Holding

Section 3‑F overrides Section 3‑D(4) permitting additional tax on purchase turnover; market fees authorized to be collected from the purchaser are excluded from turnover, whereas commission payable to the commission agent is included as consideration.

Summary

The appellant, a dealer in agricultural produce, challenged the inclusion of market fees and commission (dami) in the turnover of purchases for sales‑tax assessment under Section 3‑D of the U.P. Sales Tax Act, 1948, and also contested the levy of additional tax under Section 3‑F on that turnover. The Court held that Section 3‑F, which expressly refers to Section 3‑D, overrides the restriction in Section 3‑D(4), so additional tax may be levied on purchase turnover. Market fees, which the law authorises the commission agent to collect from the purchaser, are not part of the consideration for the purchase and therefore cannot be included in turnover. However, the commission payable to the commission agent is a reward for services and constitutes consideration, so it must be included in the turnover. Consequently, the appeal was allowed in part: the market‑fee component was excluded from turnover, while the commission component and the additional tax under Section 3‑F were upheld.

Issues considered

Whether Section 3‑F allows additional tax to be levied on the turnover of purchases notified under Section 3‑D despite the restriction in Section 3‑D(4).
Whether market fees payable under the U.P. Krishi Utpadan Mandi Adhiniyam can be included in the turnover of purchases for sales‑tax purposes.
Whether the commission (dami) payable to a commission agent can be treated as part of the turnover of purchases.

Legislation cited

Rules under the Adhiniyam (Rule 79)
U.P. Krishi Utpadan Mandi Adhiniyam, 1964s. 10, s. 17(iii)(b)
U.P. Sales Tax Act, 1948s. 3-D, s. 3-F

Subjects

Sales taxTurnover of purchasesAdditional taxMarket feeCommission (dami)Section 3-DSection 3-FU.P. Sales Tax ActU.P. Krishi Utpadan Mandi AdhiniyamCommission agent

Judgment

A

ANAND SWARUP MARESH KUMAR

v.
B
THE COMMISSIONER OF SALES TAX

September 15, 1980

[P. N. BHAGWATI AND E. S. VENKATARAMIAH JJ.J

U. P. Sales Tax Act,' 1948, Section 3D & U. P. Krishi Utpadan !lfandi Adlzi- c
niyam 1964, Sections 10 and 17 (iii) (b).
Market fee payable under the Adhiniyam-Cannot be included in the turn-
.over of purchases for assessment of sales tax under the Act.
Commission (dami) paid by dealer to commission agent-Not being a tax
or fee but reward for services rendered-To be included in turnover.

Section 3D of the U. P. Sales Tax Act, 1948 provides for the levy of a
tax ·On the turnover of purchase of goods by a dealer. Sub-section (4) provides
that on the issue of a notification under sub-section (1), no tax shall be levied
under any other section in respect of the goods included in the notification.
In 1971 section 3F was included in the. Act providing for the levy of additional
tax on certain dealers. The section provides that every dealer liable to pay
tax under section 3D (among others) whose total turnover exceeds rupees two
lakhs would in addition to the said tax be liable to pay for that assessment
year an additional tax at the rates specified therein subject to the other provisions
of the section.
Section 10 of the U. P. Krishi Utpadan Adhiniyam, 1964 provides no levy
or realisation of any trade charges other than those prescribed by rules or bye-

-r laws made ·under the Adhiniyam in respect of transactions of 5ale or purchase of
specified agricultural produce. Section 17(iii)(b) empowers the market committee
to levy market fees and to utilize such market fees collected by it under that F
section for purposes of the Adhiniyam. Before the amendment of the provi-
sion by U. P. Act No. 7 of 1978, it specifically provided that market fee payable
on transactions of sale or purchase of specified agricultural produce in the
market area should be paid by the purchaser. After the amendment which
was brought into force with retrospective effect from June 12, 1973, market
fees payable on transactions of sale or purchase of agricultural produce within
the market area can be realized by the Market Committee from the Commission
agent who is authorized to realize the same from the purchaser by virtue of
section J 7(iii)(b)(I). The rules and bye-laws made under the Act also provide
that a commission agent shall not realise any commission higher than that
prescribed by law.
The Sales Tax Officer included the market fee and commission (dami) pay-
able lo the commission agent operating within a market area established under
the U. P. Krishi Utpadan Mandi Adhiniyam, 1964 in the turnover of purchases H
708 SUPREME COURT REPORTS [1981] 1 S.C.R.

