Murgesh and Co. vs State of Karnataka

Sri T. Balachandran, M.-The main point that arises for our consideration in all these appeals filed against the first appellate orders passed by the Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore is the validity of the levy of additional tax under S. 6-B of the Karnataka Sales Tax Act, 1957, (hereinafter called the Act) in respect of the turnover realised by the agents on behalf of non-resident principals in view of S. 9 of the Act. Therefore, all these appeals are clubbed together and disposed of by this common order.

In STA. 768/79, the appellant is a dealer in edible and non-edible oils and oil cake on own account as well as on commission basis. For the year 1975-76 the Assistant Commissioner of Commercial Taxes (Assessment-II), Bangalore levied tax under S. 6-B of the Act on the turnover on behalf of resident and non-resident principals in his order dated 2-7-1976. The first appellate authority, in his order in appeal No. AP. 829/76-77 dated 21-3-1979 has directed the cancellation of the levy of additional tax only in respect of the turnover realised on behalf of resident principals. He, however held that the additional tax is payable under S. 6-B of the Act in respect of the turnover of non-resident principals in view of S. 9 of the Act. This is challenged before us in the present appeal.

In STA. 485/77 and 128/80, the appellant is a commission agent in jaggery, chillies and tamarind on behalf of resident and non-resident principals. STA. No. 485/77 relates to the assessment for the year 1975-76 under the Act and the same is filed against the appellate order in AP. 688/76-77 dated 25-3-1977 passed by the Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City, Bangalore. STA 128/80 relates to the assessment for the year 1977-78 and the same is filed against the order passed by the Addl. Deputy Commissioner of Commercial Taxes (Appeals) Bangalore City Division, Bangalore in appeal No. AP. 340/78-79 dated 19-4-1979. In both the appellate orders referred to above the first appellate authority has held that the appellant is not liable to pay additional tax under S. 6-B of the Act in respect of the turnover realised by him on behalf of resident principals. However, the levy of additional tax under S. 6-B of the Act in respect of the turnover realised by him on behalf of non-resident principals is upheld, though it was contested in the appeals. Hence the present appeals.

STA. 460/79 is filed against the levy of additional tax under S. 6-B of the Act on the turnover realised by the appellant on behalf of resident and non-resident principals by the Commercial Tax Officer, II Circle, Bangalore for the year 1976 77 and remanding the case by the Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore in Appeal No. AP. 1122/77-78 dated 14-3-1979.

In STA. 130/80, the appellant is a Commission Agent effecting sales of Tamarind, Chillies and Jaggery on behalf of resident and non-resident principals. The Commercial Tax Officer, II Circle, Bangalore in his assessment order for the period 1-7-76 to 30 6-77 passed under the Act on 11-1-1978 levied additional tax under S. 6-B of the Act on the entire commission sales turnover. The Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore in his order in Appeal No. AP. 1808/77-78 dated 24-4-79 deleted the levy of additional tax on the turnover realised on behalf of resident principals and confirmed the levy on the turnover realised on behalf of non-resident principals. Hence the present appeal is filed before the Tribunal.

STA. 295/80 is filed against the order passed by the additional Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore in Appeal No. AP. 697/77-78 dated 25-4-1979 partly allowing the appeal arising from the assessment order passed by the Assistant Commissioner of Commercial Taxes (Assessment-II), Bangalore for the year 1976-77 under the Act on 29-6-1977. The first appellate authority rejected the claim of the appellant to cancel the levy of additional tax under S. 6-B of the Act in respect of the turnover realised on behalf of nor-resident principals and also the levy of tax under the Act on handling charges and charity of Rs. 49,440-27 realised by the appellant. The direction given by the first appellate authority to the assessing authority to grant relief in respect of the turnover realised on behalf of resident principals if their turnovers have not exceeded Rs. 10,00,000 per year is also not accepted by the appellant. Hence the present appeal.

