ORDER
Subba Rao, C.J.
1. These are revisions against the orders of the Andhra Sales Tax Appellate Tribunal setting aside the orders of the Deputy Commissioner including the payments collected by the respondent as dharmam in his total turnover. The Tribunal found the following facts on the materials placed before them :
(1) That charity has been paid as a matter of custom from customers voluntarily,
(2) that it is not shown that it is a part of the price though it is separately shown as an item by itself, and
(3) that it has not gone into the pockets of the sellers as part of the price but is used for purposes of charity as earmarked in the account books of the assessees.
2. On those findings, the Tribunal held that the items described as dharmam should be excluded from the assessable turnover.
3. Learned Government Pleader contends that in view of the amended definition of the term 'turnover', any sum collected by a dealer in respect of the goods sold at the time of or before the delivery of the goods would be part of his turnover, and, therefore, the sums collected towards dharmam in the present case should be included in the turnover. The amended definition reads:
'turnover' means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods...including 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 and any other sums charged by the dealer, whatever be the description, name or object thereof.
4. Learned Government Pleader contends that under this definition, whether the amount collected in respect of the goods sold or the other sums charged by the dealer form part of the consideration for the sale or not they would be part of the turnover if they are included in the bill of sale and in support of that contention reliance is placed upon the decision of a Divisional Bench of this Court in Tax Revision Cases Nos. 511, 52 and 53 of 1955. Though some of the observations therein appear to be wide, in that case it was not decided that the aforesaid sums would be part of the turnover even though they did not form part of the consideration. There may be cases where payments for dharmam may be voluntarily made by a buyer to a dealer though the occasion for that payment is the sale transaction. It can, therefore, be reasonably argued that unless a payment made is part of the consideration for the sale, the mere fact that it is paid on the occasion of the sale does not make it a part of the turnover. As this point arises very frequently, for in most of the cases some sort of additional payments are made towards dharmam or towards other charges, to avoid confusion and to have an authoritative decision, it is necessary to post these cases before a Full Bench. We therefore refer the following question to the Full Bench, viz., 'What is the scope of the definition of 'turnover' in Section 2 (i) of the Madras General Sales Tax Act as amended by the Madras General Sales Tax (Andhra Amendment) Act, 1954.
Opinion
Viswanatha Sastri, J.
5. The question referred to us is as follows :
What is the scope of the definition of 'turnover' in Section 2 (i) of the Madras General Sales Tax Act as amended by the Madras General Sales Tax (Andhra Amendment) Act, 1954.
6. Though the terms of the reference are very wide and general we understand it in the context of the findings of the Sales Tax Appellate Tribunal, to raise the question whether the sales tax collected by a dealer from buyers of goods and payments made by buyers to the dealers on the occasion of sale for dharmam or charity, should be included in the total 'turnover' of the dealer. There are decisions of Division Benches of this Court dealing with these points but their correctness has been questioned before us. In the ensuing discussion, the Madras General Sales Tax Act (IX of 1939) will be referred to as 'the Principal Act', the Madras General Sales Tax (Andhra Amendment) Act, 1954 (XIII of 1954) as 'the Amending Act' and the Turnover and Assessment Rules as 'the Rules'. The Amending Act received the assent of the Governor on 24th June, 1954, and was published in the Andhra Gazette on 15th July, 1954.
7. Section 2 of the Amending Act substituted the following definition of 'turnover' for the one found in the Principal Act:
Section 2 (i). Turnover means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods...including 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 and any other sums charged by the dealer, whatever be the description, name or object thereof.
8. Section 4 of the Amending Act repealed Sections 8-B and 8-C of the Principal Act. Section 12 of the Amending Act gave retrospective effect to these changes by enacting that the new definition of 'turnover' in Section 2 (i) and the repeal of Section 8-B of the Principal Act 'shall be deemed to have taken effect from the commencement of the Madras General Sales Tax (Amendment) Act, 1947'. Section 10 of the Amending Act repealed Section 15, Clauses (f) and (g), of the Principal Act.
