State of Andhra Vs. M.C. Sannappa - Court Judgment

Excerpt:
sales tax - liability to tax - sections 3 (3) and 12b (1) of madras general sales tax act and rule 16 (2) of turnover and assessment rules - assessee was assessed to sales tax on turnover of rs. 11,527 being purchase value of raw hides and skins sold by him through commission agent at bangalore - he was assessed under provisions of rule 16 (2) (ii) being last purchaser in series of sales of goods effected in andhra state - rule does not say that sale which occasions export should be effected within state itself - whether sale is effected outside state or inside state if it is sale by export that would furnish stage for assessing dealer at purchase point - sale for export is not condition for imposing tax on purchase point - held, sales through commission agent were effected by export dealer would be liable to tax - not exempted under section 3 (3) of act. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds, which are available to the insured. if insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer and will be negation of the intention of the legislature and annihilate mandate of the provisions of sections 170 and 149 of the act. the insured can pursue appeal only after giving up the insurer as the appellant and not otherwise. in the instant case, the insurer has not withdrawn from party array but has remained prosecuting the appeal with the insured on the grounds which are available only to the insured. therefore, the joint appeal as filed by the insured and the insurer is not maintainable. section 166: [v. gopala gowda & jawad rahim, jj] claim for compensation accident due to mechanical defect in the vehicle held, it is not in dispute that the claimant suffered injuries in an accident, which occurred during the course of his employment, albeit due to his negligence but law does not render him remediless. statutory right is conferred on him, accruing by virtue of his employment under insured to claim compensation under workmens compensation act. the insurer is statutorily duty bound to discharge the liability of the owner of the vehicle, to pay such compensation to the employee, as mandated under the provisions of section 149 of the act. the right of an injured employee or his dependents as the case may be to be compensated, when injury is suffered or death occurs during his employment, is recognised not only under workmens compensation act, but also under benevolent provisions under section 166 and 167 of the m.v. act. the right of driver to seek compensation is not restricted only to the workmens compensation act, it has been enlarged to enable such person to seek just compensation (sections 166 and 168), conferring upon him the right of election engrafted under section 167 of the act to choose either of the two forum. the only defence which the insurer could take is limit of its liability as enumerated under section 147 of the act, leading to contest, inter alia, only between insured and insurer and does not impact claimants right to recover the compensation determined by the tribunal which crystallizes into enforceable right against both. in the instant case, the claimant/driver has exercised right of election under section 167 of the act to seek compensation under section 166 of the act resulting in award passed by the tribunal. therefore, the insured and the insurer have no escape but to discharge the said award as directed. undisputedly, in this case as deduced for proved facts, the vehicle in question was not properly maintained by the owner and despite faulty brake system, the claimant had undertaken the hazardous journey to his peril at the behest of and at the instruction of the owner. the owner is therefore, tortfeasor. section 168: [v. gopala gowda & jawad rahim, jj] insurers limit of liability - held, it is well settled that the liability of the insurance company for payment of compensation can be statutory or contractual. is for the insurance company to show that the insurance policy was a statutory policy and not a contractual policy to restrict its liability. that issue was neither raised before the tribunal nor is raised in this appeal requiring decision. thus, if at all the insurer has any valid ground to restrict its liability, it can proceed against the insured but firstly it has to discharge the award as required under section 149 (1) of the act. where the owner/insured has failed to maintain the vehicle as per prescribed safety standards and has caused the claimant to drive the vehicle with mechanical defects, the owner would be the tortfeasor and the claimant can maintain a petition seeking compensation under the provisions of the act, instead of seeking compensation under the workmens compensation act. on facts, held, the material evidence on record, particularly, with regard to the income of the claimant, his age, medical evidence and the evidence relating to pecuniary loss has not been considered by the tribunal in the correct perspective, which has resulted in passing of the impugned