1. These are revision cases preferred against the orders of the Tribunal that the Anakapalle Co-operative Marketing Society, the petitioner herein, is liable to sales tax on the turnovers of Rs. 19,21,580-6-4 and Rs. 13,11,188-5-2 for the years of assessment 1950-51 and 1951-52 respectively. There is no dispute about the turnovers as assessed ; but the legality of the levy is in question. The question arises this way.
2. The Anakapalle Co-operative Marketing Society consists of over 1,000 jaggery producing ryots as members. It was registered under the Co-operative Societies Act and it held a licence as commission agent under Section 8 of the Madras General Sales Tax Act. The members of the society, who produced jaggery from the sugarcane grown by them in their own lands or in their leasehold lands, effected sales of jaggery through the agency of the society and received the price less an agreed commission payable to the society on the sale price. While so, in October, 1950, the Government of India promulgated the Gur Control Order fixing the maximum price at which Gur could be sold in the different States. The prices fixed varied-from State to State. It so happened that the prices fixed for the sale of Gur at Anakapalle (then in the State of Madras) were somewhat lower than those fixed in the other States. This gave occasion for the society to sell jaggery at higher prices than fixed for the simple reason that there was demand for the jaggery from merchants at prices higher than the controlled price. To avoid detection of the contravention of the Gur Control Order in selling Gur at prices higher than the controlled price, the society maintained two sets of accounts-one a regular account and the other a clandestine account. The regular account showed as if the Gur was sold at controlled price and commission charged on the controlled price. But the clandestine account showed the excess in the sale price and the excess commission.
3. On a surprise check, the Commercial Taxes Department discovered the clandestine or the secret accounts which consisted of (1) Auction Sale Account Books, (2) Ryotwari Advance Registers, and (3) Thoka Cheetlu. In the auction sale account books the higher rates at which Gur was actually sold in open auction by the society were shown, whereas in the regular accounts of the society it was shown that the Gur was sold in the auction for controlled prices only. In the Ryotwari Advance Registers, the excess amounts realised by sales were shown, whereas the regular bills and patties showed only controlled prices. Thoka Cheetlu were slips of accounts by means of which such excess amounts were realised from the purchasers. The excess prices realised were therefore brought to tax by the department, finding that the society violated the conditions of the licence issued to it under Section 8 and that it was a dealer under the Madras General Sales Tax Act and liable to sales tax under Section 3 but for the exemption under the licence granted to it under Section 8.
4. There was no dispute before the Tribunal about the facts as we have set out above, that is to say, that the society had sold Gur in auction at higher prices than the controlled prices, and that the regular accounts were maintained showing not the real prices but the controlled prices and that the patties and bills were drawn up showing only the controlled prices and not the real prices. But it would appear from the order of the Tribunal that while admitting the facts, the only point argued before it was that the society could not in law be deemed to have carried on an illegal business in contravention of the Gur Control Order and that it could not in law be deemed to have violated the conditions of the licence. It would appear that that point was rested on the observations made in the writ petition filed by the president of the society reported as Pentakota Sriramulu v. Deputy Registrar of Co-operative Societies, Visakhapatnam 1957 A.L.T. 607. The Tribunal held that the observations made therein did not support the plea taken by the society, but that it was made clear in the judgment that the liability to taxation was not affected by the observations made therein. The point of law sought to be made out was rejected and the actual turnover computed on the basis of higher prices at which Gur was sold were taken as taxable turnover.
5. Before we address ourselves to the points raised before us, we may state herein that the judgment relied on before the Tribunal was reversed in appeal by the Bench in Co-operative Marketing Society, Anakafalle, by Secretary, Atchanaidu v. Pentakota Sriramulu and Anr. (1960) 1 An. W.R. 57 which judgment was confirmed by the Supreme Court in Civil Appeal No. 193 of 1962 by its judgment dated 28th August, 1964 A.I.R. 1965 S.C. 621.