of the appellant for the purposes of levy of sales tax under s~ction 30 of
the U. P. Sales Tax Act, 1948 : On appeal by the appellant the Assistant Com-
missioner (Judicial) Sales Tax upheld lhe order of the Sales Tax Officer. In
an earlier case the High Court upheld the inclusion of the market fee and the
commission (dami) in the purchases turnover for the purposes of levy of sales
tax and therefore, the appellant was granted special leave to, appeal to this
Court directly from the order of the Assistant Commissioner.
Beforn this Court, it was contended that (i) it was not open to the Assessing
Authority to demand any additional tax under section 3F in view of the provi-
sions contained in section 3D(4)(ii). The market fee paid on transactions of
sale or purchase of specified agricultural produce in the market area could not
under the Adhiniyam, be included in the turnover of purchases for the purposes
of levy of tax under the Sales Tax Act. (iii) The commission (dami) payable
by a purchaser of goods to the comm,ssion agent, being a trade charge could
;
not also be included in the turnover o [ purchases.
HELD : 1. There is no substance in the contention that additional tax levied
under section 3F could not be levied in respect of turnover of purchases of ~
goods notified under section 3D(l) of the Sales Tax Act. Although, section ~D(4)
says that in respect of turnover of ipurchases of goods notified under sec-
tion 3D(l), no tax can be levied unde::· any other provisions, section 3F intro-
.D duced in 1971 provides, that every dealer liable to pay tax under section 3D
whose total turnover of sales or of purchases, or of both in any assessment
year exceeds rupees two Jakhs would, ju addition to the said tax, pay for that
assessment year an additional tax at lhe rate specified therein. [714F, B~C].
Since section 3D is expressly mentioned in section 3F, this section over-
rides section 3D(4), and that addition:1l tax can be collected even in respect
.of turnover of purchases of goods notified under section 3D(l) notwithstanding
section 3D(4). [714D].
It cannot be said that by enacting :mb-s,ection 4 of section 3D the legislature
has forfeited its power to levy any other tax under the Act on the goods )r
notified under section 3D(l) for ever. It is always open to the legislature to
modify the effect of section 3D(4) b~1 subsequent legislation. [714E].
2. The contention of the appellant that market fee payable under the Adhi-
niyam cannot be included in the turnover of purchases must be upheld. Where
a dealer is authorised by law to pass on any tax payable by him on transac-
tion of sale to the purchaser, such tax does not form part of the consideration
for the purposes of levy of tax on ,,ale or purchases but where there is no
statutory provision authorising the deal~rs to pass on tax to the purchaser, st!ch
tax does form part of the consideration when he includes it in the price and
realises the same from the purchaser. The distinguishing factor between the
two is the existence of a statutory provision authorising a dealer to recover the
tax payable on the transaction of sak from the purchaser. [718D, 716D-E].

