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Sundaram Motors Private Limited and ors. Vs. Joint Commercial Tax Officer, Mount Road Ii Division and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 1704, 1711, 1736, 1737, 1750 and 2161 of 1964 and 13 and 26 of 1965
Judge
Reported in[1965]16STC644(Mad)
AppellantSundaram Motors Private Limited and ors.
RespondentJoint Commercial Tax Officer, Mount Road Ii Division and ors.
Appellant AdvocateV.K. Thiruvenkatachari, Adv. for ;N.R. Govindachari, ;S. Swaminathan, ;A. Devanathan and ;A.R. Ramanathan, Advs. in W. P. Nos. 1704, 1711, 1736, 1737 and 1750 of 1964 and W. P. Nos. 13 and 26 of 1965
Respondent AdvocateThe Additional Government Pleader in W.P. Nos. 1704, 1736, 1737, 1750 and 1711 of 1964 and ;The Special Government Pleader in W. P. Nos. 2161 of 1964 and 13 and 26 of 1965
DispositionPetition allowed
Cases ReferredDeputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar
Excerpt:
- - 47g :on the contrary, the expression 'turnover' means the aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration, and when a sale attracts purchase tax and the tax is passed on to the consumer, what the buyer has to pay for the goods includes the tax as well and the aggregate amount so paid would fall within the definition of turnover. it is pointed out that when judicial interpretation of a particular provision of the act has been rendered, and the legislature in repealing and re-enacting the act did not choose to vary the provisions but maintained them in the same form as in the repealed act, the normal presumption should be that the legislature accepted that judicial interpretation as valid in the context of.....srinivasan, j.1. in the deputy commissioner of commercial taxes v. krishnaswami mudaliar [1954] 5 s.t.c. 88, a bench of this court held that under the madras general sales tax act, 1939, the amount collected by a registered dealer from the purchaser by way of sales tax and paid over to the government should not be included in the turnover of the registered dealer as part of the sale price of the goods sold, and that tax is not liable to be taxed again. this decision was rendered on the 7th of january, 1954. the madras legislature thereafter enacted madras act xvii of 1954 (hereinafter called the validating act) as an act to 'define the turnover and to validate certain assessments and collections made under the madras general sales tax act'. broadly stated, this act provided that in the.....
Judgment:

Srinivasan, J.

1. In The Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88, a Bench of this Court held that under the Madras General Sales Tax Act, 1939, the amount collected by a registered dealer from the purchaser by way of sales tax and paid over to the Government should not be included in the turnover of the registered dealer as part of the sale price of the goods sold, and that tax is not liable to be taxed again. This decision was rendered on the 7th of January, 1954. The Madras Legislature thereafter enacted Madras Act XVII of 1954 (hereinafter called the Validating Act) as an Act to 'define the turnover and to validate certain assessments and collections made under the Madras General Sales Tax Act'. Broadly stated, this Act provided that in the case of sales effected by a dealer before the 1st of April, 1954, the amounts collected by him by way of sales tax shall be deemed to have formed part of his turnover. It also declared that all assessments and collections made, and all judgments, decrees or orders pronounced by any tribunal or court on the basis that amounts collected by a dealer by way of tax under the Madras General Sales Tax Act before the 1st of April, 1954, formed part of the turnover of the dealer, had been validly made or passed, and any finding recorded by any officer, tribunal or court to a contrary effect shall be void and of no effect. These provisions accordingly validated the assessments and collections made on the footing that the sales tax collected by the dealer was also part of his turnover and could be subjected to sales tax. That was in respect of such orders, assessments and collections made prior to the 1st of April, 1954. Another provision stated that the validation or the declaration referred to shall not authorise the inclusion of the tax amounts collected by the dealer in his turnover on and after the 1st of April, 1954.