9. Construing the expression 'turnover' in Section 2 (i) and the provisions of Section 8-B of the Principal Act, as they stood prior to the Amending Act, the Madras High Court decided that the sales tax collected by a dealer from purchasers of goods was collected by him as an agent of the State and was not part of his 'turnover' liable to be taxed under the Act: Deputy Commissioner of Commercial Taxes v. Krishnaswami (1954) 2 M.L.J. 151. With the correctness or otherwise of this view under the law as it then stood we are not now concerned. Even after the Amending Act came into force, this Court (Chandra Reddy and Umamahes-waram, JJ.) followed the Madras decision in two reported cases, State of Andhra v. Bujranga Jute Mills Ltd. (1955) A.L.T. 461, 463 and State of Madras v. Tungabhadra Industries Ltd (1955) A.L.T. 465. Referring to the definition of 'turnover' in Section 2(i), Chandra Reddy, J., who delivered the judgment of the Division Bench in State of Andhra v. Bujranga Jute Mills Ltd. (1955) A.L.T. 461, 463 observed:
It is only the amount collected by way of the price of the goods sold that would come within the scope of this sub-section. The sales tax is not a part of the price or consideration paid by the purchaser. In fact the tax is determined only on the price paid by the purchaser for the articles purchased. The question of tax comes up only after the bargain is struck between the parties. As such it cannot be a part of the purchase price. Therefore, tax on sale is outside the consideration paid by the consumer for the goods purchased by him.
10. When the attention of the learned Judges was subsequently drawn to the new definition of 'turnover' introduced by the Amending Act which had come into force when their decision was given but had escaped notice, they re-affirmed their conclusion in State of Madras v. Tungabhadra Industries Ltd. (1955) A.L.T. 465. Dealing with the contention of the Advocate-General that the language of the amended definition of 'turnover' was comprehensive enough to include every item mentioned in the bill and every payment made to the dealer by the buyer including sales tax, the Court observed :
In our opinion, this construction is opposed to the plain and ordinary meaning of the language of Sub-section 2 (i). The total amount set out in the bill can have reference only to the consideration for sale and it is in the consideration that these sums, charges etc., are included. So, what is made comprehensive is the consideration for sale. To adopt the other interpretation would be straining the language a bit too much. If so, could a tax collected by a dealer come within the meaning of consideration for sale ?
11. After some discussion of the point the learned Judge answered the question posed by him in these terms :
In our view, the definition of 'turnover' as amended by the Andhra State Legislature is not comprehensive enough to include sales tax collected by the dealer.
12. As we differ from the opinion of the learned Judges of this Court in the two cases cited above, we shall state our reasons at some length. Under Section 2 (h) of the Act, a sale is a transfer of the property in goods for cash or deferred payment or other valuable consideration. Under Section 2 (i) the consideration for the purchase of goods is included in the 'turnover'. The consideration proceeding from the buyer is the money which he has to part with and pay to the seller. The detriment to the buyer is the whole of the sum of money he has to pay the seller for, and on the occasion of, the sale and that is the consideration for the sale which should enter into the computation of the 'turnover'. The dealer may collect and the purchaser may pay in meal or in malt. The invoice or bill of the seller might show the price of the goods and the amount of sales tax separately but the purchaser has to pay the consolidated amount of the bill as consideration for the purchase, that is to say, as the price of the goods. As observed by the Supreme Court in State of Bombay v. United Motors (1953) 1 M.L.J. 743, 752 the decision has not been upset on this point by the Bengal Immunity Co., case [1955] 6 S.T.C. 446 -- the incidence of sales tax is really on the consumer and it is, in substance, a tax imposed on the goods on the occasion of sale. The ultimate economic incidence of the sales tax is on the consumer or the last purchaser and whatever he pays for the goods is paid only as price, that is to say, as consideration for the purchase. The statutory liability, however, for payment of sales tax is laid on the dealer on his total 'turnover' whether or not he realises the tax from the purchasers. Generally speaking, the price charged by the dealer would be inclusive of sales tax, for, it is to his interest to pass the burden of the tax to the purchaser. So far as the dealer is concerned, the payment of a sum covering the tax made by a purchaser on the occasion of sale, is really part of the price which the purchaser pays for the goods.