The use of the word, "may" in section l 7(iii)(6)(1) providing that the
commission agent may realise the market fee from the purchaser is n(lt of
much consequence. The seller or the commission agent who is liable IQ pay
the tax or the fee is entitled statutorily to realise it from the purchaser and
wherever a dealer is authorised by faw to do so, the tax or fee realised by
him from the purchaser cannot be ln!ated as part of the turnover for the
purpose of levy of sales tax. [718B-C].
ANAND SWARUp v. c. s. T. (Venkataramiah, !.) 709'-
M / s. George Oakes (P) Ltd. v. State of Madras [1962] 2 S.C.R. 570, Delhi A
Cloth and General Mills Co. Ltd. etc. v. Commissionu of Sales Tax, Indore,
[1971] Supp. S.C.R. 945, Paprika Ltd. & Anr. v. Board of Trade [1944] 1 K. B.
327, Love v. Norman Wright (Builders) Ltd. [1944] 1 K.B. 484 (C.A.) referred
to.
Joint Comme!Tcial Officer, Division II, Madras-2 etc. v. Spencer & Co.
etc. e1c. [1975] Supp. S.C.R. 439 applied.
3. There is no force in the appellant's contention that the commission (dami)
payable by the purchaser on goods to the commission agent onerating within
a market area established under the Adhiniyam cannot be treated as forming
part of the turnover of purchases because a conspectus of the provision of the
Adhiniyam and rules made. thereunder and the bye-laws of Market Committee
shows that a commission agent cannot realise any commission higher than
what is prescribed by law. The commission chargeable by the commission agent
is not a sum which he has in his turn to pay to an authority either by way
of tax or by way of fee but is only a reward for the services rendered by him.
[718 E, 719 C-D] .
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3345/1979.
Appeal by Special Leave from the Judgment and Order dated
31-7-1979 of the Assistant Commissioner (Judicial) Sales Tax.
· Meerut in Appeal No. 1502 of 1978.
V. M. Tarkunde,, P. H. Parekh and S. B. Singh for the
Appellant.
S. Markendaya for the Respondent.
The Judgment of the Court was delivered by
'
VENKATARAMIAH, J.- The appellant is a firm carrying on E-
business at Mandi Anandganj, Barut, District Meeru~ in the State
of Uttar Pradesh and is a dealer as defined in the U.P. Sales Tax
Act, 1948 (Act No. XV of 1948) (hereinafter referred to as 'the
Act'). It has filed this appeal by special leave under Article 136 of
· the Constitution against the order dated July 31, 1979 passed in
Appeal No. 1502 of 1978 on the file of the Assistant Commissioner
(Judicial) Sales Tax, Meerut Range, Meerut upholding the inclusion
of the market fee and the commission ( o_therwise called 'dami')
payable to the commission agent operating within a market area
established under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964
(U.P. Act No. XXV of 1964) (hereinafter referred to as 'the
Adhiniyam') in the turnover of purchases cf the appellant for G.;
purposes of levy of sales tax under section 3-D of the Act. The
assessment year in question is 1974-75. The appeJ.lant was granted
leave to appeal to file the above appeal directly against the order of
the Assistant Commissioner (Judicial) since the question involved in
this case had already been decided by the High Court of Allahabad
in M/s. Durga Dass Narain Dass v. The State of Uttar Pradesh & H.l
710 SUPREME COURT REPORTS [1981] 1 S.C.R.

A Ors. ( 1 )upholding the inclusion of 1the market fee and 1he
Commission (dami) in the purchase turnover for purposes of levy
of sales tax.

It is necessary at the out set to refer to some of the relevant
provisions of law bearing on the questions involved in the case m
.B order to appreciate the contentions urged on behalf of the appellant.
There is no dispute that the appellant is a dealer as defined in
section 2 ( e) of the Act and. is a purchas~r of goods notified under
section 3-D( 1). Section 3-D of the Act provides that except as
provided in sub-section (2) thereof, there shall be levied and paid
for each assessment year or part thereof a ,tax on the turnover to be
c determined in the prescribed manner of purchases of such gC)ods an<l
with effect from such date as the State Government may by
notification in tpe Gazette specify in relation to purchases made
within Uttar Pradesh by a dealer (whether qn his own account or
on account of any one else) or through a dealer act'ing as a
purchasing agent at the rate specified therein. Si.lb-section ( 4) of
section 3-D bf the Act provides that on the issue of a notification
under· sub-section ( 1) thereof, no tax shall be levied under any
other section in respect of the goods included in the notification.
The expression 'purchase price' is defined in section 2(gg) of the
Act as follows : .
.E "2(gg) 'purchase price' means the amount of valuable
consideration paid or payable by a person for the purchase of any
goods, less any sum allowed by the seller as cash discount
according to trade practiCe and shall include any sum 'charged
for anything done by the seller· in respect of the goods at the
.F time of or before, delivery· thereof, ollher than the cost of
freight or delivery or the cost of installation when such cost
is separately charged;"