award, disproportionate to the pecuniary loss and the loss of future income of the victim. the settled principles governing determination of compensation has been given a go-bye. compensation of rs.4,15,150/- awarded by the tribunal was enhanced to rs.8,20,000/-. subba rao, c.j. 1. this is a revision filed by the state of andhra against the order of the andhra sales tax appellate tribunal, guntur.2. the facts are simple. the respondent was a licensed dealer carrying on business in raw hides and skins at konakondla in andhra state. he was assessed to sales tax for the year 1951-52 on a turnover of rs. 11, 527-8-5 being the purchase value of the raw hides and skins sold by him through his commission agents at bangalore. out of the total turnover, turnover to the extent of rs. 9, 499-15-8 represented his transactions of outright sales to persons in bangalore whereas the balance related to the raw hides and skins sent by him to his commission agents at bangalore who sold them in mysore state on his account. he was assessed under the provisions of the turnover and assessment rule 16(2)(ii) being the last purchaser in the series of sales of the goods effected in andhra state. the tribunal held that the transactions in respect of rs. 9, 499-15-8 would attract the provisions of rule 16(2)(ii) of the turnover and assessment rules, but the balance of the total turnover would not be governed by the said provision as there were no sales in respect thereof for export outside the state. as the turnover of the former transactions was less than rs. 10, 000 the tribunal held that the turnover was exempt under section 3(3) of the madras general sales tax act. the state of andhra questions the correctness of the finding of the tribunal.3. the question falls to be considered on a construction of rule 16(2) of the turnover and assessment rules. the said rule reads :-'rule 16. (2) no tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the state or are sold for export outside the state.' a full bench of the madras high court in state of madras v. chambers, ltd. (1955 2 m.l.j. 63; 6 s.t.c. 157 at 173) construed the said provision and laid down its scope.rajamannar, c.j., observed at page 72 :- 'the correct position appears to me to be this : under section 5(vi) of the act, the sales of hides and skins, whether tanned or untanned, are liable to tax only at such single point in the series of sales by successive dealers as may be prescribed. rule 16 of the turnover and assessment rules prescribes the point. evidently, for reasons of practical convenience, the rule-making authority desired to fix the single point when the series of sales had come to a termination. there were two ways in which such series of sales of untanned hides and skins could come to an end. one was by the untanned hides and skins going into a tannery, that is to say, when they will cease to be untanned hides and skins any longer. the other way was when the untanned hides and skins were exported outside the state. thereafter, there could be no further transaction of sale in the series. in rule 16(2)(i) a provision is made for the sale of untanned hides and skins to a tanner, and in rule 16(2)(ii), for such hides and skins which are exported. then, the rule proceeds to fix the liability to tax. in the case of untanned hides or skins sold to a tannery, the tax is to be levied from the tanner on the amount for which the hides and skins were bought by him. in the case of hides and skins exported, the tax is levied from the dealer who was the last dealer who bought them in the state on the amount for which they were bought by him. if such last dealer was exempt from taxation under section 3(3) of the act, the dealer before him, who was not so exempt, was liable on the amount for which they were bought by him. the tax is not levied from the last purchaser because the goods were subsequently exported, any more than the tax is levied from the tanner because he bought the hides and skins for tanning. for the purpose of fixing the single point in the series of sales, the two events, namely, the sale to a tanner and export outside the state, were taken as the termini of the series of sales.' this summarises in our view, correctly and neatly, the scope of rule 16(2)(ii) of the rules.4. a divisional bench of this court, of which one of us (chief justice) was a member, in the government of andhra v. n. nagendrappa (1956 7 s.t.c. 568) construed the said provisions and expressed the view much to the same effect. the divisional bench stated :'it is fairly clear that in the case of untanned hides and skins bought by a dealer within the state and exported by him outside the state, he is liable for payment of sales tax on the amount for which the goods were bought by him and his liability to pay the tax is founded not on his being the seller for export but on being the last purchaser in the series of sales of the goods effected within the state. the export by the dealer merely marks the final stage of series of purchases by one licensed dealer from