R M KRISHNASWAMY NAIDU Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE petitioners in these cases are dealers in groundnut oil. THEy sold groundnut oil to Hindustan Lever Limited, which in its turn utilised the oil for the manufacture of vanaspati. THE exact quantum of the turnover of such sales is not of importance, for only a question of interpretation of a provision of the Sales Tax Act is called for and that question arises in the following manner : Under section 3 of the Madras General Sales Tax Act, 1959, every dealer whose total turnover for a year is not less than Rs. 10, 000, shall pay a tax for each year at the rate of 2 per cent. on his taxable turnover. It would be sufficient to state the general liability of the dealer in such broad terms. THE First Schedule lists out a number of goods, and sub-section (2) of section 3 states that in the case of goods mentioned in the First Schedule, the tax shall be payable at the rate and only at the point specified therein on the turnover relating to such goods, whatever may be the quantum of turnover in that year. This is in the nature of an exception to section 3(1). Sub-section (3) states :

(2.) IN order to understand this provision, we may refer in some detail to the First Schedule. The First Schedule contains a list of goods and specifies the single point of the levy of tax as well as the rate of tax at that point. While the general provision of section 3(1) fixes the rate of tax at 2 per cent. on the turnover at the stage of every sale, even successive sales, in the case of all goods, sub-section (2) makes an exception and states that in the case of goods listed in the First Schedule, the tax shall be at a single point only, the point being specified, and further the rate of tax shall be as indicated, which is, generally speaking, higher than 2 per cent. These goods being subjected to a single point levy, their sales attract the somewhat higher rate of tax specified in the First Schedule. Sub-section (3) makes a further exception. If the dealer sells any of the items listed in this Schedule to another dealer for use by the latter in the manufacture of some other item of goods mentioned in the same schedule, then the rate of tax shall be only one per cent. But the single point is still maintained. It would accordingly be seen that in the case of such goods which enter as component parts in the manufacture of other goods, both kinds of goods being borne on the First Schedule, the rate of tax is at a very low figure at the stage of sale to the manufacturer. But the manufactured goods, being also listed in the First Schedule, will be liable to the single point levy of tax at the stage and the rate specified in that Schedule.The proviso to sub-section (3) further requires that the main part of the section shall not apply unless the dealer, selling the goods and claiming the lower rate of taxation of one per cent., furnishes to the assessing authority

(3.) IT has also further to be mentioned that this sub-section underwent some changes. Originally, sub-section (3) provided that the purchasing dealer should use the goods as component part of other goods manufactured by him and that such manufacture should be "manufacture for sale inside the State." By Madras Act 19 of 1960, these words were replaced by the words, "manufacture inside the State for sale," and this was made retrospective with effect from 1st April, 1959. This is of some importance for till this amendment was effected, the petitioners could not claim the benefit of section 3(3). By Madras Act 44 of 1961, an explanation was added to this sub-section, and it reads thus :