13. In England, a purchase tax was levied under the Finance (No. 2) Act, 1940. It was held by the Court of Appeal that if a seller offered goods for sale, it was for him to quote a price which included the purchase tax if he desired to pass it on to the purchaser, and if he did not do so, the seller should bear the tax : Love v. Norman Wright (Builders) Ltd. [1944] 1 All E.R. 618. In delivering the judgment of the Court Goddard, L.J., observed:
Of course, if a seller quotes a price of x plus purchase tax, the buyer must pay the amount of the tax, whatever it may be, as part of the purchase price, although the amount may not be mentioned at the time the contract is made.... Where an article is taxed, whether by purchase tax, customs duty or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rates of tax, but on a sale there is only one consideration, though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer; if the buyer agrees to the price it is not for him to consider how it is made up, or whether the seller has included tax or not.
14. The Court of Appeal approved of the decision of Lawrence, J., in Paprika v. Board of Trade [1944] 1 All E.R. 372 where that learned Judge held that the purchase tax was part of the price observing that ' whenever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands, but it does not cease to be the price which the buyer has to pay even if the price is expressed as x plus purchase tax.' No doubt the tax in England was a 'purchase' and not a 'sales' tax but it was chargeable on the wholesale value of chargeable goods bought under chargeable purchases, just like the tax on 'turnover' here.
15. It is no doubt open to a philanthropically minded dealer to bear the burden of the sales tax himself without passing it on to the buyer. Normally, however, the dealer, though he is liable to pay the sales tax, shifts his liability on to the purchaser, by including the tax as part of the consideration or price the buyer has to pay. Subject to price control regulations, a seller is entitled to fix his own price for goods sold by him to the buyer. It is open to the seller to require of his buyer to pay him as part of the price a sum of money, which according to him, would be equivalent to the tax payable by him to the State in respect of the transaction of sale. This arrangement is, however, one between the seller and the buyer and in so far as the State is concerned, the 'turnover' of the dealer includes the entire sum paid by the purchaser as consideration for the sale of goods, though part of it might be styled price and another part as sales tax in the bill or invoice issued to the purchaser.
16. According to the learned Judges of this Court the question of tax arises only after the bargain is struck between the parties and on payment of the price by the buyer and therefore the tax cannot be a part of the price. We fail to see why the tax, which is in effect a tax on each sale of a commodity, could not be passed on in anticipation of the liability. The decision of the Privy Council in Rex v. Caledonian Collieries [1928] A.C. 358, 362 answers this point. Lord Warrington of Clyffe who delivered the judgment of the Board, observed :-
The respondents are producers of coal, a commodity the subject of commercial transactions. Their Lordships can have no doubt that the general tendency of a tax upon the sums received from the sale of the commodity which they produce and in which they deal, is that they would seek to recover it in the price charged to a purchaser.
17. It is said on behalf of the appellant that at the time a sale is made the tax has not become payable and therefore cannot be passed on. Their Lordships cannot accept this contention; the tax will have to be paid, and there would be no more difficulty in adding to the selling price the amount of tax in anticipation than there would be if it had been actually paid.
18. The further reason given by the learned Judges of this Court to support their conclusion is that the dealer only acted as the agent of the State for collecting the sales tax from purchasers and that the amount so collected retained its character as a tax in the hands of the dealer and did not form part of his turnover. It was observed that, to allow this amount to be taxed, would be 'permitting the department to levy tax on tax.' The decision of the Madras High Court in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88 was followed in State of Andhra v. Bujranga Jute Mills [1955] 6 S.T.C. 376. Later on, the attention of the learned Judges was drawn to the repeal of Section 8-B and the substitution of a new definition of 'turnover' in Section 2 (i) by the Amending Act and it was pointed out that as the decision of the Madras High Court was based on the old definition of 'turnover' in Section 2 (i) and the repealed Section 8-B, it did not hold good after the Amending Act came into force. Nevertheless in State of Madras v. Tungabhadra Industries Ltd. [1955] 6 S.T.C. 379, the learned Judges hold that the introduction of the new definition of 'turnover' in Section 2 (i) and the repeal of Section 8-B by the Amending Act did not make any difference and they reaffirmed the conclusion reached in State of Andhra v. Bujranga Jute Mills [1955] 6 S.T.C. 376 though without reference to the Amending Act that had then come into force.