In STA. 296/80 the appellant disputes the confirmation of the levy of additional tax under S. 6-B of the Act on the turnover realised on behalf of nonresident principals and the levy of tax under the Act on handling charges and charity of Rs. 43,913-30 for the year 1976-77 and also the direction given to the assessing authority to grant relief in respect of the turnover realised on behalf of the principals if their turnovers have not exceeded Rs. 10,00,000 per annum by the Addl Deputy Commissioner of Commercial Taxes (Appeals), Bangalore in AP. No. 695/77-78 dated 20-4-1979 arising from the assessment order dated 30-6-1977 passed by the Assistant Commissioner of Commercial Taxes (Assessment-II), for the year 1976-77 under the Act.

In STA. 454/80 the appellant disputes the confirmation of the levy of additional tax under S. 6-B of the Act on the turnover realised on behalf of the nonresident principals and also the levy of tax under the Act on handling charges and charity of Rs. 12,148-50 for the year 1976 77, and also the direction given by the first appellate authority to grant relief in respect of the turnover realised on behalf of the resident principals if their turnovers have not exceeded Rs. 10,00,000 per year by the Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore in Appeal No. AP 1328/77-78 dated 24-5-1979 arising from the assessment order dated 15-10-1977 passed by the Assistant Commissioner of Commercial Taxes (Assessment II), Bangalore for the period 1-7-1976 to 30-6-1977 under the Act.

In STA 617/80 the appellant disputes the confirmation of levy of additional tax under S. 6-B of the Act on the turnover realised on behalf of the nonresident principals and also the levy of tax Under the Act on handling charges and charity of Rs. 62,515-35 for the year 1976-77 and also the direction given to the assessing authority to grant relief in respect of the turnover realised on behalf of the resident principals if their turn overs have not exceeded Rs. 10,00,000 per year by the Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore in Appeal No. AP. 698/77-78 dated 6-8-1979 arising from the assessment order dated 30-6-1977 passed by the Assistant Commissioner of Commercial Taxes (Assessment II), Bangalore for the year 1976-77 under the Act.

In STA. 626/80 the appellant disputes the confirmation of the levy of additional tax under S. 6-B of the Act on the turnover realised on behalf of the non-resident principals and also the levy of tax under the Act on handling charges and charity of Rs. 10,743-77 for the year 1976-77 and also the direction given to the assessing authority to grant relief in respect of the turnover realised on behalf of the resident principals if their turnovers have not exceeded Rs. 10,00,000 per year, by the Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore in Appeal No. AP. 991/77-78 dated 24-5-1979 arising from the assessment order dated 22-7-1977 passed by the Assistant Commissioner of Commercial Taxes (Assessment-II), Bangalore for the year 1976-77 under the Act.

In STA 754/80 the appellant disputes the confirmation of the levy of additional tax under S. 6-B of the Act on the turnover realised on behalf of the non-resident principals and the levy of tax under the Act on handling charges and charity of Rs. 1,10,681-60 for the year 1976-77 and also the direction given to the assessing authority to grant relief in respect of the turnover realised on behalf of the resident principals if their turnovers have not exceeded Rs. 10,00,000 per year by the Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore in Appeal No. AP. 75/77-78 dated 25-10-1979 arising from the assessment order dated 29-7-1977 passed by the Assistant Commissioner of Commercial Taxes (Assessment-II), Bangalore for the year 1976-77 under the Act.

Sri C.R. Srinivasa Murthy, the learned Counsel for the appellant in STA 768/79, argued that the basic tax is levied under S. 5 of the Act, whereas the additional tax is levied under S. 6-B of the Act only on certain dealers if their turnover reaches Rs. 10,00,000 a year. Thus Ss. 5 and 6-B of the Act are independent charging provisions. An agent acting on behalf of the resident principals is assessed to tax in view of the provisions contained in S. 11 of the Act, whereas an agent of a non-resident dealer is assessed to tax in view of the deeming provisions contained in S. 9 of the Act. Though the Legislature has incorporated S. 6-B of the Act with effect from 1-4-1975 by Act 16 of 1975, they have omitted to mention the same in S. 9 of the Act When a separate charging section is introduced in the original enactment and the same is knowingly left out in the existing provision of section 9 of the Act, the appellant is not liable to additional tax under the Act.

