V.D. Bhargava, J.
1. This is a reference under section 11(3) of the U. P. Sales Tax Act. The applicant is a joint stock company carrying on the business of cotton cloth, yarn etc. at Lucknow. Under the Sales Tax Act the tax payable on cotton cloth and yarn is at single point and payable by the manufacturer. The applicant had been manufacturing the goods and selling its own goods to different depots. During the year 1950-51 the Mill transferred to its retail depots goods worth Rs. 45,16,161/15/3. It was contended on behalf of the applicant that they could charge only the ex-mill price plus excise duty plus sales tax on ex-mill price and the excise duty. The goods having been sold to the depots were disposed of during the year by the depots to the consumers for Rs. 46,54,333/12/6. The Sales Tax Officer assessed the applicant on the amount of sales as effected by the depots and not on the sales effected by the mills to the depots.
The mill thereupon filed a revision to the Judge (Revisions) Sales Tax, Lucknow, but the revision was dismissed. Then an application was made under section 11 to the Judge (Revisions) Sales Tax to make a reference to the High Court. But the Judge (Revisions) was of opinion that there was no question of law necessitating a reference to this Court and he rejected the application. Thereupon an application was made under Section 11(3) of the Sales Tax Act. On 22-3-1955 a Bench of this Court directed the Judge (Revisions) Sales Tax to state a case and to refer it to the High Court. Thereupon, the case was stated by the judge (Revisions) Sales Tax by his order dated 27-8-1955 and accordingly this matter has come before us today.
2. Learned counsel far the applicant has argued that section 3A of the U. P. Sales Tax Act provides for single point taxation. Section 3A runs as follows :-
'Notwithstanding anything contained in section 3, the State Government may, by notification in the official Gazette, declare that the turnover in respect of any goods shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify.'
Purporting to act under this provision the State Government passed a notification No. ST-117/X-923-1948 dated June 8, 1949. By that notification the Governor purporting to act under section 3A of the U. P. Sales Tax Act was pleased to declare that with effect from the 8th June, 1948, the proceeds of sale of goods entered in column 2 of the schedule thereto were not to be included in the turnover of any dealer except at the point in the series of sales by successive dealers mentioned in column 4 thereof under the circumstances shown in column 3 thereof. Out of the numerous items in the schedule, we are concerned with only two items. They are 'cotton yarn' manufactured by the mills and the 'cloth' manufactured by mills. If they are manufactured in the State, sales tax is to be paid at single point by the manufacturer at a rate of 6 pies .per rupee. Thus from this notification it is clear that the sales tax is payable by the manufacturer as the goods are manufactured in the present case in the State.
3. Clause 4 of the U. P. Controlled Cotton Cloth and Yarn Dealers' Licensing Order, 1948, runs as follows:--
'Subject to the provision of clause 16 no person other than a dealer shall obtain or attempt to obtain or store for sale or distribute controlled cotton cloth or cotton yarn and save as hereinafter provided, no dealer shall obtain or attempt to obtain or store for sale or distribution or sell or distribute or attempt to sell or distribute to any person controlled cotton cloth or cotton yarn except under and in accordance with the conditions of a licence in the appropriate form granted under this Order.'
Thus nobody was to purchase cloth without licence. There are different classes of licences provided and we are concerned with only two licences for the purpose of this case. One licence is issued in Form B for cloth and that licence is to buy controlled cotton cloth as a 'district importer' in mill packed bales or split bales. This licence is meant for the purpose of wholesale dealers, who directly obtain cloth from the manufacturer. The other class is Form B-1. That licence is to buy controlled cotton cloth from persons other than manufacturers in mill packed bales and sell in mill packed bales or split bales. From the above order it is quite clear that the mill was not in a position to sell directly to the retail dealers. Nobody could purchase cloth from the mills except under licence in Form B.