2. By virtue of the above decision and the provisions of this Act, the sales tax collected by the dealer was no longer being included in his taxable turnover on and after 1st of April, 1954. This position obtained till 1964, when the Supreme Court considered the question in Messrs George Oakes Private Ltd. v. State of Madras [1961] 12 S.T.C. 476. In that case, Messrs George Oakes, the appellants, claimed exemption in respect of the turnover relating to transactions of sales claimed to be inter-State. This claim was rejected, and, in addition, the Deputy Commercial Tax Officer added to the turnover certain amounts which the appellants had collected by way of tax. This related to the assessment years 1951-52 and 1952-53. While the claim of the appellant was pending in proceedings under the Act of 1939, the Validating Act was passed. The question was raised by the appellants that the provisions of this Validating Act whereby a tax collected by the dealer and passed on to the Government was treated as part of the turnover of the dealer liable to tax, were constitutionally invalid. The Tribunal constituted under the Act declined to enter into this question and the matter came before the High Court by way of revision. The High Court held that the constitutional validity of Act XVII of 1954 had been upheld in the decision in Sundararajan and Company v. State of Madras [1956] 7 S.T.C. 105 and dismissed the revision petition. On appeal to the Supreme Court, the narrow point which their Lordships had to consider was whether the impugned Act, that is, Act XVII of 1954, was a valid piece of legislation by a competent Legislature under Entry 54 of List II of the Seventh Schedule. Their Lordships observed that Krishnaswami Mudalihar's case [1954] 5 S.T.C. 88 had been interpreted by the High Court to mean that the State Legislature was not incompetent to make the amounts collected by a registered dealer by way of tax under Section 8-B part of the assessable turnover, but that the 1939 Act, as it stood at the relevant time, did not make such amounts part of the assessable turnover. They did not disagree with this interpretation of that decision. Dealing with the question that in no circumstances could the State Legislature validly make a law which would include the amount collected by way of tax as part of the turnover of the dealer, their Lordships rejected that contention. They held that neither the Madras General Sales Tax Act of 1939 nor the impugned Act, Act XVII of 1954, proceeded on any 'immutable distinction between sale price and tax.' The 1939 Act contained only definitions of 'sale' and 'turnover' and carried no separate definition of 'sale price'. They observe [1961] 12 S.T.C. 47G :

On the contrary, the expression 'turnover' means the aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration, and when a sale attracts purchase tax and the tax is passed on to the consumer, what the buyer has to pay for the goods includes the tax as well and the aggregate amount so paid would fall within the definition of turnover.

3. After referring to certain English cases, they say:

There is nothing in those provisions which would indicate that when the dealer collects any amount by way of tax, that can not be part of the sale price. So far as the purchaser is concerned, he pays for the goods what the seller demands, viz., the price, even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover.

4. They then dealt with the assessment and the position made in Krishnaswami Mudaliar's case [1954] 5 S.T.C. 88 in the light of Section 8-B of the 1939 Act and the Turnover and Assessment Rules and said :

The question however still remains---do the aforesaid provisions show such a distinction under the scheme of the two Acts that the amount collected by way of tax cannot be part of the turnover of the dealer and if the impugned Act makes it a part of the turn over by a deeming provision, it must be struck down as being outside the legislative competence of the State Legislature?.... We do not think that the distinction drawn in Krishnaswami Mudaliar's case [1954] 5 S.T.C. 88, whether right or wrong on a question of construction only, is material to the question of legislative competence....

5. After referring to a provision similar to Section 8-B of the Madras Act in the Bihar Sales Tax Act of 1947, which was dealt in Tata Iron and Steel Company Limited v. State of Bihar [1958] 9 S.T.C. 267, they observe:

These observations show that when the seller passes on the tax and the buyer agrees to pay sales tax in addition to the price, the tax is really part of the entire consideration, and the distinction between the two amounts--tax and price--loses all significance from the point of view of legislative competence. The matter is not in any way different under the Turnover and Assessment Rules. It is true that in column 11 of Form A, the amount collected by way of tax under Section 8-B has to be shown ; that does not, however, mean that an immutable distinction such as will go to the root of the legislative competence has been drawn and must be always maintained. It appears to us that 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 the Government. This does not mean that it is incompetent to the Legislature enacting legislation pursuant to Entry 54 of 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.

