JUDGMENT
Sujata V. Manohar, C.J.
1. This group of tax revision cases has been heard together because a common question of law arises in all these cases. The department has filed these tax revision cases against the orders of the Kerala Sales Tax Appellate Tribunal, Kozhikode, dated September 25, 1992 and similar other orders of the Kerala Sales Tax Appellate Tribunal where the same question of law arises. The relevant assessment years in all these tax revision cases are assessment years 1989-90 and 1990-91. For the sake of convenience, we are referring in brief to the facts in T.R.C. No. 9 of 1994.
2. The respondent in T.R.C. No. 9 of 1994 is a public limited company having Its registered office at Mangalore with its branch at Kozhikode. The company is a dealer in automobile springs. Their total turnover for the years 1989-90 and 1990-91 included sales tax collected amounting to Rs. 14,57,550 and Rs. 18,67,206.77 respectively. The assessing officer held that the sales tax collected formed a part of the turnover of the assessee and was liable to turnover tax under Section 5(2A) of the Kerala General Sales Tax Act, 1963. The assessing officer held that the proviso to Section 5(2A) would not exclude the sales tax collected from the levy of turnover tax. The Deputy Commissioner (Appeals) concurred with these findings in appeal which was filed by the assessee. The Tribunal however, in further appeal, has come to the conclusion that by virtue of the proviso to Section 5(2A) of the said Act, the sales tax collected by a dealer and shown separately in the bills has to be excluded while determining the taxable turnover for the purpose of levying turnover tax. Being aggrieved by these findings of the Tribunal, the department desires that the following questions of law be decided by us :
“1. Whether, in the facts and circumstances of the case, the Tribunal was right in finding that no turnover tax can be levied under Section 5(2A) of the Kerala General Sales Tax Act, 1963, on the tax collected by the assessee ?
2. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the turnover on which tax is leviable under Sub-section (1) or Sub-section (2) of Section 5 is specifically excluded from the purview of turnover tax, under Section 5(2A) of the Act ?
3. Is the Tribunal right in holding that the sales tax collected by the assessee’ is liable to be excluded as per proviso to Section 5(2A) of the Kerala General Sales Tax Act ?
4. Is the finding and conclusion arrived at by the Tribunal justified in law ?”
3. In order to appreciate the nature of the dispute which is raised before us, it is necessary to look at certain provisions of the Kerala General Sales Tax Act, 1963, as in force at the relevant time. The terms “taxable turnover”, “total turnover” and “turnover” are defined in Section 2(xxv), (xxvi) and (xxvii) respectively. Section 2(xxv) is as follows :
” ‘taxable turnover’ means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed, but shall not include the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India.”
Section 2(xxvi) is as follows :
” ‘total turnover’ means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India.
Explanation.–……….”
Section 2(xxvii) is as follows :
” ‘turnover’ means the aggregate amount for which goods are either bought or sold………., by a dealer…………..on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration, provided that………”
Looking to the definitions therefore, “turnover” means the total amount for which the goods are either bought or sold by the dealer. Total turnover would be an aggregate of the total amounts for which various goods in which the dealer deals, are either bought or sold by him, while the taxable turnover is only that part of the turnover on which the dealer is liable to pay tax after deducting such amounts as are provided for by law. It will also exclude from the levy of tax the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of goods or in the course of import of goods.
4. Section 5(1) deals with levy of sales tax on sale or purchase of goods. It provides, inter alia, that every dealer whose total turnover for a year exceeds Rs. 1 lakh shall pay tax on his taxable turnover for that year, (i) in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedules. We are not concerned with the remaining clauses of Sub-section (1) which impose sales tax on certain other transactions set out therein. Sub-section (2) of Section 5 provides that every dealer other than a dealer referred to in Sub-section (1) whose total turnover for a year in respect of the goods specified in the First or Second or Fifth Schedule or goods involved in the execution of works contract specified in the Fourth Schedule is not less than Rs. 1 lakh shall pay tax at the rate and only at the point or points specified against the goods in the First or Second or Fifth Schedule or goods involved in the execution of works contract specified in the Fourth Schedule on his taxable turnover in that year relating to such goods. If we look at the Schedules to the Kerala General Sales Tax Act, 1963, we find that in the First and Second Schedules single point sales tax is levied on various types of goods which are specified in those Schedules either at the point of first sale of such goods by a dealer or at the point of last purchase of such goods by the dealer. The Third Schedule deals with goods which are exempted from the levy of sales tax. The Fourth Schedule deals with works contract. The Fifth Schedule levies a two point sales tax on goods specified in that Schedule both at the stage of first sale by the dealer and last sale by the dealer. In other words, in respect of goods which are covered by Schedules I and II sales tax is levied only on the aggregate amount for which goods specified therein are either first sold by the dealer or last purchased by the dealer. Therefore, the turnover of only the first sale or the last purchase, as the case may be, is liable to sales tax. If in respect of these goods a dealer has also effected a second sale or third sale, that turnover is not subject to sales tax. The same will be the case in respect of goods in the Fifth Schedule, except that the turnover on which sales tax is liable to be paid for the goods in the Fifth Schedule, would consist of both the first sale and last sale of such goods by the dealer and intermediate sales are not liable to sales tax.
