R.R. Rastogi, J.
1. The assessee, M/s. Jagat Singh Lajja Ram, carries on the business of manufacture and sale of khandsari sugar. For the assessment year 1966-67, the assessee disclosed sales of sugar at Rs. 2,74,201, which had been made through commission agents and of molasses at Rs. 6,712, which he had made on his own. The Central excise duty had been paid on the sugar manufactured by the assessee and, hence, there being no liability for tax on the sales thereof, it was claimed that the turnover was below the minimum taxable limit. The Assistant Sales Tax Officer did not accept that contention. He estimated the sales of molasses at Rs. 28,000 and for determining the gross turnover included the sales of sugar as well. Tax was, however, imposed on sales of molasses only.
2. The assessee preferred an appeal before the Assistant Commissioner (Judicial) and it was contended that sugar sold through commission agents should not have been included in the gross turnover and that the estimate of the turnover of molasses was highly excessive and further that the turnover being below the minimum taxable limit, no sales tax should have been levied. The Assistant Commissioner did not accept the first contention. On the second contention, of course, he reduced the turnover of molasses to Rs. 13,000.
3. Being aggrieved, the assessee moved a revision application before the Additional Judge (Revisions), Sales Tax, Bareilly, on both the points. The learned revising authority estimated the sales of molasses at Rs. 12,000 and, as for the sales of sugar, held that the same could not be added to the turnover of molasses, relying on a decision of this Court in Commissioner of Sales Tax, U.P. v. Mithulal Murlidhar 1970 U.P.T.C. 450. Accordingly, the revision application was allowed in full.
4. At the instance of the Commissioner of Sales Tax, U.P., the Judge (Revisions), Sales Tax, has referred the case and invited the opinion of this Court on the following question:
Whether, on the facts and in the circumstances of the case, the Additional Judge (Revisions), Sales Tax, was legally justified to hold that the sales of the khandsari sugar, on which the Central excise duties had been paid, effected through commission agents of the assessee shall not form part of the gross turnover of the assessee in 1966-67
5. At the time of the hearing of this reference, nobody appeared for the assessee and, hence, we had not the advantage of hearing him. The learned standing counsel took us through the file and submitted that Section 3 of the U.P. Sales Tax Act, hereinafter referred to as 'the Act', does not specifically provide against the exclusion of sales made through commission agents nor can such inclusion be inferred from the definition of 'turnover' as given in Section 2(i) of the Act. Reliance has been placed on Commissioner of Sales Tax, U.P. v. Allied Chemicals 1969 A.L.J. 33 (F.B.) and Commissioner of Sales Tax, U.P. v. Ganga Ram Ghurey Lal 1970 U.P.T.C. 167. Before examining this contention, it would be relevant to examine the provisions of the Act, as it stood on 1st April, 1966. Section 3 of the Act provides:
Subject to the provisions of this Act, every dealer shall, for each assessment year, pay a tax at the rate of 2 naye paise per rupee on his turnover of such year, which shall be determined in such manner as may be prescribed, provided that a dealer shall not...be liable to tax if his turnover of the assessment year is less than Rs. 12,000. . . .
Explanation.--Where tax is payable and has been so paid by the commission agent on any turnover of his principal, the principal shall not be liable to pay the tax in respect of the same turnover.
The 'dealer' has been defined in Section 2(e) of the Act as under:
'Dealer' means any person or association of persons carrying on the business of buying or selling goods in Uttar Pradesh, whether for commission, remuneration or otherwise and includes any firm or Hindu joint family and any society, club or association, which sells goods to its members and also includes any department of the State Government or the Central Government which carries on such business and any undertaking engaged in the generation or distribution of electrical energy or any other form of power.
Turnover' as defined in Section 2(i) means:
The aggregate amount for which goods are supplied or distributed by way of sale or are sold, or the aggregate amount for which goods are bought, whichever is greater by a dealer, either directly or through another, on his account or on account of others, whether for cash or deferred payment or other valuable consideration.
(The provisos and the explanations to this definition are not necessary for our purpose.)
6. Section 4(1)(a) may also be noted which provides for exemption from tax. It is as under:
(1) No tax shall be payable on-- (a) the sale of water, milk, salt, newspapers and motor spirit as defined in the U.P. Sales of Motor Spirit (Taxation) Act, 1939, and of any other goods which the State Government may, by notification, in the official Gazette, exempt.