The expression 'turnover of purchases' is defined in' section
2(ii) of the Act thus :
·G "2(ii) 'turnover of purchases' with its cognate expressions
means the aggregate of the amounts cif purchase price paid or
payable by a dealer in respect of purchase of goods made by ~
or through him after deducting the amount, if any refunded to
the dealer by the seller in respect of any goods returned to
such ~eller within such period as may be prescribed;"
.H
(!) (Civil Misc .. Writ Petition No. 301 of 1978 and connected cases rlecided
on December 18, 1978).
ANAND SWARUP v. G. s'. T. (Venkataramiah, J.) 711

Section 3-F of the Act which 'provides for the levy of additional A
tax on certain dealers was introduced into the Act by U.P. Act
No. 3 of '1971. When it was so introduced it provided that every
dealer liable to pay tax under section 3, section 3A, section 3-AA
-0r section 3-D, whose total turnover of sales or of purchases, or of
both in any assessment year exceeded rupees two lacs would, in
addition to the said tax, be liable to pay for that assessment year B
an additional tax at the rates specified in respect of his turnover
liable to tax subject to the other provisions contained in that section.
We shall hereafter refor to some of the provisions of the
Adhiniyam and the Rules made thereunder. Clauses (b) and ( e)
-0f section 2 of the Adhiniyam define the expressions 'broker' or
'dalal' and 'commission agent' or 'arhatiya' respectively. 'Broker' c
or 'dalal' means a person who, in the ordinary course of business,
negotiates or arranges contracts for the purchase or sale of agricultural
produce, on behalf of his principal on payment of commission or
remuneration, whether in cash or kind, but does not include the
servant of such principal whether engagBd in negotiating or arranging
such C9ntracts. 'Commission agent' or 'arhatiya' means ~ person D
who, in the ordinary course of business, makes or offers to make,
a purchase or sale of agricultural produce, on behalf of the owner
or seller or purchaser of agricultural produce, for arhat or
-comm1ss1on. Section 10 of the Adhiniyam provides that as from
the date to be notified by the State Government in the Gazette, no
person shall, in a Principal Market Yard or Sub-Market Yard,. levy, E
-charge or realise, any trade charges, other than those prescribed .by
rules or bye-laws made undyr the Adhiniyam, in respect of any
transaction of sale or purchase of the specified agricultural produce
and no Court shall, in any suit or proceeding arising out of any
such transaction, allow in any claim or counter claim, any trade
charges not so prescribed, and that all trade charges shall be payable F
by the purchaser. Sub-clause ·(b) of clause (iii) of section 17 of
the Adhiniyam empowers the market committee to levy market fees
and to utilize such market fees and other fees collected by it under
that section for purposes of the Adhiniyam.
Section 17(iii)(b) of the Adhiniyam, as it stood before its
. amendment in 1973, read as follows:- G

"17. A Committee shall, for the purposes of. this Act, have
the power to:-

(iii) levy and collect : H
712 SUPREME COURT REPORTS [1981] 1 S.C.R.

A . . . . . . . . . . . . . . . . . ...
.

(b) market fiees on 1transactions of s<tle or purchase
of specified agricultural produce in the Principal Market
Yard and Sub-Market Yards from such person:. and at such
rates as may be prescribed, but not exceeding one-half
B percentum of the price of the specified agricultural produce
sold or purchased therein".

After clause (b) of section 17(iii) was substituted by a new
clause by U.P. Act 13 of 1973 as re-enacted by U.P. Act 20 0f
1974, it read thus :
c
"17. . ...