6. In another decision of the Supreme Court, George Oakes Private Ltd. and Ors. v. State of Madras [1962] 13 S.T.C. 98, the further question arose whether when the tax collected by the dealer was included in his turnover and subject ed to tax, the rate of tax should be the general rate of 3 pies in the rupee, or the rate applicable in the case of special classes of goods bearing an additional tax should also be applied to that part of the turnover represented by the tax collections in respect of those special classes of goods. To amplify the above, the rate of tax in respect of motor vehicles and such classes of goods was 6 pies in the rupee. The assessee had collected tax at this rate and by reason of Act XVII of 1954, such tax collections were included in the turnover and brought to tax. The assessee's contention was, firstly, that the tax could not be included in the turnover. That point stood decided against the assessee in Messrs George Oakes (Private) Limited v. State of Madras [1961] 12 S.T.C. 476. The further question whether the tax collections at the special rate should also suffer tax at the special rate after being included in the turnover was also decided against the assessee by this decision.

7. In 1959, the Madras General Sales Tax Act, 1939, was repealed and re-enacted in Act I of 1959. In 1964, the Board of Revenue issued certain instructions to the assessing officers directing that the sales tax collections of the dealer shall be included in his turnover. Pursuant to this circular, the assessing authority issued notices to the petitioners in these writ petitions proposing to make provisional assessments for the year 1964-65 by including sales tax collections also in the assessable turnover. The petitioners objected contending that the decisions of the Supreme Court referred to were only authorities to the extent that the question called for consideration in the context of Act XVII of 1954 and did not lay down that under the provisions of the Madras General Sales Tax Act the tax collections could form part of the turnover.

8. The petitioners in these cases have accordingly moved this Court for the issue of writs of prohibition to restrain the authorities from making assessments on the basis of the notices. The contentions of the petitioners shortly stated are firstly that the decision in Krishna-swami Mudaliar's case1 stands unaffected by the subsequent Supreme Court decisions and that whatever observations their Lordships of the Supreme Court might have made in their decisions had reference only to the constitutional validity of Act XVII of 1954. It is pointed out that Act I of 1959 contains identically the same provisions as Section 9-B of the Act of 1939 and that the interpretation that should be placed upon the provisions of Act I of 1959 cannot therefore be different. In the light of Madras Act XVII of 1954 also, it is con tended that the State Legislature accepted the judicial interpretation in Krishnaswami Mudaliar's case [1954] 5 S.T.C. 88 and purported to validate the impugned action in including the sales tax collections in the taxable turnover only up to 1st of April, 1954. There was a clear statement of the law, as the State Legislature understood, that in respect of transactions on and after the 1st of April, 1954, the tax collections by the dealer shall not be regarded as part of his taxable turnover. It is pointed out that when judicial interpretation of a particular provision of the Act has been rendered, and the Legislature in repealing and re-enacting the Act did not choose to vary the provisions but maintained them in the same form as in the repealed Act, the normal presumption should be that the Legislature accepted that judicial interpretation as valid in the context of the new Act as well. It is claimed accordingly that unless there had been a proper provision embodied in Act I of 1959, which resulted in making the tax collections part of the sale price or the turnover, which no doubt it is competent for the Legislature to do, it cannot follow merely on the decisions of the Supreme Court in Messrs George Oakes (Private) Limited v. State of Madras [1961] 12 S.T.C. 476 and George Oakes (Private) Ltd. and Ors. v. State of Madras [1962] 13 S.T.C. 98 that there has been a change in the law in so far as Act I of 1959 is concerned.

9. On behalf of the State, the counter affidavit disputes the maintainability of the writ petitions on the ground that they are directed against a departmental circular and not against any act done in pursuance of the statute. But this objection is however not valid, for it is not in dispute that the appropriate assessing authorities have issued notices purporting to be under the Act proposing to levy tax, including the tax collections in the turnover of the dealers, and it cannot be maintained that if such inclusion of the tax collections in the turnover of the dealers is opposed to the provisions of the statute, then the petitioners are not entitled to ask for writs of prohibition. The further contention of the State is that the definition of 'turn over' as it appears in Act I of 1959 is comprehensive enough to include whatever is paid by the purchaser as the consideration for the goods, and that, according to the respondent, includes the tax which the purchaser has to pay. It is denied also that Section 22 of Act I of 1959, which is analogous to Section 8-B of the 1939 Act, places any restriction upon the inclusion of the tax collections in the turnover. It is further contended that arguments based on the provisions of Act XVII of 1954 will not make any difference to the proper interpretation of the relevant provisions of Act I of 1959.