It is further submitted by Sri C.R. Srinivasa Murthy that in S. 9(ii) of the Act, there is no specific mention of S. 6-B of the Act after the words "subsection (5) of S. 5". Evidently the intention of the Legislature is not to levy additional tax under S. 6-B of the Act if the turnover of the agent of the non-resident principal does not reach Rs. 10,00,000 in a year. It is further contended that the words used in S. 9(ii) of the Act i.e., "an agent, a non-resident" are in singular number and the assessment under the Act is to be made at the rates leviable in respect of the turnover of the business of such non-resident in which the agent is concerned. Therefore the turnover of each non-resident principal should reach Rs. 10,00,000 to make the agent liable to additional tax under the Act. However, the first appellate authority has mis-construed the provisions of the Act and held that the agent is a dealer for all purposes of the Act

The learned counsel submitted that in view of the decision of the High Court of Karnataka in Gudathur Bheemappa v. State of Karnataka, (1980) 2 Kar L.J. 364 and the decision of this Tribunal in M.V. Uppin v. State of Karnataka, 1979 KLJ. Tri 230, the appellant is not liable to additional tax under the Act as long as the Act recognised the nonresident as a dealer under S. 2(1)(k)(iv) of the Act. He further submitted that the Supreme Court in Nestle''s Products (India) Ltd. v. State of Orissa, (1974) 33 STC 356, at page 360 has recognised the non-resident as a dealer under the Sales Tax Law. Since the turnovers of the individual non-resident principals have not reached Rs. 10,00,000 the appellant has not paid the additional tax under S. 6-B of the Act as he is governed by the law of agency. It is further submitted that the Supreme Court of India has held in State of Madras v. Cement Allocation Co-ordinating Organisation, (1972) 29 STC 114 SC, that the agent would be entitled to claim exemption if the principal could have claimed it had the principal sold the goods himself The assessing authority cannot aggregate the transactions of the several known principals at the hands of the agent and then make the agent liable for payment of additional tax. Thus it is submitted that the liability of the agent is co-extensive with that of the principal. Though the agent is considered as dealer he is not converted into a principal for all purposes under the Act.

Continuing his arguments Sri C.R. Srinivasa Murthy submitted that the introduction of S. 9 of the Act to the Statute is for the purpose of chargeability and collection of tax through the agent of a non-resident principal by creating a legal-fiction deeming the agent of the nonresident principal to be a dealer. The reason why an agent is being assessed to tax under the Act is that he is only a convenient representative for assessment, levy and collection of tax of a non-resident principal who is not within the jurisdiction of the assessing authority. But it could not be extended to change the real nature of the business activities In this connection he relied upon a decision of the Supreme Court of India in The State of Mysore v. P.B. Hussain Khunni & Co., (1967) 19 STC 215, wherein at page 220, it is observed as follows:

"The scheme of S. 14-A of the Act is that it is really the "non-resident" principal who is assessed to tax and the agent is deemed to be a dealer in respect of his business, as a convenient representative for assessment, levy and collection of the tax. The assessment is with reference to the sale on the principal''s account and the rate of tax are those applicable to the principal. The agent is given a statutory right to retain the moneys of the principal in his hands equivalent to the tax assessed or paid. Under S. 14-A, sub-section (ii), the agent is made liable to pay the tax irrespective of the fact whether the amount of turnover of the business was less than the minimum specified in S. 3(3) or not. In case the turnover happens to be less than the minimum specified in S. 3(3) the principal is given a right to obtain a refund under S. 14-A(iv). The reason for the rule excluding the provisions of exemption under S. 3(3) while assessing the agent appears to be that it might happen that the non-resident principal would be employing more than one agent and if the agents were allowed to take advantage of the provisions as to minimun turnover in S. 3(3), the principal would be able to evade taxation by entrusting his sales to several agents each to the limit of a minimum turnover."

Therefore, if the principal''s turnover is Rs. 10,00,000 or more the agent is liable to additional tax under S. 6-B of the Act. It is submitted that the authorities have not established that the principal''s turnover is Rs. 10,00,000 or more and therefore the appellant is not liable to additional tax under S. 6-B of the Act.

