KONDURI BUCHIRAJALINGAM Vs. STATE OF HYDERABAD

JUDGEMENT

(1.) This appeal raises a question under the Hyderabad General Sales Tax Act, 1950. It is from a judgment of a Full Bench of the High Court at Hyderabad, dated 11th September 1953, which, by a majority, dismissed a petition by the appellant asking for the issue of certain writs.

(2.) In Warangal in Hyderabad State there was an Association of oil mill owners called the Warangal Subha Oil Mill Owners' Association. The appellant was a member and the Vice-President of that Association. The members of the Association in the course of their business purchased ground-nuts for the purpose of converting them into oil and trading in the same.

(3.) The Hyderabad General Sales Tax Act came into force on 1st May 1950. The members of the Association who were "dealers" as defined in the Act, got themselves registered under its provisions. Soon after the Act came into force the Sales Tax Officer, Warangal verbally informed the members of the Association that they would have to pay tax on the purchase of ground-nuts made by them. Thereafter certain correspondence ensued between the Association and the taxing authorities in which the Association took up the position that the members should collect tax that they were called upon to pay, from the persons from whom they bought the ground-nuts including the actual growers thereof whom we shall hereafter refer to as the agriculturists. The Association requested the Market Superintendent at Warangal to assist its members in collecting the tax from the agriculturists according to the practice prevailing in Hyderabad. The Market Superintendent informed the Association that the members should not collect any tax from the agriculturists. The Association carried on further correspondence with the higher Sales Tax Authorities insisting that its members should be allowed to collect from the agriculturists the tax on the purchases made from them and requested that the collection of tax from the members should be suspended till a decision of the question of their right to collect the tax from the agriculturists, was arrived at. On 23rd December 1950, the Commissioner of Sales Tax, Hyderabad, wrote to the Association stating that a dealer had no right to collect the tax from an agriculturist and that the sale of agricultural produce by an agriculturist did not attract the liability to tax under the Act, and therefore the members of the Association could not collect any tax from the agriculturists and that the sale of agricultural produce by an agriculturist did not attract the liability to tax under the Act, and therefore the members of the Association could not collect any tax from the agriculturists. He added that under R. 5 (2) of the Rules framed under the Act, the turnover on which the tax was payable in respect of sales of ground-nuts was the amount for which the goods were bought and therefore the sellers of ground-nuts were not liable to pay any tax. He also intimate that a dealer in ground-nuts was at liberty to collect the tax paid by him on his purchases of ground-nuts, from the person to whom he subsequently sold the ground-nuts and in the cases in which he converted the ground-nuts into oil, he was entitled to include the tax in the price of the oil sold by him. The Association then addressed the Finance Minister of the Government of Hyderabad on the same question, on 9th January 1951. Before a reply was received from the Finance Minister the members of the Association were pressed by the local Tax Authorities to submit their returns and this they thereupon did, claiming in such returns a deduction of tax on ground-nuts purchased by them from the agriculturists. Assessments were duly made on these returns but the deductions claimed were not allowed. Demands for payment of tax were thereafter made on the members of the Association in terms of the orders of assessment. The assesses preferred appeals from the orders of assessment but these appeals had not been disposed of on the date when the petition for the issue of writs, out of which the present appeals arises, was filed. On 5th June 1951, the Finance Minister replied to the Associations' representation stating that sales tax in respect of ground-nuts was to be collected on the total turnover of the purchaser and therefore the turnover of the sellers of the commodity was exempt from the tax; that the dealers could not be exempted from payment of sale tax for the period for which permission had been refused to them to collect tax from the agriculturists because the agriculturists could have refused to pay the tax as the had no liability to pay and there was nothing to show that the agriculturists would have agreed to accept a reduction of the price to the extent of the tax, if asked to do so. On 19th June 1951 the Sales Tax Officer made fresh demands for the payment of the tax in terms of the orders of assessment. In these circumstances the petitioner on 5th July 1951, filed the petition asking for the issue of a writ of certiorari quashing the orders contained in the letters of 5th June 1951 and 19th June 1951 and a writ of prohibition restraining the Government from proceeding further in the matter of levying the tax and lastly and in the alternative, a writ of mandamus directing the Government of Hyderabad to withdraw or cancel the orders contained in the letters of 23rd December 1950 and 5th June 1951. He made the State of Hyderabad, the Commissioner of Sales Tax, Hyderabad, the Sales Tax Officer, Warangal and the Sales Tax Officer, Kareemangar, the respondents to the petition. The respondents appeared to oppose the petition and as we have earlier stated it was dismissed on 11th September 1953. From that judgment the present appeal has come to this Court. The question to be decided is whether under the Hyderabad General Sales Tax Act 1950 a dealer as defined in it, purchasing ground-nuts from an agriculturist is liable to pay tax on the purchase, it being conceded that the petitioner is such a dealer.