5. In respect of the turnover which is thus liable to sales tax, it is necessary to determine what is the taxable turnover. For this purpose, under Rule 9 of the Kerala General Sales Tax Rules, 1963, certain amounts are to be deducted from the turnover. One such item is item (1) of Rule 9 being “all amounts of sales tax collected by the dealer, if shown separately in the bills”. Therefore, for the purposes of levy of sales tax, any sales tax which the dealer may have collected on the transactions forming part of the turnover in question, if shown separately in the bills, would be excluded from the turnover. Bearing this in mind, if we turn to Section 5(2A) which deals with levy of turnover tax, it provides that every dealer shall pay turnover tax on the turnover of goods as specified thereunder. We are not concerned with the goods so specified, except for the purpose of noting that in respect of the goods which are the subject-matter of the tax revision cases before us, there is no dispute that the turnover tax is payable. The dispute relates to the interpretation of the proviso to Section 5(2A). At the relevant time, it was as follows :
“Provided that no tax under this sub-section shall be payable on that part of such turnover,–
(1) on which tax is leviable on such dealer under Sub-section (1) or Sub-section (2).”
In other words, under Section 5(2A), turnover tax is payable on the turnover of specified goods, except that in respect of such part of the turnover on which tax is leviable under Sub-section (1) or Sub-section (2), no turnover tax shall be payable.
6. The question is what is excluded by the proviso. On a plain reading of the proviso, it appears that the turnover on which sales tax is leviable under Section 5(1) or 5(2) is not subject to turnover tax. Now Section 5(1) and Section 5(2) levy sales tax on turnover which constitutes either the first sale or last purchase of certain specified goods, by the dealer. The term “turnover” by definition means the aggregate amounts for which goods are either bought or sold. Therefore the aggregate amounts for which the goods are either first sold or last purchased will not be subject to turnover tax.
7. The next question is what is meant by aggregate amounts for which the goods are first sold or last purchased.
8. The department has contended that the aggregate amount for which the goods are sold or purchased would include sales tax levied on such goods, because if one looks at what constitutes the price of such goods, the element of sales tax which is recovered from the buyer very much forms a part of the price which the buyer has paid, This contention of the department is supported by a number of authorities.
9. In the case of George Oakes Pvt. Ltd. v. State of Madras [1961] 12 STC 476, the Supreme Court considered the definition of “turnover” under the Madras General Sales Tax Act, 1939. The Supreme Court after considering the scheme of the Madras General Sales Tax Act held that when the seller passes on tax and the buyer agrees to pay sales tax in addition to the price, the tax is really part of the entire consideration and the distinction between the two amounts “tax” and “price” loses all significance. The Supreme Court was considering the question of legislative competence to levy tax on turnover which included the element of sales tax also. The observations, however, are clearly to the effect that the sales tax which the seller, i.e., the registered dealer passes on to the buyer and which the registered dealer may ultimately pay to the Government, forms part of the price.
10. In the case of State of Kerala v. N. Ramaswami Iyer and Sons [1966] 18 STC 1, the Supreme Court considered the provisions of the Travancore-Cochin General Sales Tax Act, 1950. The Supreme Court held that the turnover would include the sales tax received by the dealer as part of the price. It further held that a provision under the rules which were subsequently framed under the Act which excluded the amount of sales tax collected by the dealer in computing the net turnover were not clarificatory but were meant to be substantial relief.