10. The principal arguments, as addressed by Mr. V.K. Thiruvenkatachari, learned counsel for the petitioners in these cases, consist in claiming that the decision of this Court in Krishnaswami Mudaliar's case [1954] 5 S.T.C. 88 stands unaffected by the decisions of the Supreme Court; that the Madras Legislature accepted that position and made it clear by the provisions of Act XVII of 1954 that on and after the 1st of April, 1954, sales tax collections shall not form part of the turnover. When the 1939 Act was repealed and replaced by Act I of 1959, identical provisions as in the 1939 Act were enacted. The result should accordingly be that the judicial interpretation placed on the provisions of the 1939 Act should continue to have force and validity in the interpretation of similar provisions of the 1959 Act. It is further pointed out that though the Madras General Sales Tax Act of 1939 has been repealed, Madras Act XVII of 1954 has not been repealed at all. It should therefore follow that any principle regarding the inclusion of tax collections in the turnover accepted in Madras Act XVII of 1954 should continue to be effective even in the context of the re-enacted Sales Tax Act I of 1959.

11. I may at this stage state broadly the opposing contentions of the State. It is claimed that the Supreme Court did decide the question of principle, namely, that turnover includes whatever is collected by the seller. Whether in the context of Section 8-B of the 1939 Act or Section 22 of Act I of 1959, the expression 'turnover' has been broadly denned in the Act to include all collections, the purpose for which Act XVII of 1954 was enacted was to nullify the decision in Krishnaswmi Mudaliar's case [1954] 5 S.T.C. 88. That did not impose a ban for all time upon the assessing authority to include the tax in the assessable turnover. It is claimed that the basis of the decision in Krishna-swami Mudaliar's case1 has been undermined. It is also pointed out that it is not a proper rule of construction that when a decision has been found to be erroneous by a later decision, the mere circum stance that the Legislature re-enacted the Act should result in the incongruous situation that a mistaken interpretation is to be accepted and adhered to even subsequently.

12. In an early case of the Patna High Court in Kaniram Janki Das v. State of Bihar [1952] 3 S.T.C. 230, it was held that the amount of sales tax realised by a dealer could be included in his taxable turnover. In that context, the principal point decided by the learned Judges of the Patna High Court was that the aggregate amount of sale prices received by the dealer would constitute his gross turnover and that ' so long as the law does not place any burden on the purchaser for the sales tax payable by the dealer or authorise the dealer to collect the same from the purchaser, it has to be assumed in the eye of law that the entire amount paid by the purchaser is the sale price of the goods supplied.' In the Act which the learned Judges had to consider, the term 'sale price' had been denned as the amount payable to a dealer as valuable consideration. The learned Judges point out that the act of the dealer splitting up the amount under different heads does not recognise those payments as permissible deductions in the eye of law from the sale price itself. In a subsequent decision of the Patna High Court, Tata Iron and Steel Company Limited v. State of Bihar [1956] 7 S.T.C. 158, a different view was taken, for the relevant provisions of the Sales Tax Act had undergone a change. The learned Judges distinguished the earlier decision in Kaniram Janki Das v. State of Bihar [1952] 3 S.T.C. 230 in this way:

The basis of that decision was that there was no provision in the statute empowering the registered dealer to realise sales tax from the purchaser, and in the absence of such a provision it should be taken that the entire amount payable by the purchaser including sales tax was the sale price of the goods supplied. But this reasoning is no longer sustainable in view of the amendment made by Bihar Act VI of 1949. By this Amending Act, Section 14-A was for the first time introduced and a registered dealer was empowered to make collection of sales tax from the consumers in accordance with such restrictions and conditions as may be prescribed.... In view of these statutory amendments it is clear that the basis of the decision in Kaniram Janki Das v. State of Bihar 2 is gone and that decision cannot apply to the present case. For the reasons I have already expressed, I hold that the Sales Tax Authorities were not legally entitled to include sales tax in the taxable turnover of the assessee....

