R. R. Rastogi, J. - 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. 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 Addl. 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 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. vs. Mittbulal Murlidhar. 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 Addl. 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 no body 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 S. 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 S. 2(i) of the Act. Reliance has been placed on Commissioner of Sales Tax, U.P. vs. Allied Chemicals, and C.S.T. U.P. vs. Gangaram Chooreylal. Before examining this contention, it would be relevant to examine the provisions of the Act as it stood on 1st April, 1966, S. 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 N.P. 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.'
6. The 'dealer' has been defined in S. 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 undertaking engaged in the generation or distribution of electrical energy or any other form of power.'
7. 'Thurnover' as defined is S. 2(i) means :-
'The aggregate amount for which goods are supplied or distributed by way of sales 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 other, whether for cash or deferred payment or other valuable consideration.'
8. The Provisos and the Explanations to this definition are not necessary for our purpose.
9. S. 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.'
10. We were informed by the learned Standing Counsel that by notification No. 1615/X-902(a)52 dated 13th August, 1959, with effect from 1-3-1959 no tax was to be levied on Khandsari sugar produced after that date provided additional excise duty was paid on such sugar.
11. 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. S. 3 talks of liability to tax while S. 4 of the payability of tax. Therefore, the provision of S. 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 purpose 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 Sales Tax Rules. Rule 8 provides that a dealers 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 u/s. 3 shall be computed under the net turnover and in determining the net turnover the amounts specified in clause (a) to () 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.
12. In Commissioner of Sales Tax vs. Allied Chemicals, 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 what-so-ever under the Act and thus if those sales were not included the turnover of their 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 S. 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 overid 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. Fernadez vs. State of Kerala. In that case the Supreme Court was required to consider the impact of S. 26 of the Travancore Cochin General Sales Tax Act on the other provisions of the Act and the Rules made thereunder. S. 26 of that Act is substantially in the same terms as S. 27 of the U.P. Sales Tax Act. The Supreme Court rejected the contention that is 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 Statue 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 whatsoever to the same ..... The sales or purchases are exempted from tax altogether. The legislature cannot enact a law 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 the sales tax can be levied or imposed'.
13. It was also observed that if the aforesaid distinction was borne in mind, it was clear that S. 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.
14. In Gangaram Ghooreyala, a Division Bench of this Court again had an occasion to consider a similar question. In that case the assessee, a dealer in food grains, oilseeds and Gur had in respect of the assessment years 1960-61 and 1961-62 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 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 will 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 provision of the Act, shall have to be excluded from the levy of the tax. In that case the decision of the Full Bench in Allied Chemicals, as also of a Division Bench decision of this Court in Commr. of Sales Tax, U.P. Lucknow vs. Balbir Singh and Co., was followed. In Balbir Singhs, case it was held that the sales made by the assessee as a commission agent could be included in the assessees gross turnover even though such sales were not subject to tax in his hands.
15. There is another Division Bench decision of this Court in Commissioner of Sales Tax, U.P. vs. Mithulal Murlidhar, 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 Explanation S. 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 S. 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 vs. Gangran Gooreylal and Commissioner of Sales Tax vs. Balbir Singh & Co. and of the Supreme Court in A. V. Fernadez vs. State of Kerala. This decision is thus per in our am and, with respect, we are not bound to follow it (See Halsburys Laws of Enland, Simonds Edition, Volume 22, page 799-800, paragraph 1687).
16. In our opinion the law appears to be quite well settled and admits of no doubt. The definition of a dealer includes the principal and the commission agent both so that tax can be levied on either of them. The Explanation which is given at the end of S. 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 S. 2(i) or 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 assessees liability to tax. As has been emphasised in the case of A. 1 Fernadez 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, cannot be excluded from the turnover of a dealer. The provision contained in S. 4(1) of the Act is to be read subject to the charging section and 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.
17. For 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 no body appeared for the assessee, we make no order as to costs.