A decision of the Madras High Court in Deputy Commissioner (Commercial Taxes) Coimbatore v. Indian Refrigeration Industries Pvt. Ltd., (1980)46 STC 264, was also brought to our notice wherein it was held by Rama Prasad Rao C.J., agreeing with Balasubramanyam J. as follows:

"For interpreting taxing statutes of various States it is only the general scheme and structure that has to to be compared and courts ought not to attempt at meticulous and word to word comparison of the comparable and relevant sections in the different enactments."

In this view of the matter the decision of the Supreme Court of India reported in 19 STC 215, a case that has arisen in the State of Karnataka, is applicable to the facts of the present case and the State is bound to accept the same.

Moreover, it is submitted that additional tax under S. 6-B of the Act cannot be collected from the customers. The agent has to recover the additional tax from his principals. Further the scheme of the Act is not to levy additional tax on a dealer whose turnover is less than Rs. 10,00,000 in a year. The exception in S. 9 of the Act is only for the purpose of basic tax. Therefore, it is submitied that as long as the non-resident principal is not liable to additional tax under S. 6-B of the Act, the agent of such non-resident principal is also not liable to additional tax.

In support of the contention by the appellant in para 3 of the grounds of appeal, that the Commissioner of Commercial Taxes, Karnataka, Bangalore has held in SMR 15/78-79 dated 31-3-1979 in the case of M.V. Ramaiah and Sons, New Tharagupet, Bangalore that a commission agent need not be assessed to payment of additional tax under S. 6-B of the Act not only in respect of his transactions on behalf of resident principals, but also in respect of his non-resident principals whose turnover did not reach Rs. 10,00,000 per year, the learned Sales Tax Practitioner has filed a photo-stat copy of that decision. We find from the assessment records relating to STA 768/79 that the turnover of each of the nonresident principals through the appellant have not reached Rs. 10,00,000 per year.

Sri G.S. Siddamallappa, the learned Sales Tax Practitioner appearing on behalf of the appellants in STA 485/77 and 128/40 concurred with the arguments of Sri C.R. Srinivasa Murthy in STA 768/79. He has also filed a copy of the decision of the Commissioner of Commercial Taxes in the case of M.V. Ramaiah & Sons, N.T. Pet, Bangalore in SMR 15/78 79, dated 31-3-1979 holding that the agents of non-resident principals are on the same footing as the agents of resident principals with regard to the levy of addditional tax under S. 6-B of the Act. He has also argued that the appellants are not liable to additional tax under S. 6-B of the Act as the turnovers of each of their principals are less than Rs. 10,00,000 in a year. It is also submitted by him that the agent whose turnover is less than Rs. 10,00,000 in a year will escape the liability of additional tax under S. 6-B of the Act even though the total turnover of the non-resident principal through several agents in the State is more than Rs. 10,00,000 and vice-versa, if the decision of the first appellate authority is accepted, which is against the scheme of the Act.

In STA. 460/79, Sri B.R.V. Goud, argued on the same lines as in STA. 768/79, STA. 485/77 and STA. 128/80. He further submitted that the intention of the Legislature is to levy additional tax under S. 6-B of the Act on big dealers who have got huge turnovers of Rs. 10,00,000 and above, to mop up the extra profit earned by them without allowing them to pass on the same to the customers. Therefore the non-resident principals with meagre turnovers realised through their agents in the State should not be held liable to additional tax under S. 6-B of the Act which will amount to hostile discrimination. The total turnover of the appellant is just above Rs. 10,00,000 including the turnnovers of several non-resident principals and also his own turnover. In such an event, he submitted that he is not liable to additional tax under the Act. He has also relied upon a clarification issued by the Commissioner of Commercial Taxes in MSR/CR. 66/75-76 in page 19 of the Commercial Taxes Bulletin for the quarter ending June, 1975 to the effect that if the turnover of each principal at the hands of the agent is less than Rs. 10,00,000, then no additional tax is payable. Further, it is submitted by the learned counsel that no proposition notice is issued by the assessing authority before levying the additional tax under S. 6-B of the Act. Therefore, he prayed that the orders passed by the lower authorities levying additional tax under S. 6-B of the Act may be set aside.