7. We were informed by the learned standing counsel that by Notification No. 1615/X--902(9)-52 dated 13th August, 1959, with effect from 1st March, 1959, no tax was to be levied on khandsari sugar produced after that date provided additional excise duty was paid on such sugar.
8. On an analysis of the above provisions, it would appear that, since additional excise duty had been paid on the aforesaid sales of sugar, no sales tax was payable. It is not disputed that these sales had been made through commission agents and had been included in their turnover. The question that, however, arises is as to whether, on these facts, these sales were liable to be included in the gross turnover of the assessee. There is a very important aspect which has to be kept in view and it is the distinction between the liability to, and imposition of, the tax on the one hand and its payability on the other. The liability to tax or the imposition of tax precedes the payability of tax. Section 3 talks of the liability to tax while Section 4 of the payability of tax. Therefore, the provision of Section 4 would arise for consideration only after the liability to tax has been determined. For determination of liability to tax, the turnover of an assessee has to be found out and, in case, it is less than Rs. 12,000, there would be no liability to pay tax, but, if it exceeds that limit, then liability to pay tax arises. The definition of 'turnover' means the aggregate amount for which goods are supplied or distributed by way of sale or sold. Such supplies, distribution or sales might have taken place either directly or through another. The aggregate amount is to be taken into consideration for finding out the turnover. To our mind, therefore, there is ample justification in the submission made by the learned standing counsel that, in order to determine the turnover for the purposes of finding out the liability to tax, the gross turnover is to be found out and such turnover is to include all sales made by a dealer either directly or through another. Thus, it is clear that gross turnover must consist of sales which are liable to tax under the charging section, but, if they are not liable to tax under the charging section, they cannot be included. As noted above, liability to tax is different from payability of tax. This distinction also becomes clear from a reference to Rules 8 and 44 of the Sales Tax Rules. Rule 8 provides that a dealer's liability to pay tax under the Act shall be determined on the basis of his gross turnover. Rule 44, on the other hand, provides for deduction from turnover. It says that the tax under Section 3 shall be computed on the net turnover and, in determining the net turnover, the amounts specified in Clauses (a) to (g) of that rule shall be deducted, if they are included in the gross turnover. Thus, liability to pay tax is to be determined on the basis of the gross turnover, while the tax payable is to be determined on the basis of the net turnover.
9. In Commissioner of Sales Tax v. Allied Chemicals 1960 A.L.J. 44, the assessee, a dealer in chemicals, had, for the assessment year 1956-57, disclosed sales within Uttar Pradesh at Rs. 7,642 and odd and sales made outside Uttar Pradesh at Rs. 15,591 and odd. As for sales made outside Uttar Pradesh, it was claimed that, since they fell outside the purview of the U.P. Sales Tax Act, they could not be taken into consideration for any purpose whatsoever under the Act and, thus, if those sales were not included, the turnover of the remaining sales being below the prescribed minimum turnover liable to tax, the assessee would not be liable to tax at all. The question, on these facts, which came up for consideration before the Full Bench was whether the sales made outside Uttar Pradesh should be included in the turnover for the purpose of determining whether the dealer is liable to tax under the Act. Because of Section 27 of the Act, according to which, no matter what any provision of the Act may say, no liability to tax can be visited on sales made outside Uttar Pradesh, the view taken was that those sales could not be taken into account at all in the assessment proceedings against the assessee. This section was held to override all other provisions of the Act and the charging section was held to be subject to this section. Reference was made in that decision to A.V. Fernandez v. State of Kerala  8 S.T.C. 561 (S.C.). In that case, the Supreme Court was required to consider the impact of Section 26 of the Travancore-Cochin General Sales Tax Act on the other provisions of the Act and the Rules made thereunder. Section 26 of that Act is substantially in the same terms as Section 27 of the U.P. Sales Tax Act. The Supreme Court rejected the contention that it was permissible to include the prohibited transaction for the purpose of determining the assessable turnover. It observed:
If there is no liability to tax there cannot be any assessment either. Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same....The sales or purchases are exempted from taxation altogether. The legislature cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed.
10. It was also observed that if the aforesaid distinction was borne in mind, it was clear that Section 26 of that Act enacted a provision with regard to non-liability of those transactions to tax and they were taken out of the purview of the Act.
