STATE OF TAMIL NADU Vs. MANAKCHAND

JUDGEMENT

(1.) This case raises a point of crucial importance under the Tamil Nadu General Sales Tax Act, 1959, on which there are already two Bench decisions of our Court. In our judgment, both these require reconsideration. The problem arises this way. A dealer engaged in the business of buying and selling goods is assessable to sales tax for a given assessment year if his total turnover exceeds Rs. 50, 000 in that year. This is laid down under section 3(1) of the Act. It has been tacitly assumed for a long time that this provision only refers to the total sales turnover during the year. This is apparently because the tax on the total turnover goes by the name of 'sales tax". In Britain, they have what is known as a "purchase tax". Even in this State, tax is levied at the purchase point in regard to transactions in certain goods. This is called 'single point" by barring single point purchase tax, the general charge under section 3(1) is a cumulative sales tax, and the turnover which is taxed the total sales turnover. The dealer who sells the goods effects the sales turnover, and he is the person who is charged to tax on that turnover. In the year, 1970, the State Legislature introduced a scheme of purchase tax as complimentary or supplementary to the general cumulative sales tax under section 3(1). This was done by introducing in the Act, section 7-A. It is now settled that section 7-A is a new and separate charging section different ant distinct from section 3 of the Act. Under section 7-A, tax is charged on the purchase turnover of a dealer where the goods purchased by him have not borne tax at the point of sales when the goods were purchased by him, as a tax levied on his selling dealer. If these two are separate charging sections, namely, section 3(1), on the one hand, and section 7-A, on the other, then it stands to reason that although they appear in one and the same enactment, the turnover of sales and the turnover of purchases, although of the same assessee's cannot be clubbed together for any purpose connected with his assessment. Section 3(1) says that the liability for the tax on sales turnover exists only for those whose total turnover is Rs. 50, 000 and above in that year. If the sales turnover is less than this amount, he does not have to pay any tax. In the present case, the assessee is a dealer in jewellery. His sales turnover for the year 1975-76 was Rs. 40, 931. Hence, if this alone were the turnover in his business, the dealer would not have to be charged to sales tax for the assessment year. But this is not the whole story. The dealer in this case had also made sum purchases of old jewellery which are liable to tax under section 7-A(1) of the Act. The turnover in such purchase, according to the assessee's books, amounts to Rs. 39, 721 for the same year 1975-76. What the assessee in this case did was to file an option under section 7(1) of the Act, opting to get assessed under compounded rates. Under section 7(1), the compounded rates of tax would begin to operate only where the total turnover is either Rs. 50, 000 or is in excess of Rs. 50, 000. The assessing authority found that the total sales turnover of the assessee was only Rs. 46, 931. But since the assessee had returned a purchase turnover also and that purchase turnover was computed in the sum of Rs. 39, 721, adding both the turnovers, the aggregate turnover would exceed the sum of Rs. 50, 000. The assessing authority, accordingly, did the arithmetical exercise of addition, and brought to tax the amount of Rs. 46, 931 although considered individually, and by itself, that amount was not assessable to tax under section 7(1) of the Act even at compounded rates. Even under the general provisions of section 3(1), a turnover of less than Rs. 50, 000 cannot be brought to tax. But this is not all. Having assessed the sales turnover of Rs. 46, 931 to tax, the assessing authority turned to the purchase turnover of Rs. 39, 721 and brought it also to charge under the provisions of section 7-A(1) of the Act.On appeal, the assessment of the sales turnover under section 3(1) as well as the assessment of the purchase turnover under section 7-A(1) were both confirmed by the Appellate Assistant Commissioner, subject to a small deletion of a part of the turnover. On further appeal, it was urged before the Appellate Tribunal by the assessee that the sales turnover assessable either under section 3(1) in a regular assessment, or under section 7(1) under compounded rates, on the one hand, and the purchase turnover assessable under section 7-A(1), on the other, were distinct and separate subjects of charge and hence the turnover under both the heads cannot under any circumstances, be clubbed, just for the sake of arriving at the target of Rs. 50, 000 and charging the tax either under section 3(1) or section 7(1) of the Act. This contention was accepted by the Tribunal. The other argument addressed by the assessee before the Tribunal was that even as respects the purchase turnover of Rs. 39, 721.40 since it was below the non-taxable maximum of Rs. 50, 000 falling under the proviso of section 7-A(1) of the Act, the levy of purchase tax on that sum was also not proper.

(2.) In this revision brought by the State Government, the main question argued by the learned Government Pleader was that for the purpose of assessment in this case, the aggregate sales turnover of Rs. 46, 931 must be clubbed with the aggregate purchase turnover of Rs. 39, 721 and that should be the proper thing to do even for purposes of an assessment made under section 7(1) under compounded rates. The contention of the learned counsel for the assessee, on the contrary, is that since the aggregate sales turnover of Rs. 46, 931 has not reached the ceiling limit of Rs. 50, 000 either under section 7(1) or under section 3(1) of the Act, it cannot be brought to tax likewise, since the aggregate purchase turnover of Rs. 39, 721.40 is below the taxable limit of Rs. 50, 000 that too cannot be brought to tax under section 7(1).The learned Government Pleader has referred to two Division Bench judgments of this Court as being in his favour. The first is Mohanlal v. Commissioner of Commercial Taxes. This was an order passed by a Division Bench at the admission stage. The Bench rejected the revision filed by an assessee under the Tamil Nadu General Sales Tax Act raising a point similar to the present one before us. We are inclined to feel that this decision, if it can be so called, is not truly and authoritatively binding on the court, considering that the matter has not been the subject of consideration on an examination of the contentions of rival parties, but was disposed of during the admission stage. The reasoning in this judgment, however, was held to be correct in a later decision reported in Chennakesavalu v. Board of Revenue. The later decision was a well-considered one on a final hearing of a revision under the Act. We cannot get away from the binding character of this later decision.

(3.) In both the decisions, it will be found that emphasis had been laid on the definition of the expression "total turnover" in the Act. The learned Judges apparently took the view that "total turnover" can only be "total turnover" in a dealer's assessment for a given assessment year. According to them, the Act does not contemplate a total turnover for sales and a total turnover for purchases in one and the same year. It seems to us that this argument does not accord with the scheme of the Act as well as the very basis on which section 7-A was introduced by the legislature when they altered the pre-existing scheme of the Act. The learned Judges have missed the fact that section 7-A is a separate charging section, as laid down by the Supreme Court in State of Tamil Nadu v. Kandaswami. The learned Judges have also not given proper weight to the words of section 7-A itself. Those words are to the effect that the purchase tax would be exigible under circumstances in which "no tax is payable under section 3 ......" These words show that purchase tax under section 7-A is only on the goods purchased which did not suffer tax earlier as part of the sales turnover of the selling dealer under section 3(1) or section 7(1), as the case may be. It is quite clear that the expression "total turnover" which is found in section 3(1) of the Act is, and must be, different from the expression "turnover" occurring in section 7-A(1) of the Act. The two are different in kind, and separated by time. It follows that in the matter of the charge also, they must stand separate. When the Act deals separately with the two, it cannot be in consonance with the construction of the statute to mix up, or club, the two different turnovers for the purpose of arriving at "total turnover" for the purpose of assessment under the Act.We have earlier referred to the fact that under section 3(1), what is subjected to charge is only the total sales turnover. A study of the words of charge in section 3(1), however, would show that the language used therein is strictly neutral. It is, on its terms, capable of referring not only to the sales turnover, but also to the purchase turnover during a year. The words are :