6. The writ petition was filed by Pentakota Sriramulu, the president of the society in the following circumstances: We recall that the Anakapalle Co-operative Marketing Society Ltd. was constituted mainly for the purpose of affording credit facilities to its members and to arrange for the sale of their agricultural produce and that the society had a licence as a commission agent under the Madras General Sales Tax Act and was earning commission on the turnover of its sales. Under its bye-laws, its business extended to the sale of jaggery belonging to members as well as non-members. The society sold jaggery in excess of the control price fixed under the Gur Control Order and earned commission on the said turnover. This state of affairs were revealed by a surprise check by the Sales Tax Department. The matter was brought to the notice of the Co-operative Department wherefore the Registrar directed its supersession, one of the grounds therefor being the contravention of the Gur Control Order. Thereafter the Registrar appointed a Deputy Registrar to act as an arbitrator under Section 51 of the Madras Co-operative Societies Act (VI of 1932). When the officer so appointed started the enquiry under Section 51 of the Act, the president and some of the directors who had participated in the activities mentioned above, filed the writ petition. The main ground urged in support of the petition was that as the commission was earned on illegal transactions, Section 51 of the Madras Co-operative Societies Act would not apply for the reason that such transactions could not be regarded as 'business' within the purview of Section 51. The argument prevailed with Bhima-sankaram, J., who disposed of that writ. The Division Bench disagreed with that View. The learned Judges held that the business of earning commission on sales in contravention of the Gur Control Order did not cease to be 'business' within the meaning of Section 51 of the Madras Co-operative Societies Act and that it was quite competent for the Registrar of Co-operative Societies to refer the matter to the arbitrator under Section 51 of the Act. The judgment of the Bench was upheld by the Supreme Court. With reference to the point raised whether the business of the sales effected for higher prices was the business of the society, the Supreme Court observed thus :
The next contention of the learned counsel was that the dispute about the retention of money belonging to the society by the appellant was not 'a dispute touching the business of the society'. The argument was that the expression 'business of the society' included only what was legally permissible as the legitimate business of the society and since the business activity out of which the claim against the appellant was alleged to arise involved a contravention of the Gur Control Order it was not a dispute touching the business of the society. We are unable to agree with this submission. In so far as it impinges on the third point urged by the learned counsel based on the maxim ex turpi causa non orilur actio we shall deal with it in considering that submission. But that apart, we do not see any basis for the argument that the claim made before the arbitrator was not a dispiite touching the business of the society. It could not be disputed that the sale of the produce belonging to the members of the society was part of the business of the society and then the charging of commission for those sales and the crediting of the society's accounts with that commission would equally be the business of the society. Apart, therefore, from the question of illegality raised by reason of the sale being at prices in excess of the controlled price, it is not capable of argument that the failure on the part of the appellant to credit to the society the full amount of commission due on the sales effected by him on behalf of the society and the resistance by him of that demand, would not be a dispute touching the business of the society. This objection is clearly without substance and must be rejected.
7. Referring to the question of illegality of the transaction as precluding the claim, the Supreme Court observed :
The last of the points urged by learned counsel was that the transaction of sale which gave rise to the commission alleged to be improperly retained was illegal and that therefore the society could not, in law, make a claim on the basis of such an illegal transaction. We see no substance in this point either. No illegality attached to the contract between the appellant and the society ; that was perfectly legal. It arose out of his position as the president of the society and he was, in law, bound to account for the moneys he received on behalf of the society. The fact that he entered into illegal transactions would have no bearing on the right of the society to make the claim for an account of the commission due to the society which he unjustly withheld. We consider the reasoning of the learned Judges of the Division Bench rejecting this argument to be correct. Moreover this matter has been examined by this Court in a decision reported as Kedar Nath Motani v. Prahlad Rai  1 S.C.R. 861 and in view of this decision learned counsel for the appellant did not himself press this point very seriously.
8. So, the point raised before the Tribunal on the strength of certain observations made by Bhimasankaram, J., is no longer tenable.