19. The history of the legislation shows that in amending the definition of 'turnover' in Section 2 (i) and repealing Section 8-B of the Principal Act, the Legislature sought to nullify the effect of the decision in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88. In that case, Satyanarayana Rao, J., following the opinion of Harries, C.J., in Bata Shoe Co., Ltd. v. Board of Revenue [1949] 1 S.T.C. 193, drew a distinction between a case where the dealer, not authorised by law to collect the tax, added it as a matter of private bargain to the sale price in the bill of sale and collected it from the customer and a case where the dealer was so authorised by the Act and observed :-
In the former case it is undoubtedly part of the purchase price as all the collections made by the dealer from the purchaser must be treated as constituting part of the sale price. If, however, under law the dealer is empowered to pass on the sales tax to the purchaser, to collect it and pay it to the Government, what he is permitted to so collect under law would continue to retain its character as tax and it would never form the purchase price.
20. The learned Judge relied on Sections 8-B and 15 (f) and (g) of the Act, rule 5-A (7) of the rules and Form A prescribed for the making of returns for his conclusion that 'having regard to the scheme of the Act and the rules relating to the turnover and assessment, it is impossible to treat the tax collected by the registered dealer as part of the purchase price.' Now the Amending Act substituted for Section 2 (i) of the Principal Act a new definition of 'turnover' wide enough to include sales tax collected by the dealer from the purchaser. The Amending Act repealed Section 8-B which impliedly conferred authority on the registered dealer to collect the tax from the purchaser. It also repealed Section 15 (f) and (g) of the Principal Act which penalised collections of tax by a dealer in contravention of Section 8-B (1) and his failure to pay the amounts specified in Section 8-B (2) within the prescribed time.
21. It is common knowledge that dealers in selling to the buyers charge the amount of sales tax payable on such sales. The Legislature must have been fully aware that this tax was thus passed on to the consumer. Except in the case of a few commodities for which special provision is made in the rules the purchaser is not liable to pay sales tax. The Legislature was also aware of the decision in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88, which held that sales tax collected by the registered dealer was not part of the price paid by the purchaser but a tax collected by the dealer as the agent of the State and in respect of which he was accountable to the State under Section 8-B (1) and (2) of the Act. With this knowledge, the Legislature not only repealed Section 8-B of the Act but also amended the definition of 'turnover' in Section 2 (i) so as to include the total amount set out in the bill of sale as the consideration for the sale, or purchase of goods, including any sums charged by the dealer for anything done in respect of the goods sold and any other sums charged by the dealer whatever be the description, name or subject thereof. The result is that the dealer no longer levies a tax on or collects a tax from the purchaser. What he does after the Amending Act is to increase the price of the article so as to ensure that he will not be the loser by having to pay the sales tax levied upon him by the Act. The tax is thus passed on to the buyer who pays it not as tax but as part of the price of the goods. The seller does not collect the tax qua tax from the purchaser. The total amount which the purchaser pays is the price of the goods. The dealer can no longer deduct from the aggregate of the amounts recovered by him the amount representing the sales tax payable but must include in his turnover all that he has received as the consideration for the sale 'whatever be the description or name' given to its component parts.