(m) . . . . . ...
(b) market fees, which shall be payable by
purcha.sers, on transactions of sale of specified
D agricultural produc• in the Principal Market Yard or
a Sub-Market Yard at such rates, being not less than
one percentum and not more than one-and-a-half
percentum of the price of the agricultural produce so
sold, as the State Government may specify by
notification in the Gazette." ·
E
The above clause was substituted by a new clause by U.P. Act
No. 7 of 1978 with retrospective effect from June 12, 1973
as follows:-

"17.
F (iii) . . . . . . . . . . . . . . . . . . . . . ...
(b) market fee, which shall be payable on
transactions of sale of specified agricultural produce
in the market area at such rates, being not less than
one percentum and not more than one and half
G percentum of the price or the agricultural prod1:1ce so
sold, as the State Government may specify by
notification, and such fee shall be realised in. the
following manner:-
( 1) if the produce is sold through a
H commission agent, the commission agent may
realise the market fee from the purchaser and
shall be liable to pay the same to the Committee;
ANAND SWARUP v. c:s. T. (Venkataramiah, !.)

(2) if the produce is purchased directly by
-a trader from a. producer the trader shall be
liable t<? pay the market fee to the Committee;
( 3) if the produce is· purchased by a trader
from another trader, theJ trader selling the produce'
may realise h from the purchaser and . shall be /

liable to pay the market fee to the Committee; B
and
( 4) in any other case of sale of such
produce, the purchaser shall be liable to pay the .
-market fee to the Committee."
Rule 79 ( 1) of the Rules framed under the Adhiniyam for C
purposes of section 10 of the Adhiniyam provides that as from the
date notified by the State Government under section 10, no person
shall, in a Principal Market Yard or Sub-Market Yards, levy, charge
or realize, in respect of any transaction of sale or purchase of the
specified agricultural produce, any trade-charges, other than those
specified by the Market Committee under sub-rule (2), thereof. D
Sub-rule (2) of Rule 79 of the Rules provides that the Market
.Committee shall specify in its bye-laws the trade charges that may.
be charged or realized by a trader or a commission agent or a
broker or a weighman or a measurer or a palledar holding licence
under .the Rules, but not exceeding the limits prescribed by that sub-
. Rule. Sub-rule (3) of Rule 79 of the Rules also provides that all E
trade charges including commission shall be payable by the purchaser.
Three contentions are urged before us in support of the above
appeal- ( 1) that it is not open the assessing authority to demand
any additional tax under section 3-F of the Act in view of the
provision contained in sub-section ( 4) of section 3-D of the Act
which expressly prohibits !he levy of tax under any other section F
of the Act in respect of purchase turnover of the· goods notified
under section 3-D(l); (2) that the market fees payable under the
Adhiniyam, being a sum which can be collected from the purchaser
by vintue of the provision contained in section 17(iii) (b) of the
Adhiniyam by the commission agent who is required to pay the
same to the Market Committee, cannot be considered as forming G
part of the consideration paid or payable by the purchaser toI the
commission agent in respect of purchase of goods at an auction held
within a market area established under the Adhiniyam and, therefore,
it cannot be included in the turnover of purchases Jor purposes of
levy of tax under section 3-D of the Act and (3) that the commission
(dami) payable by a purchaser of .goods to the commission agent H
4-645 S. C. India/SO
714 SUPREME COURT REPORTS [1981] 1 S.C.R.

A operating within the market area being a trade charge payable by
the purchaser by virtue of section 10(2) of the Adhiniyam read with
Rule 79 ( 3) of the Rules framed thereunder cannot also be included
in the turnover of purchases.

In so far as the first contention is concerned, .the appellant
B depends upon sub-section ( 4) of section 3-D of the Act which no
doubt says that in respect of the turnover of purchases of the goods
notified under section 3-D(l), no tax can be levied under any other
provision of the Act. But section 3-F of the Act which w~s introduced
into the Act subsequently by U.P. Act No. 3 of 1971 provides that
c every dealer liable to pay tax under section 3, section 3cA, section
3-AA or section 3-D wl;lose total turnover of sales or purchases or
of both in any assessment year exceeds rupees two lacs shall, in
addition to the said tax, pay for that assessment year an additional
ltax at the rate specified therein. Since section 3-D of the Act is
expressly mentioned in section 3"F, it has to be held that section 3-F,
D overrides sub-section ( 4) of secrion 3-D and that additioJ:ial tax can
be collected even in respect of the turnover of purchases of goods
notified under section 3-D(l) notwLths1anding sub-section (4) of
Section 3-D of ·the Act. It cannot be said 1that by enacting sub-sectioa
( 4) of section 3-D, the State Legislature forfoited ]ts power to levy any
other ·tax under the Act on the goods Mtified under section 3-D( 1) for
E
ever. It is always open to 'the Legislature to modify the effeot of sub-
section ( 4) of section 3-D by a subsequent legislation. We do not,
itherefore, find any subsitance in the contention that additional tax
1

levied under section 3-F cannot be levied in respect of the. turnover
of purchases of goods notified under section 3-D(l) of. the Act.
The first contention, therefore. fails.

