KALAM SOMASUNDARAM CHETTIAR Vs. STATE OF MADRAS

JUDGEMENT

(1.) THIS is a revision by the assessees against the order of the Sales Tax Appellate Tribunal in his assessment proceedings for the year 1951-52.

(2.) THE assessees carried on business at Salem in the manufacture and sale of groundnut oil and cakes and are registered as such under the provisions of the Madras General Sales Tax Act. During the year 1951-52 the assessees purchased groundnut of the value of Rs. 22, 95, 670 and converted it into oil and oil cakes and effected a sale of these products. THE gross turnover of the oil and oil cakes during the year was Rs. 43, 59, 133-3-1. THE scheme of taxation in respect of groundnuts and groundnut oil under the Madras General Sales Tax Act is this : Under rule 4(2) of the Madras General Sales Tax (Turnover and Assessment) Rules in the case of groundnuts, the gross turnover of a dealer for the purpose of these rules is the amount for which the goods are sold by the dealer. In cases, however, where a dealer purchases groundnuts and manufactures groundnut oil and cakes from the groundnut or kernel purchased by him and who is registered as a manufacturer of groundnut oil under rule 18 of the Turnover and Assessment Rules, the manufacturer "is entitled to a deduction equal to the value of the groundnut of kernel purchased and converted by him into oil and cakes provided the amount for which the oil is sold is included in his turnover". So, generally speaking when a dealer as a manufacturer includes the sale value of the oil in his turnover, he is entitled to deduct therefrom the purchase price of kernel or the groundnut, which has been utilised for the manufacture of the oil under rule 18(2).

(3.) FROM this decision of the Commercial Tax Officer as the appellate authority, the assessees took the matter in further appeal to the Sales Tax Appellate Tribunal. The contention raised by them there was while the lower authorities rightly granted them the deduction under rule 18(2) of the Turnover and Assessment Rules, they had erred in holding that the grant of such deduction was inconsistent with the claim to exemption under Article 286(1)(a) on the turnover of the Sales effected by them. The view however which the Appellate Tribunal took on this matter was (1) that on a proper construction of the rules framed under the Sales Tax Act in respect of the sales turnover of manufacture of oil, a dealer would not be entitled to exemption both under rule 18(2) and under Article 286(1) affirming the view of the Commercial Tax Officer and (2) that the claim of the assessees to an exemption under Article 286(1)(a) was paramount and the lower authorities has erred in not excluding from the turnover of the assessees their "outside sales". As a result, the basis of the assessment had to be altered inasmuch as the assessees were held entitled to the exclusion from their turnover of the price realised by the sales effected outside the State but that in respect of such turnover the purchase price of the relative groundnut or kernel could not be deducted under rule 18(2). Learned counsel for the assessees also raised before the Tribunal the contention that if they found that the assessees were entitled to exemption under Article 286(1)(a) the jurisdiction of the Tribunal was confined to their allowing the appeal, notwithstanding that the assessees might not be entitled to both the deduction as well as the exemption and that inasmuch as both the lower authorities had granted to the assessees relief by way of deduction under rule 18(2) such a deduction could not be disturbed by the Tribunal. This argument was however rejected and the Tribunal held that the entire assessment was before them by reason of the appeal which had been brought up by the assessees and that it was open to them to lay down the correct basis of the assessment and directed the assessing authority to effect the assessment in accordance with these principles. It is against this order of the Tribunal which remanded the assessment proceedings to the Commercial Tax Officer on the basis mentioned earlier that this revision has been filed. There is no challenge about the correctness of their view as regards the relative scope of the deduction and exemption open to an assessee under rule 18(2) and Article 286(1)(a), as the same is in accordance with the view expressed by this Court in a decision in Sri Chandramouleswara Oil Co., Kurnool, In re where the following proposition was laid down :-