Sri T.H. Hanumantharayappa appearing on behalf of the appellants in STA. 130/80, 295/80, 296/80, 454/80, 617/80, 626/80 and 754/80 did not advance any arguments against the direction issued by the first appellate authority to the assessing authority to grant relief in respect of the turnovers realised on behalf of resident principals if their turnovers have not reached Rs. 10,00,000 per year after due verification. Since we do not find anything wrong in issuing such direction which is according to law, we do not consider it necessary to modify the direction already issued.

Except in STA. 130/80, the learned counsel for the appellant has challenged the levy of tax under the Act on the realisation of handling charges and charity in all other cases. During the course of arguments, the learned sales Tax Practitioner brought to our notice that he has no objection to accept a decision of this Tribunal in STA. 488/77, dated: 22-12-1978 wherein it was held that charity does not form part of the turnover of business, but handling charges form part of the turnover of business. In view of the submissions of the learned Sales Tax Practitioner, the assessing authority may allow deduction in respect of the amount collected towards charity and made part of the taxable turnover of the appellants. However, the levy of tax on the realisation of handling charges is upheld as the same forms part of (he turnover of the business.

In STA. 617/80 the appellate authority has issued direction to the assessing authority to calculate the additional tax on a turnover of Rs. 10,70,792-45 relating to the sales of taxable goods through other agents by the appellant and issue revised demand notice accordingly (vide: para 8 of the appeal order in AP. 698/77-78, dated: 6-8-1979 of the Addl. Deputy Commissioner of Commercial Taxes (Appeals), Bangalore City Division, Bangalore).

Sri T.H. Hanumantharayappa has argued that the appellant has not been given a notice about this additional imposition by the appellate authority as required by R. 33 of the Karnataka Sales Tax Rules 1957. Since no opportunity is given, he prayed for deletion of this part of the order. We have to accept the contention of the learned counsel for the appellant, as we find from the record that no notice is issued to the appellant as required by the Karnataka Sales Tax Rules 1957. Hence the direction issued by the first appellate authority in this regard is quashed. However, the assessing authority is free to verify whether the agents through whom the appellant has sold the goods have paid additional tax under S. 6-B of the Act and in case the agents have not paid the additional tax on behalf of the appellant, the assessing authority is at liberty to proceed with the levy of additional tax under S. 6-B of the Act according to law.

As regards the levy of additional tax under S. 6-B of the Act on the turnover realised on behalf of non-resident principals in all the cases represented by Sri T.H. Hanumantharayappa, the learned Sales Tax Practitioner reiterating the arguments of the other counsel, submitted that the additional tax under S. 6-B of the Act is to be recovered only from dealers who make huge turnover as could be made cut from the language used in Ss. 5 and 6-B of the Act. The levy of tax under S. 5 of the Act is on the turnover of the dealer, whereas the levy of additional tax under S. 6-B of the Act is on the status of the dealer according to his capacity. It is submitted that sub sec. (5) of S. 5 of the Act controls S. 5, whereas S. 6-B of the Act is an independent charging section. S. 9 of the Act is an enabling section or machinery section which does not control the charging section. In fact the charging section controls S. 9 of the Act. He submitted that S. 6-B of the Act is introduced into the Statute subsequently. But S. 9 of the Act is not suitably amended even though that was in the Statute book to enable the levy of additional tax under S. 6-B of the Act irrespective of the minimum turnover of the nonresident principal. Cl. (iv) of S. 2(1)(k) of the Act includes a non-resident dealer or an agent of a non-resident dealer, a local branch of a firm or Company or association situated outside the State in the definition of "dealer". According to Sri T.H. Hanumantharayappa the manager or the agent of the non-resident dealer is brought to S. 9 of the Act to enable the levy and collection of tax. The dealers under the Act are directly liable to tax under the Act with certain rights, whereas the deemed dealers are recognised to realise the revenue to the State on behalf of the non-resident principals. S. 9 of the Act deals with a deemed dealer under the Act. Sri T.H. Hanumantharayappa submitted that sub-secs. (1) to (3) of S. 14-A of the Madras General Sales Tax Act, 1939, are in pari materia with S. 9 of the Act and therefore the liability of the agent of the nonresident principal to pay additional tax under S. 6-B of the Act, is co-extensive with that of the non-resident principal in view the decision reported in (1967) 19 STC 215