We shall now proceed to consider the question whether market
fees paid on transactions of sale or purchases of specified agricultural
produce in the market area established under the Adhiniyan:i can be
included in the turnover of purchases for purposes of levy of ta.it
G under the Act. Before the amendment of section 17 (iii) (b) of
the Adhiniyam by U.P. Act No. 7 of 1978, it specifically provided
that market fee payable on transactions of sale or purchase of
specified agricultural produce in the market area shonld be paid
by the purchaser. After the amendment which was brought into
H force with retrospective effect from June 12, 1973, market fees
payable on transactions of sale or purchase of agricuitural produce
within the market area can be realized by the M~rl:et Committee
ANAND SWARUP v. C.S.T. (Venkataramiah, 1.) 715

from the commission agent who is authorised to realize the same A
from the purchaser by virtue of section 17(iii)(b)(l) which reads:-

"17. . . . . . . . . . . . . . . . .

(iii) ........ : ...... .
B
(b~ . . . . . ......•.•. -. •'.

~
(1) If the produce is sold through a
commission agent the commission agent may
realise the market fee from the purchaser . and
shall be Hable to pay the same to the c
'Y:-- Committee."

The argument urged on behalf of the appellant is that when
a dealer who in this case happens to be a commission agent is
permitted by law to collect the market fee which he· is liable to pay
to the Market Committee from the purchaser, . such market. fee D
-cannot form part of the conside).'ation for sale and, therefore, cannot
be included in the turnover of purchases for purposes of levy of
tax under the Act. But on behalf of the State Government,· it is
urged that all sums paid by a purchaser to a seller or to a
commission agent for the purchase of the goods including any tax·
or fee payable by him form the consideration for the purchase and, E
therefore, are liable to be included in the turnover of purchases.
Reliance is placed by the State Government on M/s George Oakes
(P.) Ltd. v. State of Madras(!) in which this Court while interpreting
· a similar provision in the Madras General Sales Tax Act, 1939
observed that the expression 'turnover' meant the aggregate amount
for which goods were bought or sold whether for cash or deferred
payment or other valuable consideration and when a sale attracte_d F
purchase tax and the tax was passed on to the coi:i.sumer what the
buyer had to pay for 1the goods included the tax as well and the
aggregate amount so paid would fall within ,the definition of iturnover.
In the above case, the Court was conSltruing ~he meaning of the
expression 'turnover' appearing in a statute in which there was no
provision authorising the seller to recover !he sales tax payable by G
him from the purchaser although the price of the goods realized
by him included the sales tax payable by him and thus he had passed
on his liability to the purchaser. The next decisio!l on which
reliance was placed by the State Government is Delhi Cloth and
(1) [1962] 2 S.C.R. 570. H
716 . SUPREME COURT REPORTS [1981] 1 S.C.R.