another and it is at that stage that the taxable event, namely, the last purchase, and the person who is liable to pay the tax, namely, the last purchaser, are both determined. in other words, the tax is really one on the transaction of purchase anterior to the sale for export or export sale. the turnover which is taxable under the act may be the sale or purchase turnover and the state has the option to collect the tax from the dealer on his purchase turnover.'5. the tax therefore is on the transaction of the purchase though the taxable event is determined at the stage of the sale to the tanner or the sale for export. for, in either case the series of sales of untanned hides purchased terminate in the state at that stage, and therefore they cannot be caught in the net of taxation as transactions in untanned hides and skins. in the former case, they would lose their character in the process of tanning. in the latter case, they leave the state, and therefore beyond the reach of the state's taxing authority. if, with this background the provision of rule 16(2) is approached, there will not be any difficulty in appreciating its scope. it is contended by the learned counsel for the respondent that as the sale for export outside the state is a necessary condition for taxing the dealer at the purchase point, the respondent cannot be assessed as he did not sell the goods for export outside the state but only sent them to his commission agents in mysore state to be sold on his account. this argument is plausible, but it ignores the principle underlying the rule. no doubt, if the words in the rule are clear and unambiguous, the assessee is entitled to have the exemption even though the object of the rule is frustrated.6. what is the meaning to be given to the words 'sold for export outside the state' a sale for export outside the state may be effected in diverse ways. a dealer in andhra state may sell his goods to one in mysore state and the sale is effected by export of the goods from andhra state to mysore state. the seller may deliver the goods in andhra state to a common carrier who is an agent of the buyer and the goods may be transported to mysore state. the seller may himself carry the goods to mysore state and there sell them to persons in that state. a commission agent in mysore state may book orders in advance and the dealer in andhra may consign the goods to mysore against those orders. the seller may send the goods to his commission agent in bangalore who may thereafter sell them to persons in that place. whatever may be the mode adopted, the sale is effected only by exporting the goods from andhra state to mysore state. if the object of the legislature is to catch the transactions in the net of taxation before they leave the state, on principle there cannot be a distinction for the purpose of taxation in regard to goods transported by the adoption of diverse methods. the words 'sale for export' therefore can be reasonably construed to mean 'sale by export' or 'export sale'. in all the cases narrated above, the sale is effected only by the process of export. in every case, there is a sale which occasions the export of the goods outside the state. it is true that it is only when the state of export is reached in the series of sales by successive dealers, the tax becomes exigible. but the rule does not say that the sale which occasions export should be effected within the state itself. whether the sale is effected outside the state or inside the state, if it is a sale by export or an export sale that would furnish the stage for assessing the dealer at the purchase point. the sale for export is not a condition for imposing the tax on the purchase point, but one that furnishes the stage for imposing it. the words, therefore, should be reasonably construed without doing violence to the language, and, if so construed, they can only mean export sale or sale by export. the sale either before or after export, if it is consummated only by export, furnishes the stage for taxing the dealer at the purchase point in the series of sales liable for the tax. in the government of andhra v. n. nagendrappa (1956 7 s.t.c. 568) a divisional bench of this court held that though the sale was held through a commission agent outside the state, the turnover was liable to be taxed. no doubt, that case may be distinguished on the ground that the sales effected through the commission agents were sales for export to foreign buyers, whereas in the present case, the commission agents sold the goods only in the mysore state. even so, for the reasons given by us, we hold that as the sales through the commission agents were effected by export, the dealer would be liable to tax. if the turnover of the said transactions effected by the commission agents is added, the total turnover would be more than rs. 10, 000 and therefore not exempted under section 3(3) of the act and is liable to tax. the order of the tribunal is therefore set aside. the respondent will pay the costs of the petitioner. advocate's fee rs. 50.