22. With all deference to the learned Judges who decided State of Madras v. Tungabhadra Industries Ltd. [1955] 6 S.T.C. 379, they have not given due weight to the provisions of the Amending Act to which we have referred. They placed reliance on rule 5-A (7) of the rules prescribing two conditions under which a dealer may collect tax but then this rule was framed under the power given in Section 8-B to the State Government to prescribe the conditions and restrictions subject to which the dealer may collect tax. When Section 8-B itself was repealed, rule 5-A (7) stood abrogated. Where a rule or bye-law is made under an Act or a section of the Act, the repeal of that Act or section abrogates the rule or bye-law unless it is preserved by the repealing Act : Watson v. Winch [1916] 1 K.B. 689. We therefore respectfully dissent from the opinion of the learned Judges with regard to the effect of the repeal of Section 8-B on rule 5-A (7) when they said :
This rule performs the same function as Section 8-B (1) of the Act in regard to the right of a dealer to collect the tax on the sales effected by him and the repeal of that sub-section does not, in our opinion, affect his rights in any way. Despite the disappearance of Section 8-B (2) the liability of the dealer to make over the payment to Government still continues under rule 5-A, sub-rule (7) (ii).
23. A stream can rise no higher than its source and a rule framed under a statute cannot survive the repeal of the statute unless the repealing enactment preserves the rule. It need hardly be pointed out that the columns found in Form A prescribed for a return to be made by the dealer cannot control or affect the interpretation of the section of the Act. The learned Judges also relied on Section 3 (4) and (5) of the Act and pointed out that rule 5-A (7) came into existence to carry out their intendment. Section 3 (4) provides that for the purposes of Section 3 and the other provisions of the Act 'turnover' shall be determined in accordance with such rules as may be prescribed. But then the definition of 'turnover' in Section 2 (i) must govern the rules and the definition in the Amending Act, in our opinion, clearly includes in the 'turnover' tax charged to the purchaser as part of the price. If any rule says anything to the contrary it will, to that extent, be invalid. Section 3 (5) provides that taxes under Sub-sections (1) and (2) shall be assessed, levied and collected in such manner as may be prescribed. Section 3(1) provides that every dealer shall pay for each year a tax on his total turnover for such year at the rate specified therein and Subsection (2) provides for a single point tax. Section 3(5) has reference to the assessment, levy and collection of tax levied on the dealer and made payable by the dealer under Section 3 (i). Section 8-B and rule 5-A (7) alone deal with the authority of the registered dealer to collect the tax from the purchaser and the conditions subject to which this power may be exercised. It is therefore difficult to accept the conclusion of the learned Judges that rule 5-A (7) exists 'de hors Section 8-B (1)'. For these reasons we hold that, in view of the provisions of the Amending Act to which we have referred, State of Andhra v. Bujranga Jute Mills [1955] 6 S.T.C. 376 and State of Madras v. Tungabhadra Industries Ltd. [1955] 6 S.T.C. 379 were wrongly decided. In this connection, it may be of interest to note that Raja-gopalan, J., who with Satyanarayana Rao, J., was a party to the decision in Deputy Commissioner of Commercial Taxes v. Krishnaswami Mudaliar [1954] 5 S.T.C. 88, which was followed by this Court in the two decisions already cited, was a party with Rajagopala Ayyangar, J., to the decision in Sundararajan and Co. v. State of Madras [1956] 7 S.T.C. 105, 109, where it was observed as follows:-
If Section 8-B had been repealed, amounts collected to cover the sales tax a registered dealer would have to pay could legitimately have been included in his taxable turnover.
24. That is precisely the situation under the Amending Act.
25. We were informed by the Government Pleader that rule 5-A (7) and (8) of the Rules has since been deleted by G. 0. No. 723 dated 9th November, 1955. We are clearly of the opinion that 'turnover' in Section 2 (i) of the Act as amended by Andhra Act (XIII of 1954) includes amounts collected by the dealer from the purchaser, to cover the sales tax payable by the former. We have not referred to the decisions of the other High Courts in view of the difference in the language of the enactments relating to sales tax in force in the different States.