11. In the case, however, of the Joint Commercial Tax Officer v. Spencer & Co. [1975] 36 STC 188, the Supreme Court took a slightly different view. While interpreting the Madras Prohibition Act, 1937, under which a seller of foreign liquor was obliged to collect from the purchaser sales tax, the Supreme Court after considering the scheme of the Madras Prohibition Act, 1937, came to the conclusion that under the said Act, the sales tax was payable by the purchaser. It was payable on the price of the liquor. Under the scheme of the Act, a seller was a collector of tax from the purchaser for the Government. The amounts of sales tax so collected by the seller on behalf of the Government under a statutory obligation cannot be a part of his taxable turnover under the Madras General Sales Tax Act, 1959. The Supreme Court endorsed the stand that ordinarily, when a dealer has no statutory duty to collect sales tax payable by him from his customer and the dealer passes on the amount of tax he is liable to pay on the customer, such amount does not cease to be the price for the goods although the price is expressed as X plus tax. However, it considered the scheme of the Madras Prohibition Act, 1937 under which an obligation was cast on the seller to collect sales tax from the purchaser. Under the scheme the seller was merely an agent of the Government for the purpose of collection of tax. It, therefore, excluded such tax collected by the seller from the seller’s turnover.
12. The same line of reasoning was further developed by the Supreme Court in the case of Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax [1980] 46 STC 477. The Supreme Court considered in this case the scheme of the U.P. Sales Tax Act, 1948. The Supreme Court distinguished a scheme under which a dealer is authorised by law to pass on any tax payable by him on a transaction of sale to the purchaser. It said that such tax does not form part of the consideration for the purposes of levy of tax on sales or purchases. But where there is no statutory provision authorising the dealer to pass on the tax to the purchaser and the dealer, in fact, realises the tax from the purchaser, such tax forms a part of the price and is, therefore, includible in the turnover for the purposes of levy of sales tax.
13. The above cases of Anand Swamp Mahesh Kumar [1980] 46 STC 477 (SC) and George Oakes (Private) Ltd. [1961] 12 STC 476 (SC) were considered by the Supreme Court in the case of Central Wines v. Special Commercial Tax Officer [1987] 65 STC 48. The Supreme Court considered the scheme of the Andhra Pradesh General Sales Tax Act, 1957. It said that the sales tax component of the sale price charged by the dealer to the purchaser under the said Act is not collected by him as an agent of the State even if the form in his bill or the voucher issued to the purchaser indicates the amount of sales tax separately. What is collected by the dealer from the purchaser is not the tax but is merely a part of the sale price charged by the dealer to the purchaser. The Supreme Court distinguished the decision in Anand Swarup Mahesh Kumar’s case [1980] 46 STC 477 (SC) by observing that in that case the court was concerned with the market fee which was collected by a dealer from the purchaser for being passed on to the market committee. It was evident that the amount so collected by the dealer was as an agent of the market committee and, therefore, could not be treated as a component of the sale price.
14. In the case of Deputy Commissioner of Sales Tax v. Sarma and Sons [1992] 85 STC 77 ; (1991) 2 KLT 41, a Division Bench of this Court considered the provisions of the Kerala General Sales Tax Act in the light of the decisions of the Supreme Court cited above and held that the entire consideration received for the sale by a dealer should be included in the turnover. So far as the purchaser is concerned, he pays for the goods what the seller demands, i.e., price even though it may include tax. Under the Kerala General Sales Tax Act, there is no statutory obligation or duty on the dealer to collect the sales tax payable by him from his customers. The dealer is merely enabled to pass on the tax to the customers. Therefore, the amounts so collected forms part of the purchase price. It is entirely because of the specific provision in Rule 9(1) of the Kerala General. Sales Tax Rules that the tax so collected is excluded from the taxable turnover for the purposes of Section 5. In the light of this observation, we have no hesitation in holding that turnover for the purposes of turnover tax would also include sales tax which may have been collected by a dealer from his customer, along with the price for the goods so sold or purchased. In fact, the definition of “turnover” under Section 2(xxvii) clearly provides that turnover means the aggregate amount for which goods are either bought or sold. The aggregate amount would clearly include the sales tax also. Section 5(2A) which levies turnover tax forms part of the same section which levies sales tax and there is no reason for us to hold that the term “turnover” has a different meaning for the purposes of turnover tax; Undoubtedly, for the purposes of levy of sales tax under Sections 5(1) and 5(2) the sales tax collected is excluded from the taxable turnover by virtue of Rule 9 set out therein. Rule 9, however, does not come into operation as far as Section 5(2A) is concerned. In fact, the concept of taxable turnover is absent from Section 5(2A). What Section 5(2A) provides is that a turnover tax is to be paid by every dealer on the turnover of goods specified in that sub-section. However, by virtue of the proviso as then in force, turnover forming the subject-matter of Section 5(1) and 5(2) is excluded for the purposes of turnover tax. In other words, that turnover which is already subjected to sales tax under Sections 5(1) and 5(2) will not be subjected to turnover tax. It is only that part of the turnover which is not subjected to sales tax under Sections 5(1) and 5(2) that is subjected to turnover tax.
