N. Deviah Gowder vs Commercial Tax Officer

Veeraswami, J.—The Commercial Tax Officer, Coimbatore (North), served upon the petitioner a notice dated 29th September, 1959,

intimating him that with the coming into force of the Madras General Sales Tax Act, 1959, on and from 1st April, 1959, the sales of arecanuts by

him could no longer be classified as agricultural produce within the definition of turnover in Section 2(r) and explanation (1) and that he was liable

to pay tax on his sales of arecanut from that date. The officer, therefore, called upon him to file returns in the prescribed form showing his estimated

total and taxable turnover for the year 1959-60, which should be based on the turnover of actual sales of arecanut the petitioner had made during

1958-59. The notice wound up by a warning that in default of submission of return as required, his turnover would be estimated to the best of

judgment at Rs. 6 lakhs and he would be provisionally assessed for the year 1959-60. Certain correspondence followed between the petitioner

and the Commercial Tax Officer, in which the petitioner maintained that he being a producer of arecanuts which constituted an agricultural

produce, sales thereof were not taxable, while, on the other hand, the department stressed the position that, since the amendment of the Act in

1959 introducing explanation (1), the sales of arecanuts constituted a turnover liable to tax. In this petition under Article 226 of the Constitution the

petitioner seeks a rule prohibiting the respondent from proceeding further pursuant to the notice aforesaid.

On behalf of the petitioner two points are strenuously urged. One of them is that the petitioner is not a dealer. The basis of this contention is that

the petitioner is himself an agriculturist who grows green arecanuts and in order to market the arecanuts, he husks them without subjecting them to

any kind of process, physical or chemical. It is said, therefore, that the idea of the petitioner in selling the arecanuts is not in commercial but the

selling is a part of the petitioner''s activity in agriculture. In other words, the argument is that where for purposes of marketing, an agriculturist who

grows arecanuts happened to remove the husk from the arecanut in order to make the same marketable that by itself will not render him a dealer

within the meaning of the Act, because his purpose is not to engage in trade or business in the sense of commerce. The second ground which is

urged pertains to the proviso to the definition of ""turnover"". The proviso excludes from the purview of turnover agricultural produce. Explanation

(1) in effect limits the scope of the proviso and states that agricultural or horticultural produce shall not include such produce as has been subjected

to any physical, chemical or other process, being made fit for consumption, save mere cleaning, grading, sorting or drying. According to the

petitioner all that is done to the arecanuts produced by him is to remove the husk from them and by whatever name this removal of the husk is

called, it is not a physical, chemical or other process within the meaning of the first explanation to make the arecanuts fall outside the scope of the

proviso. Unfortunately in this case the petitioner has come too early to this Court. Neither the petitioner has placed before the department the

necessary facts, nor the department has had an opportunity to assess the facts with reference to which the two grounds urged for the petitioner in

this Court can properly be decided. There is, however, no difficulty in pointing out that an agriculturist merely because he happens to market his

crops, will not be a dealer ; nor will he be a dealer because the agricultural produce has been put to some kind of treatment only in order to make

it marketable. Whether an agricultural produce has lost its character as such by a process contemplated by explanation (1) will depend upon the

particular facts in each case. It should be examined on the facts found, as to how far a processing has brought about a change to the original

produce as to alter its character to such an extent, as to justify the conclusion that the produce after treatment is a different produce and not the

same agricultural produce. In this case in the correspondence in the relevant file it does not appear that the petitioner ever brought it to the notice of

the Commercial Tax Officer that the arecanut sold by him underwent only husking and no process of any kind. In the absence, as I said, of the

necessary facts, it is not possible for this Court to express any opinion. But it is expected that the department, as and when the facts are

established, will decide (1) whether the petitioner is a dealer, and (2) if so, whether on the materials placed before it, the arecanuts marketed by

him will not fall within the ambit of the proviso to the definition of turnover.

The question whether a person is a dealer is more or less a jurisdictional question and in the first instance, the assessing authority will have the

right to decide it. If the assessing authority arrived at the conclusion that the petitioner is a dealer, it is for the petitioner to establish to its satisfaction

that the aggregate amount for which he sold the arecanuts is not turnover as defined under the Act, because it falls within the scope of the proviso.

It is contended for the petitioner that the Commercial Tax Officer has already prejudged the two questions. I do not think so. The replies of the

Commercial Tax Officer will have to be understood in the light of the communications sent by the petitioner to him. In these communications, the

petitioner did not take up the position that the arecanuts sold by him underwent only husking and no other treatment. In the circumstances, as and

when the petitioner files a return for the year in question, the authorities will determine the two questions afresh, without bringing to bear upon them

any preconceived or prejudiced notions, but in the light of the facts found by the department on the materials produced by the petitioner.

The rule nisi is discharged and the petition is dismissed. No costs.