26. The further point that calls for consideration is whether sums collected by a dealer from purchasers as dharmam or charity on the occasion of the sales effected by him should be included in his turnover. The findings of the Tribunal as set out in the order of the reference are (1) that the payment for dharmam or charity is made by purchasers as a matter of trade usage or custom; (2) that it is paid by the customers voluntarily; (3) that the amount is not shown as a part of the price in the bill though it is separately shown as an item by itself; and (4) that the sums paid by customers for charity are earmarked in the books of the dealer and are used for charitable purposes. The amended definition of 'turnover' in Section 2 (i) of the Act is of a wide and sweeping character. The last limb of the definition includes any other sums charged by the dealer whatever be the description, name or object thereof. The fact that the payment is voluntary does not affect the question. Even the sale and the payment of the price are voluntary in the sense that the seller is not obliged to sell and the buyer is not obliged to buy except by their own choice and on their own terms. The fact that the payment to charity is made as a matter of trade usage only shows that it is an incident that attaches to every contract for sale of goods, though not expressly stipulated, because it is so well-known and so widely recognised and acted upon. The fact that the payment is not shown in the bill or invoice as part of the price but separately as an item charged to the purchaser is not a decisive factor. So are processing and packing charges and sales tax payable by the dealer and yet they are included in his turnover. Dharmam is usually a small percentage of the price proper and is charged to the buyer. The buyer has to pay the total amount of the bill though it is split up into price plus packing charges plus sales tax plus dharmam plus sundry charges. Nor does the fact that the collection for dharmam is utilised by the dealer for charitable purposes decide the issue. The consideration for the sale is the whole of the amount paid by the purchaser and it makes no difference to him whether the consideration is paid to the dealer or to a third person on his direction. The detriment to the buyer is the same whether his payment goes into the pockets of the dealer or for the benefit of anyone else designated by the dealer. From the standpoint of the buyer the total amount paid by him to the dealer is the price of the goods. The aggregate amount represents the consideration for the sale moving from him though it might be split up into several heads in the bill. For purposes of book-keeping the dealer might split up and distribute the amount paid by the buyer among convenient heads like cost price of the goods, labour charges, packing materials, sales tax, dharmam and profit, but the buyer would, in his books, enter the total amount paid by him to the dealer as the cost price of the goods. So far as the buyer is concerned, the whole amount has been paid by him in consideration of the sale and as the price of the goods bought. But for the transaction of sale, the buyer would not have made any payment to the dealer and the dealer could not have realised anything from the buyer for dharmam. The obligation of a purchaser to make a small payment for dharmam is attached by mercantile usage to a contract for sale of goods and the parties enter into dealings on that basis. Therefore, it is as if the dealer contracts to sell his goods to the buyer for a lump'sum of money, a part of which is towards the price and another part for the charities to which the dealer intends to contribute and then sells the goods to the buyer on receipt of the agreed amount and issues a bill specifying the amounts received by him under the different heads. The amended definition of turnover in Section 2 (i), particularly the last limb of that clause, is designedly made so wide as to catch within its net, amounts collected by a dealer towards dharmam on the occasion of a sale and as part of the sale transaction. This was the view taken in Sambamurthi v. State of Andhra 1956 A.L.T. 810 and on the point now under consideration, it has to be accepted as a correct statement of the law. There are observations in support of the view we are taking in Kaniram Janki Das v. State of Bihar A.I.R 1953 Pat. 10 and to the contrary in Nemkumar v. Commissioner of Sales Tax A.I.K. 1955 Nag. 99, 102, but then the Courts had not to interpret the definition of 'turnover' found in Section 2 (i) of the Act as amended.
27. The attitude of many merchants, traders and consumers towards sales tax is similar to that of Samuel Johnson who in his dictionary defined 'excise' as a 'hateful tax levied on commodities and adjudged not by the common judges of property but by wretches hired by those to whom the excise is paid'. The sentimental aversion to include a dealer's collections from customers for dharmam in his turnover is intelligible but then it must be realised that it will be imposing an impossible burden on the assessing authority if it is obliged to find out in each case and for each year, how much of the collections has been spent for real charities, how much spent for nominal or colourable charities and how much was utilised by the dealer for his personal benefit. In any case, it is not for us to express an opinion on the expediency of the Amending Act, for considerations of policy lie wholly outside our sphere. We have construed the Amending Act as it stands without stretching or cutting down its language for the purpose of avoiding supposed hardship to individuals.
Judgment
Subba Rao, C.J.
28. Following the opinion given by the Full Bench on the question referred to them these revisions (petitions) are allowed with costs. Advocate's fee Rs. 100 in each.