13. A decision of the Andhra High Court, State of Madras v. Tungabhadra Industries Ltd. [1955] 6 S.T.C. 379, is of some importance. The Andhra State enacted Act XIII of 1954, whereby it purported to amend the definition of 'turnover' to include any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of the goods. It was contended by the State that by reason of this amended definition, the foundation of the decision in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88 had been taken away, so that the turnover as denned by the amendment could include the collections of sales tax. It was also claimed by the Andhra State that Section 8-B of the Act had been deleted from the statute book, so that the power given to a registered dealer to collect the tax had been withdrawn. It was the contention of the State that by reason of these features, the tax collected by the dealer as part of his sale transaction could no longer be characterised as anything apart from the price he charged for the goods and that therefore the tax, if collected by the dealer, would form part of the consideration of the sale and was liable to be included in the turn over. This contention was not accepted by the learned Judges, who pointed out that the relevant Turnover and Assessment Rules contained the necessary provision authorising a registered dealer to collect tax, subject to certain conditions, and also imposed upon him a liability to pay the amount so collected by him. Notwithstanding that Section 8-B(2) of the Act had been deleted, the pre-existing position was still maintained by the Rules. The learned Judges accordingly held that the amended definition of turnover was not comprehensive enough to include sales tax.

14. In this context, I may mention that the definition of 'turnover' as it appears in Act I of 1959 cannot be regarded as including the tax realisations.

15. Mr. V.K. Thiruvenkatachari argues that when the Validating Act was passed by the Madras State Legislature, the State accepted the fact that in the light of the decision of the Madras High Court, the assessments made on the basis of the inclusion of tax in the turn over were not correct, but that they, having been made in good faith, had to be legalised. In the statement of objects and reasons relevant to the passing of this measure, the Government definitely state that they propose to accept the statement of the law made by the Madras High Court with effect from 1st of April, 1954, and not to include in the turnover of a dealer amounts collected by way of tax. Normally, the statement of objects and reasons is not a very valid guide to the interpretation of the Act, but in the present case the provisions of Act XVII of 1954 are so clearly in accord with the policy declared in the statement of objects and reasons, that reference to it is only made to emphasise the stand taken by the Government at that time. It is also noticeable that in George Oakes (Private) Limited v. State of Madras [1961] 12 S.T.C. 476, the learned Judges of the Supreme Court say that it is undoubtedly open to the Legislature to include sales tax collections in the turnover of a dealer and levy sales tax thereon; but, in the instant case, it would be a matter for consideration on an examination of the provisions of the Act, whether such a power had really been assumed by the Government by that piece of legislation. Mr. V. K. Thiruvenkatachari further points out that when a Legislature repeals a law and re-enacts the same law and uses identical words and expressions in the later Act, the interpretation to be placed upon such like words and expressions should follow the judicial interpretation that prevailed prior to the re-enactment. Reference was made by the learned counsel to Maxwell on 'Interpretation of Statutes' (11th Edn.) page 302, where the learned author observes:

When the legislature puts a construction on an Act, a sub sequent cognate enactment in the same terms would prima facie be understood in the same terms.

16. Again at page 303,

It must be taken for granted that the legislature is acquainted with the actual state of the law and the practice of the courts. Therefore, when the words of an old statute are either incorporated in, or by reference made part of, a new statute, this is understood to be done with the object of adopting any legal interpretation which has been put on them by the courts, though not necessarily all the reasons for that interpretation. So, the same words appearing in a subsequent Act in pari materia, the presumption arises that they are used in the meaning which has been judicially put on them, and that unless there is something to rebut that presumption, the new statute is to be cons trued as the old one was. The presumption may however be displaced in special circumstances, for example, where intervening legislation in pari materia would make it unjust or absurd to adopt the interpretation applied to the earlier Act in construing the later one.

17. Craies 'Statute Law' (5th Edn.) at page 133, also says:

If Acts are framed using the forms of words or clauses in prior Acts, which have received judicial construction, unless a contrary intention appears, the courts may presume that the Legislature has adopted the judicial interpretation, or has used the words in the sense attributed to them by the courts.

18. Halsbury also deals with the matter in the same manner thus:

In construing a statute, it has to be assumed that Parliament knows the existing state of the law even in technical matters. Where, therefore, words and expressions in a statute are plainly taken from similar context in earlier statutes in pari materia which have received clear, well-settled and recognised judicial interpretation, it must be assumed that the Parliament was aware of that interpretation, and in the absence of anything in the statute showing a contrary intention, intended it to be followed. The courts will not, however, hold themselves bound', where it is clear that the interpretation was erroneous....'(Vol. 36, 3rd Edn., page 403).

