STATE OF MADRAS Vs. EASTERN SUPPLIES LTD

JUDGEMENT

(1.) The assessment relates to the year 1949-50. The assessee is a dealer in groundnuts. On and after 26-1-1950 and before export on 31-1-1950, they purchased a quantity of 374 bags of groundnut for a sum of Rs. 21,355-2-0. The assessee claimed that this amount should be deducted from his turnover as it was not assessable to tax. The exemption was claimed under Article 286(1)(b) of the Constitution. The Appellate. Tribunal relying on the decision of the Supreme Court in -- 'State of Tra-vancore-Cochin v. Bombay Co.,Ltd., Alleppey', AIR 1952 SC 306 (A) allowed the exemption on the ground that the

(2.) In view of this clear pronouncement by the highest authority the assessee is not entitled to exemption in respect of the purchase price of the groundnut.

(3.) It was, however, contended on behalf of the assessee, that the point at which the groundnuts could be taxed was only the point of sale and not the point of purchase, and therefore, the levy by the department on this turnover was not justified. This argument, in our opinion, proceeds on an erroneous assumption. It is no doubt true that in the case of untanned hides and skins, Rule 16 provides that the point or the event at which the tax is attracted is the sale, but the turnover in such an event should be calculated under Rule 4 on the purchase price and not on the sale price. This is totally different from the case of groundnuts, as there is no similar rule regarding the purchase and sale of the groundnuts. We have, therefore, necessarily to fall back upon the charging section, Section 3, which directs that every dealer should pay for each year tax on his total turnover. The turnover as provided by Sub-section (4) of Section 3 for the purpose of taxation, should be determined in accordance with the rules enacted under the provisions of the Act, Rule 4 provides that in the case of groundnuts, the turnover should be calculated on the amount at which goods were purchased by the dealer. The tax, therefore, is not with reference to the sale or purchase as such, but upon the dealer on the basis of his turnover, which is subjected to the tax by the charging section, Section 3. This position is made clear also by the Supreme Court in --' (B)', where analogous provisions relating to cashewnuts were considered. Under Rule 4, Clause 2(b) in the case of cashew-nuts also, the turnover is to be calculated on the amount for which the goods were bought by the dealer. Adverting to this aspect of the matter, at page 334 of the report, it was observed, that under Section 3(4) of the Act the turnover is to be determined in accordance with the rules that might be prescribed, and Rule 4 of the rules framed under the Act prescribes that in the case of certain goods including cashew and its kernel the gross turnover of a dealer is the amount for which the goods were bought by him and in all the other cases, the amount for which the goods were sold by him.