser and that the agriculturist-producers, who are the principals, are entitled to pass on the incidence of sales tax to the purchasers and, therefore, what has been done by the market committee by passing the impugned resolution is nothing but passing the incidence of sales tax from the principals to the purchasers. In support of this plea, reliance is placed upon the decision of the Madras High Court in Sundararajan & Co. Ltd. v. State of Madras [1956] 7 S.T.C. 105, that of the Patna High Court in Tata Iron and Steel Co. Ltd. v. State of Bihar [1956] 7 S.T.C. 158, and that of this court in Government of Andhra Pradesh v. East India Commercial Co. Ltd. (1957) 1 An. W.R. 144, and those of the Supreme Court in Tata Iron and Steel Co. Ltd. v. Bihar State A.I.R. 1958 S.C. 452 at 463 and George Oakes (Private) Ltd. v. State of Madras [1961] 12 S.T.C. 476 (S.C). It is well-settled that the primary liability to pay the sales tax, so far as the State is concerned, is on the seller. The seller is entitled to put up the price of the commodity or article sought to be sold, so as to include the sales tax which he would have to pay. However, he cannot realise any sales tax as such from the purchaser. The seller may or may not include sales tax in the price and it is for him either to include sales tax or not in a particular transaction of sale as it is purely a business point of view. But, however, he is liable to pay sales tax to the State irrespective of the fact whether he collects from the purchaser or not. As observed by the learned Judge, S. R. Das, C. J., speaking for the majority, in Tata Iron and Steel Co. Ltd. v. Bihar State A.I.R. 1958 S.C. 452 at 463:.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 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. [1944] 1 K.B. 484.

While considering the scope and true effect of Section 8-B of the Madras General Sales Tax Act, 1939, and the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, the Supreme Court in George Oakes (Private) Ltd. v. State of Madras [1961] 12 S.T.C. 476 at 485-486 (S.C.), held that a registered dealer is enabled to pass on the incidence of tax and the amount collected by way of tax is to be shown separately, for it has to be paid over to Government. The learned Judge, S. K. Das, J. (as he then was), speaking for the court, observed thus :.the true effect of Section 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 II 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 what 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.

The aforesaid authorities would clearly establish that the liability to pay sales tax to the State is only on the seller and the buyers have no statutory duty to pay sales tax, although the seller may include the sales tax in the sale consideration and make it obligatory for the purchaser to pay it as part of the sale consideration. The principals, therefore, cannot compel the purchasers to pay sales tax separately, but instead they may include sales tax in the sale consideration and make it obligatory for the purchasers to pay the same as part of the sale consideration.

21. We have already indicated that the market committee has no jurisdiction, either by passing a resolution or in any other manner, to interfere with the mode and manner of levy or collection of sales tax on transactions of sale held within the notified area. In our considered opinion, what has been intended to be done by the impugned resolution is squarely opposed to the provisions of Section 11 of the Sales Tax Act. The valuable right vested in the commission agents to get the amount of sales tax paid by them reimbursed by their principals is being taken away by the impugned resolution. Where the market committee prohibits the commission agents from charging sales tax from their principals, it is nothing but a contravention of the provisions of Section 11 of the Sales Tax Act. We are, therefore, unable to agree with the learned single Judge that the passing of the impugned resolution is nothing but regulating the trade practices within the notified area.

22. For all the reasons stated, we have no hesitation to hold that the impugned resolution is illegal, without jurisdiction and unenforceable and is liable to be quashed.

23. In the result, the writ appeals and the writ petition are allowed with costs and the writs shall issue. Advocate's fee Rs. 100 in each.


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