9. It is settled law now that the tax is not confined to lawful businesses only: Canadian Minister of Finance v. Smith  A.C. 193 at p. 198. Once the character of an enterprise has been ascertained as being of the nature of business, the person who carries it on cannot found himself upon elements of illegality in it to avoid tax: Lindsay, Woodward and Hiscox v. Commissioners of Inland Revenue (1932) 18 Tax Cas. 43 at pp. 54, 56. By bringing the profits to tax, the authority does not condone or take part in the illegal enterprise : Mann v. Nash (1932) 16 Tax Cas. 523 at p. 530. A partnership of 133 persons which was not incorporated under the Indian Companies Act was held assessable in spite of the illegal constitution of the association : Sri Gopalji Co. v. Commissioner of Income-tax (1931) 5 I.T.C. 257. The Madras High Court has recently elaborately considered the position in Md. Abdul Kareem & Co. v. Commissioner of Income-tax  16 I.T.R. 412 and held that a firm constituted in contravention of the Abkari Regulations was taxable.
10. While so, Sri Srinivasamurthy has raised certain points before us which we will presently consider. His first contention is that the Anakapalle Co-operative Marketing Society, hereinafter to be referred to as the society, is not a dealer within the meaning of the Act.
11. 'Dealer' under the Act then in force meant 'any person who carries on the business of buying or selling goods.' Sri Srinivasamurthy relied on certain recitals of facts in the judgment of the Bench in Co-operative Marketing Society, Anakapalle, by Secretary, Atchanaidu v. Pentakota Sriramulu and Anr. (1960) 1 An. W.R. 57 and argued that the sales were effected not by the society but directly by the owners of the jaggery to the purchasers, and so the society would not be a dealer. The recitals in the judgment relied on are these : After setting out the allegations and making reference to the Gur Control Order and the higher prices offered for jaggery, i.e., prices higher than those fixed by the Gur Control Order, the learned Judges stated :
Finding that this deflected the business to the market and consequently the society could not earn any commission, representations were made to the Government officials to keep the prices down to the level of those fixed in the Gur Control Order. Since no steps were taken by the officials concerned in that behalf, it is said that the members resorted to the following device. When jaggery belonging to a member was sold by the society, the owner would be present and there would be a private arrangement between him and the purchaser whereby a price in excess of what was purported to be sold by the society would, in fact be paid for it. The difference between the ceiling price and the agreed price would be given direct to the seller by the purchaser. The seller would pay commission to the society on the extra price also. This state of affairs was disclosed to the Sales Tax Department when they happened to inspect the accounts of the society....
12. These recitals are said to indicate that the sale transactions were between the owners of the jaggery and the purchasers of jaggery. This line of argument seems to us untenable for various reasons. Firstly, we have to say that even the recitals, as they are, show that it was a sale of jaggery by the society.
13. A far more weighty ground is that these assumed facts are contrary to the statement of facts by the Tribunal. In more than one place, the Tribunal stated that the facts were admitted. The admitted facts are set out thus :
In the present case the jaggery in question was sold by the society in the course of its normal business. It was put to auction and knocked down-'of course through the clerks and servants only -to the highest bidder, ignoring the provisions of the Gur Control Order. In order to escape detection, the society maintained two sets of accounts one called regular account and the other a secret one. The prices noted and the commission shown as earned thereupon in the regular accounts are fictitious amounts not exceeding the control price according to the Gur Control Order, while the real price and the real commission earned are noted in the secret accounts. The full prices for which the commodity was sold in auction are realised by the society and paid over to the members. The commission earned on the entire price was also realised by the society, but the extra commission (over and above the amount due on the control price noted in the regular accounts) was separately entered in the secret accounts.
14. It emerges clearly from the facts that the sales were effected by the society in open auction. The argument on the assumption that the sales were effected without reference to the society is contrary to the statement of facts.