11. In the Ganga Ram Ghurey Lal 1970 U.P.T.C 167, a Division Bench of this Court again had an occasion to consider a similar question. In that case, the assessee, a dealer in foodgrains, oil-seeds and gur, in respect of the assessment years 1960-61 and 1961-62, had made certain sales through commission agents and if they were to be excluded from the turnover, the other sales were below the minimum taxable limit. The assessee claimed that sales made through commission agents should not be added to the turnover. That submission was not accepted and it was held, after referring to the charging section and the definitions of 'dealer' and 'turnover': 'It follows, therefore, that, in order to determine the gross turnover of a dealer, all sales effected by him will have to be aggregated even though the tax would be levied only upon the net turnover, which means the turnover liable to tax, so that a part of the turnover, which is exempted by any of the provisions of the Act, shall have to be excluded from the levy of the tax.' In that case, the decision of the Full Bench in the Allied Chemicals 1969 A.L.J. 33 (F.B) as also of a Division Bench decision of this Court in Commissioner of Sales Tax, U.P., Lucknow v. Balbir Singh and Co.  14 S.T.C. 546 were followed. In the Balbir Singh's case  14 S.T.C. 546, it was held that the sales made by the assessee as a commission agent could be included in the assessee's gross turnover even though such sales were not subject to tax in his hands.
12. There is another Division Bench decision of this Court in Commissioner of Sales Tax, U.P. v. Mithulal Murlidhar 1970 U.P.T.C. 450, which has been referred to and relied upon by the learned revising authority. In that case, of course, it has been held that if the turnover of sales effected through the commission agents has already been subject to tax within the meaning of the explanation to Section 3, then that turnover cannot be added for any purpose to the turnover of the principal, but, in case, it has not been so assessed in the hands of the commission agent, then it can be treated to be a part of the turnover of the principal for all purposes, and not only for the purpose of determining the quantum of the taxable turnover under Section 3. In that decision, it appears that the attention of the Bench was not invited to the earlier decisions of this Court in Commissioner of Sales Tax v. Ganga Ram Ghurey Lal 1970 U.P.T.C 167 and Commissioner of Sales Tax v. Balbir Singh and Co.  14 S.T.C. 546 and of the Supreme Court in A.V. Fernandez v. State of Kerala  8 S.T.C. 561 (S.C.). This decision is thus per incuriam and, with respect, we are not bound to follow it (see Halsbury's Laws of England, Simonds Edition, Volume 22, pages 799-800, paragraph 1687).
13. In our opinion, the law appears to be quite well-settled and admits of no doubt. The definition of a 'dealer' includes both the principal and the commission agent, so that tax can be levied on either of them. The explanation, which is given at the end of Section 3, makes it clear that where tax is payable and has been so paid by the commission agent on any turnover on behalf of its principal, the principal shall not be liable to pay the tax in respect of the same turnover. In other words, if a particular turnover has been assessed in the hands of the commission agent, the principal ceases to be liable to tax on such turnover. However, in order to determine the gross turnover, all sales effected by him have to be aggregated even though the tax would be levied upon the net turnover. In the definition of 'turnover', as given in Section 2(i) or in the charging section or in any other provision, there is no prohibition that sales effected through commission agents are not to be included in the turnover, in order to find out the assessee's liability to tax. As has been emphasised in the case of A.V. Fernandez1, the distinction is to be borne in mind that if there is any non-liability of a transaction to tax, then certainly such a transaction is taken out of the purview of the tax itself. Unless there is such a provision which renders a transaction non-liable to tax, it cannot be excluded from the turnover of a dealer. The provision contained in Section 4(1) of the Act is to be read subject to the charging section and the definitions of 'dealer' and 'turnover', because it provides for exemption from tax. As we have emphasised above, the liability to, or imposition of, tax is very much different from the payability of tax. For determination of liability to tax, therefore, the entire turnover of a dealer in respect of sales either effected by him directly or through the commission agents is to be taken into consideration. In this view of the matter, the sales of sugar made by the assessee through the commission agents were to be aggregated in order to find out the turnover liable to tax.
14. For the reasons given above, we answer the question in the negative, in favour of the department and against the assessee. In the circumstances of the case and further in view of the fact that nobody appeared for the assessee, we make no order as to costs.