A General Mills Co. Ltd. etc. v. Commissioner of Sales Tax Indore(l);
In ·that case this Comt held that the expression 'Sale price' as
defined in section 2(o) of the Madhya Pradesh General Sales Tax
Act, 1958 included the sal.es tax collected by a deaj.er from his
purchaser as there was no provision in that statute imposing any
liability on the purchaser to pay the tax imposed by it on the dealer
B and there was no law empowering the dealer to collect •the tax
from his buyer. In both the decisions referred to above, this Court
relied upon Paprika Ltd. "& '.Anr. v.
Board of Trade(2) and Love v.
Norman Wright (Builders) Ltd.( 3 ) in which it had ·been laid down
that the price payable by a purchaser under a contract or goods
for the purpose of certain penal provisions was the price fixed by
c the contract and a seller who wished to recover the amount of the
purchase !ax should, except where an adjustment was authorised by
statute, include that amount in the price so fixed., From the
observations made in the decisions referred to above, it follows that
where a dealer is authorised by law to pass on any tax payable by
D him on the transaction of sale to the purchaser, such t~ does not
form part of the c0,nsideration for purposes of levy of tax on sales
or purchases but where there is no statutory provisidn ·authorising
the dealer to pass on the tax ~o the purchaser, such tax does form
part of the · consideration when he includes it in the price and
realizes the same from the purchaser. The essential factor which
E distinguishes the former class of cases from the latter class is the
existence of a statuary provision auhorising a dealer to ·
recover the tax payable on the transaction of sale from the ,purchaser.
It is on account of the above distinction that this Court held in
Joint Commercial Officer Division II. Madras-2 etc. v. Spencer
& Co. etc. etc.( 4 ) that the sales tax which a seller of foreign liquor·
F was liable to pay under section 21-A of the Madras Prohibition Act,
1937 did not form part of the turnover on which sales tax could
be levied under ·the Madras General Sales Tax Act, 1959 because
the seller was entitled to recover the sales tax payable by him from
the purchaser. The relevant part of secHon 21-A of the Madras
Prohibition Act, 1937 referred to above read thus :
G "21-A. Every person or institution which sells'. foreign
liquor-
(a) X X X
(b) x x x
(1) [1971] Supp. S.C.R. 945.
H (2) [1944] 1 K. B. 327.
(3) [1944] 1 K. B. 484 (C.A.).
(4) [1975] Supp. S.C.R. 439.
. ,•
ANAND SWARUP v. c. s: T. (Venkcitaramiah, J.) 7i7

