Purchase tax on dealer's ground-nut purchases upheld; seller not liable to bear collected tax, and Article 286(3) did not apply.

A dealer purchasing ground-nuts was held liable for purchase tax under the Hyderabad General Sales Tax Act because the charging scheme treated turnover as including purchases and permitted tax to be levied at one point in the transaction chain, here on the buyer. A registered dealer could not collect tax from the agriculturist seller, since the Act allowed collection only of tax actually payable under it and the seller was not a statutory tax payer. Article 286(3) did not bar the levy, as the essential commodities legislation relied on was not treated as the relevant Parliamentary declaration for that constitutional restriction at the material time.

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Issues: (i) Whether a dealer purchasing ground-nuts from an agriculturist was liable to pay sales tax on the purchase under the Hyderabad General Sales Tax Act, 1950; (ii) whether a registered dealer had a right to collect the tax from the agriculturist seller; (iii) whether Article 286(3) of the Constitution barred the levy because ground-nuts had been declared an essential commodity.

Issue (i): Whether a dealer purchasing ground-nuts from an agriculturist was liable to pay sales tax on the purchase under the Hyderabad General Sales Tax Act, 1950.

Analysis: The charging provisions made every dealer liable on his turnover, and turnover included the aggregate amount for which goods were bought or sold. The scheme of the Act showed that tax could be levied at one point in the series of transactions, either on the seller or on the buyer, but not on both. In the case of ground-nuts, rule 5(2) fixed the taxable turnover by reference to the amount for which the goods were bought, so the buyer who was a dealer was the person liable. An agriculturist, not being a dealer, had no taxable turnover, but that did not take the dealer's purchase outside the Act.

Conclusion: The dealer was liable to pay tax on the purchase of ground-nuts, and this issue was decided against the assessee.

Issue (ii): Whether a registered dealer had a right to collect the tax from the agriculturist seller.

Analysis: Section 11 permitted a registered dealer to collect only tax payable under the Act, subject to the Rules. Since the agriculturist seller was not liable to pay any tax under the Act, no amount could be collected from him as tax. The attempted collection from the agriculturist was therefore unsupported by the statute, though the dealer might in other circumstances recoup himself in the manner indicated by the authorities.

Conclusion: The dealer had no right to collect the tax from the agriculturist seller, and this issue was decided against the assessee.

Issue (iii): Whether Article 286(3) of the Constitution barred the levy because ground-nuts had been declared an essential commodity.

Analysis: The constitutional restriction applied only where Parliament had made a law declaring goods to be essential for the life of the community in the sense contemplated by the Article. The majority held that the Essential Supplies (Temporary Powers) Act, 1946 was not such a declaration for the purpose of Article 286(3), and that the later Parliamentary enactment of 1952 could not assist the appellant because it was not in force when the levy in question was made. Accordingly, the levy was not hit by Article 286(3).

Conclusion: Article 286(3) did not invalidate the tax, and this issue was decided against the assessee.

Final Conclusion: The tax levy on the dealer's purchases of ground-nuts was upheld, the constitutional objection failed, and the appeal was dismissed with costs.

Ratio Decidendi: Under the Act, liability follows the dealer's taxable turnover on the purchase side where the Rules so provide, and a registered dealer cannot collect tax from a person who is not statutorily liable to pay it; the constitutional bar in Article 286(3) applies only to a law of Parliament declaring goods essential in the sense contemplated by that provision.

Dissenting Opinion: Bose J. would have held that once Parliament applied the Essential Supplies (Temporary Powers) Act, 1946 to Hyderabad, the declaration of essential commodities attracted Article 286(3) and the levy could not stand.

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