Our attention was drawn by the learned counsel for the appellant to a decision of the High Court of Andhra Pradesh in Irri Veera Raju v. Commercial Tax Officer, Tadepalligudam, (1967) 20 STC 501, in which it was held that the words "on behalf of any principal" occurring in the definition of "dealer" in S. 2(1)(e)(iv) of the Andhra Pradesh General Sales Tax Act, 1957 indicate that the agent is a dealer in respect of each of the principals, that he is deemed to be as many dealers as there are principals and therefore the total turnover of the petitioners in respect of the several principals could not be computed for assessing them, when in fact the turnover of each one of the principals was below the non-taxable limit, i.e. Rs. 10,00,000 each The same principle of computation of turnover is applicable to the present cases for levy of additional tax under S. 6B of the Act on the agents of non-resident principals.

The learned counsel for the appellant further argued that the first appellate authority has made an erroneous appreciation of the case law reported in (1969) 24 STC 367 and has come to wrong conclusions. The authority has quoted a passage which is out of context from that judgment without going through the whole judgment.

Sri T.H. Hanumantharayappa submitted that according to S. 9(ii) of the Act in respect of the business of non-resident dealers, the agent is to be assessed to tax. As per the observation of the Madras High Court as reported in State of Madras v Abdul Shukoor & Co., (1975) 35 STC 210, the liability of the agent is co-extensive with that of the principal. The counsel also drew our attention to a decision of the High Court of Orissa in Nestle''s Products (India) Ltd. v. State of Orissa, (1974) 33 STC 356, in support of his contention.

Finally, Sri T.H. Hanumantharayappa brought to our notice that the disputes that have come up before this Tribunal related to the appellate orders passed by one single authority only. When the Commissioner of Commercial Taxes who is the Chief Executive of the Department has passed a considered order in SMR/15/78-79, the appellate authority should have followed the decision of a superior Tribunal. His failure to follow the decision of a superior authority is a breach of public duty resulting in administrative chaos. In this connection we would like to reproduce the observations made in the ruling of the Allahabad High Court in Indian Hume Pipe Co. Ltd. v. State of U.P., (1972) 29 STC 487, 492, which run as under:

"It is abundantly clear that in the instant case the Sales Tax Officer had not placed on record any fresh material which could justify his sticking to his original view which had been reversed by the revising authority. In fact no attempt has been made in the counter-affidavit filed on behalf of the department to show that the Sales Tax Officer was justified in ignoring the decision of the revising authority in respect of the assessment year 1961-62. In our opinion the course adopted by the Sales Tax Officer is highly improper, if not illegal. As has been pointed out by the Supreme Court in Bhopal Sugar Industries Ltd. v. Income Tax Officer, Bhopal, if the inferior officers in the hierarchy of Tribunals were permitted to ignore the directions and decisions of a superior officer, it would strike at the very root of the administration of justice and would produce chaos. Such conduct on the part of inferior officers would contribute towards arbitrariness and perversity in assessment orders."

Concluding his arguments, the learned Sales Tax Practitioner prayed for setting aside the the levy of additional tax under S. 6-B of the Act as the assessing authority has not proved that the turnover of the non-resident principals in the State is more than Rs. 10,00,000.

It is thus contended in all the cases that this Tribunal had already held in M.V. Uppin v. State of Karnataka, 1979 KLJ. Tri 230, that the agent is not liable to additional tax under S. 6-B of the Act in respect of the transactions effected on behalf of the principals in case the turnover of each of the principals is below Rs. 10,00,000. The same view is confirmed by the High Court of Karnataka in Gudathur Bheemappa v. Commercial Tax Officer, I Circle, Bellary, (1980) 2 Kar L.J. 364. It is thus submitted that though this decision relates to the case of an agent of resident principal who is governed by S. 11 of the Act, the same principles would apply even in the case of an agent of non-resident principals. In support of this, the order of the Commissioner of Commercial Taxes in SMR/15/ 78-79 dated 31-3-1979 has been cited and a photo-stat copy of the same has been filed.