shall collect from the purchaser. and pay over to the Government A
at such intervals and in such manner as may be prescribed, a
sales tax calculated at the rate of eight 'annas in the rupee,
or at such other rate as may be notified by the Government
from time to time, on the price 0£ the liquor so sold."
In the course of the dedsion fo the case of Spencer & Co. ( 1 )
this Court observed thus : B
"It is clear from sec. 21-A of the Madras Prohibition
Act, 1937 that the sales tax which the section requires the
seller of foreign Hquor to collect from the purchaser is a tax
on the purchase,r ·and not on the seller. This is· what makes
the authorities on which counsel for the appellants relied
inapplicable to the cases before us. Under sec. 21-A the tax
c
payable is on the price of the liquor and that tax is to be paid
by the purchaser, the seller is required to collect the tax from
the purchaser which he has to pay over to the Government.
Sec. 21-A makes the seller a collector of tax for the Government
and the amount collected by him as tax. under this section
cannot therefore be a part of his turnover. Under th@ Madras D
General Sales Tax Act, 1959 the dealer has no statutory duty
to collect the sales tax payable by him from his customer, and
when the dealer passes on to the cus~omer the amount of tax
which the former is liable to pay, the said amount does not
cease. to be the price for the goods although "the price is
expressed as X plus purchase tax" (Paprica Ltd. & Anr. v. E
Board of Trade (1944) 1 All E. R. 372). But the amounts
collected by the assessees concerned in these appeals under a
statutnry obligation cannot be a part of their taxable turnover
under the Madras General Sales Tax Act, 1959."
'
We do not find any substantial difference between section 21-A .F
of the Madras Prohibition Act, 1937 and section 17(iii)(b)(l)
of ,the Adhiniyam. Whereas the le'vy under section 21-A of the
Madras Prohibition Act, 1937 was sales tax payable to the State
'Government, under seetion 17 (iii) (b) of the Adhiniyam, the levy
in question is market fees . payable to the Market Committee and
secondly wliereas the former provision stated that "every person or
institution which sells foreign liquor. . . . . . . . . . shall collect from G
the purchaser and pay over to the Government. ....... ", the latter
provision states that "If the produce is sold 1tihrough a commission
agent,· the commission agent may· rel!lize the market fees from the
pu~chaser and shall be liable to pay the same to the Committee".
· (1) [1975] Supp. S.C.R. 439. H
718 SUPREME COURT REPORTS f 981] 1 S.C.R;
A The levies in both the cases are statutory although under lthe Madras
Prohibition Act, 1937, it is a tax payable to the Government' and
under the Adhiniyam, it is a fee payable to a Market C01runittee
which is a statutory body. The only distinguishing feature between
the two laws is than whereas the Madras Act provides that every
person who sells foreign liquor shall collect sales tax from the
B purchaser, the Adhiniyam provides that the commission agent mcy
realize the market fees from the purchaser. The use of 'shall' in
the former case and of 'may' in the latter case is not of much
consequence in so far as the question involved in the present case
is concerned because in baitlh the cases the seller or the commission
agent who is ,liable to pay the tax or the fee, as the case may be,
c is entitled statutorily to realize it from the purchaser and wherever
a dealer is authorised by law .to do so, the tax or fee realized by him
. from the purchaser cannot be treated as part of the turnover
for purposes of levy of sales tax. The contention of the appellant
that market fees payable under the Adhiniyam cannot be included
in the turnover of purchases has, therefore, to be upheld.
D
There is, however, no substance in .the third contention of the
appellant that the commission ( dami) payable by a purchaser to a
commission agent operating within a market area established under
il!he Adhiniyam cannot be treated as forming part of the turnover of
purchases for two reasons-(i) the commissiQn paid by the purchaser
E
is not any tax or fee payable to a Government or statutory body which
is not a party to the contract of sale and (ii) the commission is actually
the profit of the dealer who in this case happens to be a commission
agent and should, therefore, necessarily be considered as consideration
for the sale of goods.
F
The provisions contained in section 10 of the Adhiniyam and
the Rules framed thereunder do not in any way affect the above
conclusion reached by us. Section 10 of the Adhiniyam merely
provides •that as from ·the date to be notified by the State Government
in the Gazette, no person shall, in a Principal Market Yard or Sub-
G Market Yard, levy, charge or realize, any •trade charges other than
those prescribed by rules or bye-laws made under the Adhiniy~m,
in respect of any .transaction of sale or purchase of the specified.
agricultural produce and no Court shall, in any suit or proceeding
arising out of any such transaction, allow in any claim or counter
claim, any trade charges not so prescribed. It also provides that
H such charges shall be collected from the purchasers thereby barring
the collection of such charges from •the producers of agricultural
produce who are ordinarily the sellers in a market area. Sub-rule
·-· ;

.
ANAND SWARUP v. c. s. T. (Venkataramiah; !.) 719

(1) of Rule 79 of the Rules framed under the Adhiniyam provides A
·that as from the date notified by the State Government no person
shaU, in' a Principal Market Yard or Sub-Market Yard, levy, charge
or realise, in respect of any .transaction of sale or purchase of the
specified agricultural produce any trade charges, other than those
specified by the Market Committee under sub-rule. (2) thereof, and
sub-rule (2) of Rule 79 authorises the Market Committee to make B
bye-laws prescribing the ma.Ximum commission that may be charged
by a commission agent or a broker. Sub-rule (3) of Rule 79
reiterates that all trade charges shall be payable by the purchaser.
A combined reading of section 10 of the Adhiniyam, Rule 79 ·of
the· Rules made under the Adhiniyam and the bye-laws made by
the Market Committee shows that a commission agent cannot realize c
a"ny commission higher than what is prescribed by law. The
commission chargeabae by [he commission agent is noit a sum which
. he has in his turn to pay to an authority either by way of tax or by
r,.
way of fee 'buu is only a reward for the services rendered by him. We,
therefore, reject the above submission made on behalf of the appellant. .
D
For the foregoing reasons, the appeal is allowed in part. The
inclusion of the market fees in the rnrnover of purchases of the
assessee for purposes of levy or tax under the Act is set aside. The
assessing authority is directed to modify the order of assessment in
accordance with this decision. In the circumstances of the case, the
E
parties shall bear their own costs.

N.V.K. Appeal allowed in part. F