The Public Prosecutor vs Ebrahim Sarfuddin and Company and Another

Somasundaram, J.—This is an appeal by the State against the acquittal of the respondents by the Fourth Presidency Magistrate for an

offence u/s 15(b) of the Madras General Sales-Tax Act.

For 1953-54 the respondents submitted a return for Rs. 1,88,000 and odd but the authorities after checking found that the turnover was Rs.

3,25,000 and odd. In this estimate of the gross turnover the authorities have included the sales-tax recovered by the respondents which apparently

was omitted in the return submitted by the respondents. By a decision of this Court in Dy. Commissioner of Commercial Taxes v. Krishnaswami

Mudaliar and Sons (1954) 2 M.L.J. 151, it was held that the turnover of a dealer does not include the sales-tax that are collected on the goods

sold by dealer. But the authorities on the basis that the sales-tax is also included in the turnover have been collecting tax on the total turnover. By

the decision of this Court a situation was created by which portion of the tax collected on the basis of the turnover included in the sales-tax will

have to be returned. The Legislature therefore intervened and passed Act XVIII of 1954 which came into force on the 14th July, 1954. By this

Act they validated all the taxes collected up to date, that is, the taxes on the turnover including the sales-tax as well. u/s 3(2) of the Act a provision

is made as follows:

Nothing in Sub-section (1) shall be construed as authorising any officer in assessing any dealer in the exercise or purported exercise of jurisdiction

or powers conferred by the principal Act to include in the turnover of the dealer amounts collected by him after 1st April, 1954 by way of tax

under the principal Act.

Under Sub-section (1) all assessments and collections made, on the basis of the turnover including sales-tax were validated. But under this

clause there is a Proviso that no act or omission on the part of any person shall be punishable as an offence which would not have been so

punishable if this Act had not been passed. The respondents already paid the taxes on the basis of the return. In this case after the return which did

not include the sales-tax, the authorities, that is the sales-tax officers issued notice in February, 1955 calling upon the respondents to pay the

balance of tax due to them on the basis that the turnover includes the sales-tax as well. The respondent did not pay the balance of the tax. On this

the prosecution is for failure to pay the tax and to recover the balance of the tax due.

The Fourth Presidency Magistrate who tried this case held that the Proviso to Section 3 will apply and therefore, the respondent is not liable to

pay. Against this order of acquittal this appeal has been preferred.

Two things are clear : (1) Before this Act came into force, the turnover would not include the sales-tax as well. If the authorities included the

sales-tax in the turnover and demanded the tax due and if the assessee pays only the tax on the turnover without including the sales-tax, then surely

the authorities cannot prosecute him for failure to pay the excess tax as demanded by them. After this Act came into force the authorities cannot

include in the turnover the sales-tax as well; and if they include it, it will be illegal and any demand based on such inclusion will also be illegal and

failure to pay the excess tax will not be an offence. In between these two circumstances Act XVII of 1954 has intervened and has validated all the

taxes collected before this Act came into force based on the inclusion of the sales-tax as well; and the question now is having regard to the fact that

it has validated such collection of tax whether the sales-tax authorities can now call upon them to pay the excess tax and for failure of which

whether there can be a prosecution. In as much as under Clause (2) of Section 3 they cannot include the sales-tax in the turnover and as u/s 3(1)

all orders passed and all action taken by any officer in the exercise or purported exercise of jurisdiction or powers conferred by the principal Act

were validated the authorities may be entitled to collect the taxes in respect of returns before the 1st of April, 1954, including the sales-tax in the

turnover. But the Proviso has been specially provided for not prosecuting those who were not liable if this Act were not passed. It seems to me

that the only restriction that has been placed upon the authorities by the Proviso is that they cannot prosecute a person if he has not paid tax as

assessed by the authorities that is based on the turnover including the sales-tax if they have already passed orders taxing him on that basis. But

certainly they are entitled to collect it in other ways than by prosecution. The lower Court was therefore, justified in holding that the authorities

cannot prosecute him for the offence.

The acquittal is justified and the appeal is dismissed.