1. Sri M. Anandam, Chartered Accountant, on behalf M/s. Satyanarayana Oil Trading Company, Gulbarga, appellant, and the Sales Tax Officer, Gulbarga, on behalf of the Sales Tax Department, appeared before us.
Heard their arguments.
2. M/s. Satyanarayana Oil Trading Co., Gulbarga, has filed this appeal against the order of the learned Deputy Commissioner, Appellate, on the following grounds, namely that: 1. The Sales Tax Officer and the Deputy Commissioner erred in taxing the purchase turnover of groundnut and cotton seeds as they were not sold but were consumed in manufacturing oil. The tax is payable by a dealer or casual trader under Section 5(1) of the Hyderabad General Sales Tax Act only when the same are re-sold. 2. To levy tax on purchases is ultra vires as the purpose of the enactment is to levy tax on sales only.
3. The Deputy Commissioner is not justified in confirming the penalty of Rs. 1,000.
3. Regarding items Nos. 1 and 2 of the grounds of appeal the learned authorised representative of the appellant vehemently argued that under Section 5(1) of the Hyderabad General Sales Tax Act, 1950, tax can be levied only on sales but not on purchases. He has contrasted the provisions of charging sections under this Act with those of the Madras General Sales Tax Act, 1939, and. contended that Section 5(1} is an addition in the Hyderabad Act and that it restricts the right of the State to levy tax only when a dealer sells the very goods that he had previously purchased. This reading of the provisions of the Act is, in our opinion, not correct.
4. It is an admitted fact that the appellant purchased certain commodities which are taxable at the purchase point under Rule 5(2) of the Hyderabad General Sales Tax Rules, 1950, but the appellant's representative contended that levying tax on such turnover is illegal as the commodities so purchased by him have not been sold in the State, but have been consumed by him in the manufacture of oil as stated above.
5. According to Dalton "a tax on sales or on turnover is only a tax on the commodities sold or turned over-it makes no essential difference whether the tax is legally imposed on the buyer or seller". In Sri Radhakrishna Groundnut Oil Mills v. State of Madras [1954] 5 S.T.C.357, their Lordships of the Madras High Court have held that under Rule 4(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, the levy of tax at purchase point on dealings in groundnuts is lawful.
It matters little whether an assessee sold the groundnut he had purchased or converted that groundnut into oil, so long as the condition required by that rule was satisfied, viz., that groundnut was purchased by the assessee in the course of his business. A dealer is defined in Section 2(e) of the Act as "any person who is engaged in the business of buying or selling goods in the Hyderabad State". If the contention of the appellant's representative is to be accepted the definition of dealer should be something like this. "A dealer means a person who carries on business of buying and selling the very goods he bought". Again the word "turnover" is defined by Section 2(m) of the Act as "the aggregate amount for which goods are either bought by or sold by a dealer", and under Rule 5(2) of the Hyderabad General Sales Tax Rules, 1950, the turnover should be calculated, in the case of groundnuts, on the amount at which they were purchased by the dealer.
As this provision is in consonance with the right vested in the State under Item 54 of List II- State List-of the Seventh Schedule to the Constitution of India it is lawful for it to impose tax on purchase turnover of a dealer whether or not there is a subsequent sale by him of the same goods. Apparently the interpretation given to the provisions of the Act by the learned authorised representative of the appellant is therefore not correct.
6. He stressed much on the following words of Section 5, "in respect of every point in a series of sales". This Section 5 of the Act is not a charging section but by laying down that in a series of sales the tax is leviable at every point of sale except as provided otherwise in Section 6 of the Act, it only reiterates the intention already declared in Sections 3(1) and 4(1) of the Act. The real charging section of the Act is Section 4, according to which "every dealer whose turnover is not less than Rs. 7,500...shall save as otherwise provided in this Act pay a tax...on so much of the turnover for the year as is attributable to the transactions in goods other than exempted goods". That is to say, the tax is leviable on every dealer or at every point of sale (or purchase) other than the cases falling under Section 6 which have been specifically exempted. Therefore even if Section 5(1) is deleted and the two provisos thereof are read with Section 4 the position would remain the same and it would still mean that tax is leviable "at every point in a series of sales by successive dealers" inasmuch as even under Section 4 every dealer shall pay tax on his turnover. Further, the appellant's representative contended that there should be more points of sale than one by successive dealers, if tax is to be levied under the Act. This contention is again erroneous because the intention of the Legislature in incorporating Section 5(1) cannot be anything other than to clarify the position of the provisions - of Section 4 as explained by us above. "Series of sales" do not mean to be that tax can be levied only when there are more points of sale than one. Tax can be levied under the Act even when there is only one sale, so long as such sale is by a dealer or to a dealer. If the definition of "sale" under Section 2(k) is substituted in Section 5(1) it would then read as "the tax is leviable in respect of every point in a series of transfers of property in goods from one person to another in the course of trade or business for cash or for deferred payment or for other valuable consideration". That is to say, the Government can levy tax on dealers so long as there is a transfer of property in goods by one person to another in the course of trade or business involved in such transactions. The meaning imported by the learned authorised representative of the appellant that under Section 5(1) tax is leviable only when there is more than one sale in a series of successive dealers, is therefore not tenable.
7. Regarding item No. 3 of the grounds of appeal, the contention of the appellant was that a penalty of Rs. 1,000 levied on him is illegal as the same has been included in the assessment order, and that no separate notice has been given and no separate order has been made for the same. It appears from the records that in spite of several notices issued to the appellant no return was submitted and the books of accounts were not produced as desired. Without going into the other merits of the case, on examination we find that this objection to the imposition of the penalty has not been raised at the earlier stage before the Deputy Commissioner, Appellate, and as such the original order has become absolute. The objection is therefore rejected. The appeal is accordingly dismissed on all grounds.