19. This principle was acted upon by the Privy Council in Vasudeva Mudaliar v. Srinivasa Pillai I.L.R.(1907) Mad. 426, . The question arose whether Article 132, which provided for a period of limitation of 12 years to enforce payment of money charged upon immovable property, or Article 147 which gave a period of limitation of 60 years for a suit by a mortgagee for foreclosure or sale, applied to the instant case. The Judicial Committee examined the previous state of the law commencing with Act IX of 1871. They adopted the narrower construction of Article 147 limiting its application to one class of mortgages in which the suit is brought for foreclosure or sale, and observed :

The narrower construction escapes the necessity of attributing to the Legislature a great and sudden change of policy. It also gives effect to the ordinary presumption that the Legislature, when it repeats in substance in a later Act an earlier enactment that has obtained settled meaning by judicial construction, intends the words to mean what they meant before.

20. That this principle of interpretation is well-recognised can admit of no doubt. In a decision of the Queen's Bench Division, Dyke v. Gower [1892] 1 Q.B. 220, it was observed, referring to an earlier decision also of the Queen's Bench Division :

Knowing of that decision, Parliament in 1875 drafted the present Act in the form in which they did and it is only reasonable to suppose that from their knowledge of the construction which the Judges had put upon the section in the earlier Act, they could tell what construction the Judges would be likely to put upon a similar section in the Act which they were passing....

21. A like view was expressed in another decision of the Queen's Bench Division in Foskett v. Kaufman (1885) 16 Q.B.D. 279, where the following observations occur, :

If we had only to deal with the Reform Act, I should say that the qualifications in these two sections are different and distinct, but in the case of Bartlett v. Gibbs 5 M. & G. 81, it was decided that on the true construction of that Act of Parliament they are two distinct qualifications. That decision has been acted upon ever since, and Parliament, with full knowledge that that was the construction put upon the Reform Act, has not altered anything with regard to it. It would therefore be contrary to every rule of conduct of the courts after a case had been decided for so long a time, and after the matter had been subsequently before Parliament, and yet no alteration made therein, if this Court were to alter the construction which had been decided to be the true construction of the statute....

22. Mr. Viswanathan, learned counsel for the State, purported to claim that the corresponding sections of the 1959 Act in so far as the definition of turnover and the authority given to a registered dealer to collect tax are concerned, are differently worded, so that the two Acts cannot be held to be in pari materia. A perusal of these provisions, far from supporting the contention of the learned counsel, really establishes that the Legislature intended to maintain the same position in so far as these provisions are concerned as it was before the enactment of Act I of 1959. It is no doubt true, as Mr. Viswanathan urged, that it is not a rule of law with regard to the interpretation but it is only a presumption. But, where circumstances exist which show that the Legislature, when it was fully aware of a particular construction placed upon certain provisions, maintained those provisions without altering them to any degree, the presumption assumes the proportion of a rule of conduct for the courts in guiding their interpretation. Learned counsel next urges that if it is established again by decisions that the earlier interpretation of the provisions was erroneous in law, then the abovesaid presumption cannot be relied upon to maintain such an erroneous interpretation.. Reference was made by the learned counsel to The Royal Court Derby Procelam Company Limited v. Raymond Russel [1949] 2 K.B. 419. The principle of this decision is as stated by the learned counsel, viz., that it could not be maintained that whenever Parliament re-enacted a statute, it thereby gave statutory authority to every erroneous interpretation which had been put upon it. Denning, L. J., observed that if a decision is in fact found to be erroneous, there is no rule of law which prevents it being overruled. What happened in that case is worth noting if only to understand the above observation. There was a decision in Frederick Braby and Company Limited v. Bredwell [1926] 1 K.B. 456, which had placed a particular interpretation on the statute. In 1947, that decision was overruled in Braithwaite Company Limited v. Elliot [1947] 1 K.B. 177. In between these two dates, the Parliament enacted an Act of 1933 and it appears to have been contended that Parliament by enacting the provision gave statutory authority to the interpretation contained in the 1926 decision, and it was urged that when that interpretation had been acted upon for such a long time, it should not have been overruled. It was in those circumstances that the question came to be considered and the above observation made. Mr. Viswanathan contends that in the decisions of the Supreme Court to which reference has been made, it has been clearly stated that the inclusion of the sales tax in the turnover is not beyond legislative competence and that therefore the decision of the Madras High Court in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88, having been overruled, it is no longer incumbent upon the courts to adopt the construction that was given in that decision in interpreting similar provisions in Act I of 1959. This argument is to my mind unsound, for neither expressly nor by implication was the Madras decision overruled. What their Lordships of the Supreme Court have pointed out is only that it lies within the legislative competence of a State Legislature to include in the taxable turnover such tax collections as might be made by the dealer, and they point out that if the Legislature has assumed that power, then the levy of tax on such tax collections could not be struck down as invalid. Indeed, the question that was considered by the Supreme Court was not on the validity of the inclusion of such collections in the context of the provisions of the Act, but while they were examining the validity of the Validating Act of 1954. It was held by the Supreme Court that the State could include such tax collections and to the extent to which the Validating Act of 1954 did so, it was within its legislative competence. They did not however upset the decision of the Madras High Court in the Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88. Even accepting the position it is only a presumption guiding interpretation what has happened in the legislative history of this enactment has taken the matter beyond the stage of presumption and given it the status of affirmed fact. The provisions of Act XVII of 1954 may be referred to shortly. Section 2 of the Act purported to define ' turnover ', but this definition of ' turn over ' did not make an amendment of the main Act (1939) itself. This section reads :