The learned State Representative, Sri B.S. Thyagaraju, on the other hand contended that the appellants fulfill the conditions specified in S. 6-B of the Act read with S. 9 and therefore they have to be taxed as if the entire turnover is their own. He submitted that the decision of the Supreme Court of India in State of Mysore v. P.B. Hussain Kunhi & Co., (1967) 19 STC 215, cannot come to the rescue of the appellants since the provisions contained in S. 14-A of the Madras General Sales Tax Act is not in pari materia with S. 9 of the Act. According to him clauses (iv) and (v) of S. 14-A of the Madras Act providing for the refund to the nonresident principals are important provisions and their absence in S. 9 of the Act is significant and makes the Supreme Court decision distinguishable. He further submitted that the agent of a nonresident principal is not separately registered in respect of each principal since the agent also does not require such separate registration. He, therefore, submitted that in view of the fiction in S. 9 of the Act, the agent of the non-resident principal is himself to be treated as a dealer and the entire turnover in his hand should be considered as his own turnover. Therefore, he submitted that the observation of the Supreme Court of India in 19 STC 215 at para 2, page 220 are relevant and submitted that it is quite possible that a non-resident principal may act through several agents each of whom may not have turnover of more than Rs. 10,00,000 and they escape the liability of additional tax. In order to over-come such a situation the fiction in S. 9 of the Act, according to him, makes the agent himself the dealer and in doing so the legislature virtually ignored the principal and considered the agent as liable to be taxed. His answer to the contention that the levy of additional tax under a separate section of the Act is that in reality the additional tax increases the rate of tax. For this he relied upon the decision of this Tribunal in Doddaballapur Spinning Mills Ltd. Coimbatore v. State of Karnataka, 1979 Kar L.J. (Tri) 235. Regarding the Statement of objects and reasons for the introduction of the additional tax, he drew our attention to the part dealing with Statute, Rules and Notifications in 35 STC in which it was published and submitted that the statement of objects and the reasons did not mention anywhere that the additional tax was ought to be levied only upon big dealers. All that it says is that the measure was intended to augment the revenues of the State.

After careful consideration of the arguments for and against the appellants, we are inclined to feel that the contentions urged before us on behalf of the appellants are acceptable to us. We agree that the decision of the Supreme Court of India in P.B. Hussain Kunhi''s case, (1967) 19 STC 215, relating to S. 14-A of the Madras General Sales Tax Act, 1939, is fully applicable to the facts in these cases. The fact that clauses (iv) and (v) as found in the Madras Act are not incorporated in S. 9 of the Act, does not mean that the two provisions are not similar. The two provisions are substantially identical The relevancy of the omitted clauses arises only when the question of claim for refund by a non-resident principal would arise. In other words, even in the absence of that provision a non-resident principal can make a claim against the agent for refund since the non-resident principal is recognised under the Act in the definition of the word ''dealer'' in S. 2(1)(k) of the Act which includes a non-resident dealer also Further merely because S. 9 created a fiction making the agent of a non-resident principal as a dealer it does not convert the agent into a principal for all purposes under the Act. (Vide: Supreme Court decision in State of Madras v. Cement Allocation and Co-ordinating Organisation, (1972) 29 STC 114 SC. It was urged on behalf of the appellants that the Sales Tax Act being a State Act, the Legislature can modify the relationship between a principal and an agent for limited purposes of assessment and recovery of the tax but cannot change the law of agency itself which is a Central enactment. The learned State Representative submitted that by the fiction in S. 9, the law of agency has been modified and the non-resident principal has been completely left out of the picture In our opinion this is not a correct way of looking at the provision. Whether the non-resident principal is still a dealer within the Act or not has already been decided in a number of cases. In V. O. Vakkan v. State of Madras, (1955) 6 STC 647 SC, the Supreme Court of India has clearly held that a person whether he is a resident or non-resident is a dealer within the meaning of the Madras General Sales Tax Act, 1939, if he carries on the business of selling the goods within the State of Madras. Explanation (2) to S. 2(b) of the Madras General Sales Tax Act, 1939 makes the agent, (if any) also a dealer and does not intend to take the non-resident principal outside the scope of the liability. The Orissa High Court while considering a similar provision in Nestle''s Product (India) Ltd. v. State of Orissa, (1974) 33 STC 356, held that:

"As the assessee carried on the business of selling goods within the State of Orissa, it was a dealer and merely because it had an agent within the State its liability qua-dealer under the Act did not cease."