4. There would have been no difficulty but since, this is one of the mills which was held to be uneconomical mill by the State Government and, therefore, certain concessions were allowed to the mill (sic). By a letter No. 2662/XXIX-BD(2)-61-50 dated 31st August, 1950 from the Commissioner, Food & Civil Supplies, Lucknow to the Provincial Textile Controller, Kanpur a scheme was provided for the distribution of the production of the uneconomic mills and the mills were also to be treated as district importers meaning thereby that they were also allowed to carry on the business under Licence B. There were certain restrictions which had been put, but we are not concerned with them in this case. In accordance with this letter the Vikram Cotton Mills had opened certain depots and these depots had Licence B. The mill used to supply cloth to these depots at ex-mi![ price. The depots were permitted to sell at about 10 per cent profit and charged tax which was originally charged by the mill.
5. It was conlended on behalf of the applicant that when the mill as manufacturer had transferred the goods to the depots, who were the district importers or the wholesale dealers, the sale had been effected and when they were transferring the goods they were transferring it as manufacturers and the sales tax should be at the price at which they had transferred it. When the depot was selling the goods to Form B 1 licensees or retail dealers it was not acting as 'a manufacturer' but as 'an import licensee' and, therefore, the depot was not bound to pay any tax, as under the notification it was the 'manufacturer', who was bound to pay tax at single point.
6. On behalf of the State it has been argued that though the agencies may be two, one the mill itself and the other a depot but actually it was one company, the applicant, who was selling the goods and when the depot was selling the goods it was selling as manufacturers.
7. We do not agree with the contention of the learned counsel for the State, and we think there is force in the argument of the learned counsel for the applicant. Firstly in the affidavit which has been filed in this case it has been urged that the proprietorship of the depots is not exactly the same as that of the company and, therefore, the contention of the learned Standing Counsel that they are one is not correct. This point had not been decided by the Sales Tax Officer and even assuming for the sake of argument that they were one, we think that it is open to a person to carry on different businesses. He could act as a manufacturer, a wholesale dealer and a retailer, and when acting in different capacities he would be liable to taxes in different capacities. When the goods had been transferred by the company to the depot, the function of the company as manufacturer had ceased and, thereafter, it was the function of a wholesale dealer that it was performing. Under the circumstances, we think the learned counsel for the applicant is correct and the sales tax could only be charged on the turnover of the mill and not on the turnover of the depots.
8. There is yet another ground, on which, we think the tax should be charged only on the mill turnover and not on the depot's turnover. The depots under B licence could not only sell the goods obtained from the mill but they could, if they so liked, also obtain goods from other mills as district importers and sell them. In that event, there could not possibly have been any scope for the argument that the turnover of the goods obtained from the other mills should also be included in the turnover of the company.
9. We might mention here, that the Judge (Revisions) Sales Tax while stating the case had made reference to notification No. 3138/XXXI-B (d) 2 dated 16-10-1948 by which it was said that the sale price for the mill shops included a 10% profit and some administrative charges and reliance was placed on that notification by the Judge (Revisions) Sales Tax. In reply to this a counter-affidavit had been filed on behalf of the applicant that the company was never aware of this notification. At the time of the argument the learned Standing Counsel admitted that the reference to that notification was wrong and it should have been really another notification the number of which was 213/XXXIX B(d) 2-17-49 dated 2-4-1949 by which in effect the mills were entitled to make certain profits of the depots also.
That notification was issued specially in order to help the uneconomic mills. While fixing the ex-mill sale price the profits derived from the depots under this notification were not taken into consideration but since it was not possible for the company to sell at the fixed ex-mill prices, therefore, they were given certain special benefits. We do not think that that notification in any way affects the case. Thus we think that the tax should have been charged only on Rs. 45,16,161/15/3 and not on Rs. 46,54,333/12/6.
10. We accordingly allow this reference anddirect the Sales Tax Officer to assess accordingly. Theapplicant is entitled to its costs of this referencewhich we assess at Rs. 100/-. The excess tax, if any,paid by the assessee shall be refunded.