15. It was contended on behalf of the department that in order to determine that part of the turnover on which turnover tax is payable, we must take the entire turnover of a dealer and deduct from it those portions on which sales tax is leviable. In the case of goods falling in Schedules I and II on which sales tax is leviable, only the taxable part of the turnover would be excluded. On the remaining part of the turnover of goods forming part of Schedules I and II, tax would be payable. In the present case the only portion which is excluded from the taxable turnover of a dealer for the purpose of levy of sales tax under Section 5(1) and 5(2) is sales tax collected on the goods forming part of his turnover. Therefore, the department submits that on the sales tax collected by the dealer in respect of purchase or sale of goods in Schedules I and II, a turnover tax is payable.
16. We do not find any merit in this contention. The language of the proviso to Section 5(2A) is very clear. It makes a clear difference between tax which is leviable and tax which is payable. What is excluded is the turnover on which tax is leviable under Sub-sections (1) and (2) of Section 5. Such tax is clearly leviable under Section 5(1) and 5(2) on the turnover of goods forming part of Schedules I and V consisting of first sales or last purchases. On such turnover, which would necessarily include the sales tax collected on it, no turnover tax is payable. Therefore, what is excluded is the entire turnover which is subjected to sales tax under Section 5(1) and 5(2) and not only a part of it which is taxable. In other words, it is the second and third sales of goods under Schedules I and V which would be subjected to turnover tax because they are not subjected to sales tax. The intention of the Legislature to bring under the ambit of turnover tax transactions of sale and purchase not subjected to sales tax, is clear from the budget speech of the Finance Minister which accompanies the introduction of Finance Bill, 1987, by which turnover tax was introduced in the Kerala General Sales Tax Act, 1963. While we cannot look at the budget speech for the purpose of interpretation of Section 5(2A), it can be looked at as throwing light on the circumstances in which the, said provision was introduced. While dealing with turnover tax, the speech in paragraph 115 states :
“There are a large number of registered dealers, handling goods at the point of second or third sale and therefore not liable to sales tax. All those persons whose annual turnover is over Rs. 25 lakhs, irrespective of whether they are paying sales tax or not will be charged with a turnover tax of 1 per cent.”
17. The intention of the Legislature appears to have been to tax those sales which were not subjected to sales tax. It was not to subject those portions of the turnover excluded from the taxable turnover for the purposes of sales tax to turnover tax. It was urged before us by the department that in Section 5(2A) there are express provisions excluding certain transactions of sale or purchase from turnover tax which are similar to the exclusionary clauses in Rule 9. For example, sale or purchase of goods in the course of inter-State trade or commerce is excluded from turnover for the purpose of turnover tax. Similarly, sale or purchase of goods in the course of export or import is also excluded. However, there is no express exclusion of sales tax from these provisions unlike in Rule 9 ; and hence a turnover tax can be levied on sales tax also. This argument is based on a mis-reading of Section 5(2A). What is subjected to turnover tax is the entire turnover. Ordinarily such turnover would have included sales tax also. But, by virtue of proviso (1) those turnovers which are subject to sales tax are exempted from turnover tax. Therefore, it is in respect of those sales or purchases which are not subjected to sales tax that a turnover tax is levied. In these circumstances, there can be no need at all for expressly excluding sales tax from the turnover for the purpose of turnover tax, because by the very scheme of Section 5(2A), when sales tax forms part of the turnover, that turnover is not subjected to turnover tax. There was, therefore, no necessity for expressly excluding sales tax from the provisions of Section 5(2A). Hence, the contention of the department in this connection cannot be accepted.
18. In the premises, the questions of law which have been raised are answered as follows :
(1) The Tribunal was right in holding that no turnover tax can be levied under Section 5(2A) of the Kerala General Sales Tax Act, 1963, on the sales tax collected by the assessee on sales and purchases of goods in Schedules I and V of the said Act which are subjected to sales tax.
(2) The turnover on which tax is leviable under Sub-section (1) or Sub-section (2) of Section 5 is excluded from the purview of turnover tax under Section 5(2A).
(3) Sales tax collected by the assessee is liable to be excluded as per the proviso to Section 5(2A) of the Kerala General Sales Tax Act.
In view of the above, it is not necessary to answer question No. 4.
19. The questions, therefore, are answered in favour of the assessee and against the department, as set out hereinabove. In the circumstances, there will be no order as to costs.
Learned Additional Advocate-General applies for leave to appeal to the Supreme Court. In our view, looking to the clear provisions of Section 5(1), 5(2) and 5(2A) of the Kerala General Sales Tax Act, no substantial question of law of general importance arises in these cases. The quantum of tax involved is also small. Hence the leave to appeal to the Supreme Court is refused.