While disposing of the case in Guduthur Bheemappa v. Commercial Tax Officer, I Circle, Bellary, (1980) 2 Kar L.J. 364: 47 STC 121, the High Court of Karnataka has observed in page 123 as follows:

"The learned counsel also cited a decision of the Kerala High Court in Jayanthilal & Bros. v. Appellate Assistant Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam, to the effect that there must be as many separate assessments as there are non-resident principals and could not be considered together in a single assessment. The decision of the Kerala High Court was in relation to S. 18 of the General Sales Tax Act, 1125, applicable to that State and in relation to a provision akin to S. 9 of the Act."

This evidently shows that the liability of the agent under S. 6-B of the Act is coextensive with that of the non-resident principal though we are not giving an opinion whether separate assessments are to be made in respect of each non-resident principal.

These decisions provide ample justification for the stand of the appellants. If in any case there were to be a principal selling through several agents, he cannot escape his liability to pay additional tax under S. 6-B of the Act as the turnovers of the principal in the State can be got verified. The question whether additional tax leviable under S. 6-B of the Act is a new charging section or not is not very relevant for deciding the issue before us. The Supreme Court of India no doubt observed in S. Kadar v. State of Kerala, (1974) 34 STC 73 SC, that additional tax is only an enhancement of rate of tax in the ease of dealers having turnover of more than Rs. 10,00,000 a year. But these observations were made in the context of deciding the constitutional validity of the additional tax The question whether the provision relating to additional tax constituted a new charging section or not did not arise for consideration in that case. Similarly in 1979 Kar.LJ. (Tri) 235, there was no question whether additional tax was a new charging provision or not. However, having regard to the fact that the liability to pay additional tax arises or is created in the circumstances specified in the new section, we must hold that this is an additional charging provision. Therefore we are in respectful agreement with the views of the learned Commissioner of Commercial Taxes when he said that Ss. 5 and 6-B are two independent charging sections.

The question whether an agent of non-resident principal should separately register himself in respect of each principal is not a relevant one. Registration is intended to have the dealers on the rolls of the Department.

As pointed out by the learned State Representative, the statement of objects and reasons to the amending Bill, which inserted S. 6-B into the Act does not specifically say that the additional tax is only intended to tax the big dealers. Whatever may be the object of inserting this new provision to the Act the chief aim is to augment the State Revenue. The interpretation of the provisions contained in S. 9 has to be made on the basis of the language in that section itself which does not permit the levy of additional tax under S. 6-B of the Act on an agent whose turnover on behalf of a nonresident principal is less than Rs. 10,00,000 in a year. We, therefore, hold that no additional tax can be levied in such cases.

In the result, the appeals succeed in so far as the levy of additional tax under S. 6-B of the Act on the agents of non-resident principals is concerned.

In view of the above, we pass the following order:

All these eleven appeals are allowed in so far as the levy of additional tax under S. 6B of the Act on the turnovers realised by the agent on behalf of non-resident principals are concerned The levy of additional tax under S. 6-B of the Act on the commission agency turnovers with out verifying the turnovers of the nonresident principals at the hands of the agents in the State is set aside The assessing authority is at liberty to levy additional tax under S. 6-B of the Act in these cases if it is established that each of the principals has realised a turnover of Rs. 10,00,000 or more during the year through their agents in the State.

In STA. 295/80, STA. 296/80, STA. 454/80, STA. 617/80, STA. 626/80 and STA 754/80, the appeals are allowed in respect of the levy of tax under the Act on the realisation of charity and made part of the taxable turnovers. However, the levy of tax under the Act on the realisation of handling charges and made part of the turnovers in all these cases is upheld.

In STA. 617/80 the directions issued by the first appellate authority to calculate additional tax on a turnover of Rs. 10,70,792-54 relating to the sales of taxable goods through agents is quashed as narrated in the earlier part of this order. The assessing authority may initiate suitable proceedings as already directed in this order.

The institution fee paid in all these cases shall be refunded. Keep original in STA. 768/79 and copies in the other appeals.