In the case of sales made by a dealer before the 1st of April, 1954, amounts collected by him by way of tax under the Madras General Sales Tax Act, 1939, hereinafter referred to as the principal Act, shall be deemed to have formed part of his turnover.

23. This provision accordingly gave the sales tax collections the character of a turnover only in respect of the sales held before the 1st of April, 1954. The use of the word 'deemed' recognizes the legal position that under the principal Act, tax collections were not part of the turnover. Section 3 of the Act validated assessments or levy of tax on the tax included as part of the turnover only in respect of proceedings before the 1st of April, 1954. Sub section (2) of Section 3 is of the greatest importance, and it reads thus:--

Nothing in Sub-section (1) shall be construed as authorising any officer, in assessing any dealer in the exercise or purported exercise of jurisdiction or powers conferred by the principal Act, to include in the turnover of the dealer amounts collected by him after the 1st April, 1954, by way of tax under the principal Act.

24. I have referred to the statement of objects and reasons where the State Government purported to say that they propose to accept with effect from the 1st of April, 1954, the statement of the law made by the High Court and not to include in the turnover of a dealer for the purpose of the assessment collections by way of tax subsequent to the 1st of April, 1954, and it is that statement of policy that finds expression in Sub-clause (2) of Section 3 of Act XVII of 1954. In effect, this provision prohibits the assessing authorities from including in the turnover of a dealer any amounts collected by him after the 1st of April, 1954. While the State Legislature is undoubtedly legislatively Competent to include sales tax collections of a dealer in his assessable turnover, it deliberately refrained from assuming that power ; that to my mind is the effect of Section 3(2) of the Act of 1954.

25. It is significant to note that though the principal Act, that is, Madras Act IX of 1939, was repealed and re-enacted as Madras Act I of 1959, Madras Act XVII of 1954 still stands on the statute book. Mr. V.K. Thiruvenkatachari argues that in the light of this feature and by reason of Section 18 of the Madras General Clauses Act, Madras Act XVII of 1954 continues to Control Act I of 1959. Under the General Clauses Act, where an Act has been repealed and re placed by another Act, references in any other Act to the repealed Act shall, unless a contrary intention appears, be regarded as references to the re-enacted Act. It would therefore follow that in construing references to the Madras General Sales Tax Act or the 'Principal Act' in Act XVII of 1954, we have to hold it as if the references were to Madras Act I of 1959, and if that is so, whether or not a different interpretation of the legal position with regard to the inclusion of sales tax collections in the turnover of a dealer is possible on the terms of Madras Act I of 1959, Madras Act XVII of 1954 prohibits the inclusion of such sales tax amounts in the assessable turnover of the dealer. Whether this the Legislature intended or not, by retaining Madras Act XVII of 1954 on the statute book, that result is inescapable.

26. It follows that the assessments made or sought to be made in these cases are illegal. The rules are accordingly made absolute. In the circumstances of the case, there will be no order as to costs in any of the writ petitions.


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