15. It is now settled by a decision of the Supreme Court in Raghubar Mandal Harihar Mandal v. State of Bihar A.I.R. 1957 S.C. 810 that the High Court has to proceed on the statement of facts by the Tribunal. At page 811 the following occurs :
It is also well settled that the duty of the High Court is to start with the statement of the case as the final statement of the facts and to answer the question of law with reference to that statement. The provisions of the Indian Income-tax Act are in pari materiea with the provisions of the Act [the reference is to the Bihar Sales Tax Act (6 of 1944)] under our consideration, the main scheme of the relevant provisions of the two Acts being similar in nature, though the wording of the provisions is not exactly the same.
16. The contention is open to a further objection that the recitals in a judgment could not be read as evidence in the case. The judgment relied on is certainly not relevant under Sections 41 and 42 of the Indian Evidence Act. Section 43 is explicit that judgments, orders or decrees, other than those mentioned in Sections 40, 41 and 42, are irrelevant, unless the existence of such judgment, order or decree is a fact in issue, or is relevant under some other provisions of the Act. The only other provision is the admissibility of the judgment as a transaction under Section 13(a) of the Indian Evidence Act, in which case the recitals therein cannot be read. We have pointed out at the very outset that even otherwise the recitals do not also bear out the contention of the learned counsel who proceeds on an assumption contrary to facts.
17. The learned counsel's contentions that the society was not a dealer and that the transactions were not sales, based as they are on the assumed facts which are not correct, are manifestly untenable. We have referred to the definition of a dealer as it obtained then. 'Sale' was defined as a transfer of the property in goods in the course of trade or business for cash or for deferred payment or other valuable consideration. [Section 2(h) of the Madras General Sales Tax Act.] Having regard to the facts of the case set out by the Tribunal, the society would be a 'dealer' and the transactions would be 'sales' within the meaning of the Act.
18. In Kandula Radhakrishna Rao and Ors. v. The Province of Madras  3 S.T.C. 121 a commission agent's business was examined with reference to the definitions of dealer and sale and it was expressed thus at page 135 :
In the case of a commission agent, the accepted mercantile practice is that he has control over or possession of the goods and he has the authority from the owner of the goods to pass the property in and title to the goods. If this is so, undoubtedly when a commission agent sells goods belonging to his principal with his authority and consent and without disclosing to the buyer the name of the owner, there is certainly a transfer of property in the goods from the commission agent to the buyer. A business which consists in such transactions can properly be described as a business of selling goods.... A commission agent doing this kind of business would, in my opinion, fall within the definition of dealer in the Sales Tax Act.
19. Sri Srinivasamurthy next contended that even otherwise the sales of gur for excess prices could not have been the normal course of the business of the society. This contention was answered by the Division Bench in Co-operative Marketing Society, Anakapalle, by Secretary, Atchanaidu v. Pentakota Sriramulu and Anr. (1960) 1 An. W.R. 57 at p. 61 thus :
To the extent that the commission bore only on the control price, it is not disputed that it was business. But what is urged is that when the society collected commission on price in excess of the controlled price, it ceased to be business.
We do not think there is any force in this argument. The expression 'business' is a term of wide connotation. It is only in the course of business that higher commission was earned by the society. That does not have the effect of converting business into something which cannot be described as business.
20. Further comment is therefore unnecessary.
21. Next it was contended that jaggery was agricultural produce which had to be excluded from the turnover under Section 2(i) of the Act. This contention cannot possibly be supported as it is opposed to the Division Bench ruling in K. P. Vaidyanatha Iyer v. The State of Madras  5 S.T.C. 94 wherein it was held that the sale of jaggery was not sale of agricultural produce within the meaning of the definition of 'turnover' in Section 2(i) of the Act.
22. The last contention was that there was no violation of the conditions of the licence. But this contention was advanced on the pleas that the society was not a dealer, that the transactions were not sales by the society and that the society had not itself carried on the business. As we have found these pleas untenable, the contention that there was no violation of the conditions of the licence fails. The Tribunal has set out the conditions of the licence and which of the conditions were contravened. It is not urged that the conditions of the licence were not violated on the facts found by the Tribunal.
23. The result is that these two Tax Revision cases fail and are dismissed with costs, one set. Advocate's fee Rs. 150.