DELHI CLOTH AND GENERAL MILLS CO. LTD. ETC. versus COMMISSIONER OF SALES TAX, INDORE

Citation: [1971] SUPP. 1 S.C.R. 945 · Decided: 28-07-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

845 
DELm CLOTH AND GENERAL MILLS CO. LTD. ETC. 
A 
v. 
COMMISSIONER OF SALF.S TAX, INDORE 
July 28, 1971 
[K. S. HEGDE AND A. N. GROVER, JJ.) 
Madhya Pradesh General Sales Tax A.ct, 1958, ss. 2(c), (o), (t), and 4-
Sales Tax recovered from buyer-If part of turnover. 
The assessee, while selling goods, charged the sales tax separately 
and collected it from the buyers. It did not include the sales-tax so collec· 
B 
ted in its turnover. The authorities under the Madhya Pradesh General 
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Sales Tax Act, 1958, as well as the High Court, held that the sales tax col-
lected from the buyers was a part of the price of the goods sold and tbore-
fore should have been included in the assessee's turnover. 
In appeal to this Court, 
HELD: · Under s. 4 of the Act the liability to pay tax is that of the 
dealer. There is no provision in the Act imposing any liability on the 
purchaser to pay the tax so imposed on the dealer and there ~ no law 
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empowering the dealer to collect the tax from bis buyer. Hence the dealer 
would not be legally entitled to collect the tax payable by him from his 
buyer, and whatever collection the dealer makes from his customers can 
only be by adding the tax to the price, so that, the tax becomes part of 
the valuable consideration given by a purchaser for the goods purchased 
by him. 
Therefore, the distinction between the two amounts-tax and 
price-loses all significance, and the tax becomes a part of the sale price as 
defined in s. 2(c) of the Act and must be taken into consideration in com-
E 
puling the turnover. (9480-G ; 950A) 
Tata Iron & Steel Co. Ltd. v. Stat• of Bihar, [1958) S.C.R. 1355, Mis. 
·George Oaks (P) Ltd. v. State of Madras, 12 S.T.C. 476, Paprika Ltd, .t 
Anr. v. Board of Trade, (1944) All. E.R. 372 and Lov. v, Norman Wright 
(Buil<krs) Ltd., [1944] I All. E.R. 618, referred to. 
Deputy Commissioner of Commercial Taxes, Coimbatore, v. M. Krisll-
naswamy Mudaliar & Sons, 5 S.T.C. 88, distinguished. 
QVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1272 
and 1273 of 1967. 
Appeals by special leave from the judgment and order dated 
July 10, 1967 of the Madhya Prad_esh High Court in Misc. Civil 
Cases Nos. 61 and 62 of 1967. 
AND 
Civil Appeal No. 2453 of f968. 
S. T. Desai, A. N. Sinha and G. S. Chatterjee for the appel-
lant (in C.As. Nos, 1272 and 1273 of 1967). 
A. N. Sinha, for the appellant (in C.A. No. 2453 of 1968). 
I. N. Shroff, for the respondent (in all the appeals). 
6~-1 s.c. India/71 
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946 
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B 
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SUPRBMll COURT REPORTS 
(1971] SUPP. S.c;.R
0 
The Judgment of the Court was delivered by 
Hegde, J.-These appeals by special leave arise trom the 
decision of the High Court of Madhya Pradesh in three references 
under s. 44(1) of the Madhya Pradesh General Sales Tax Act, 
1958 (to be hereinafter referred to as the Act). Those references 
were made at the instance of the assessee who is the appellant in 
all these appeals. The question of law referred to the High Court 
for its opinion in each one of these cases is identical and that 
question reads: 
"In the facts and circumstances of the case is the 
sales tax recovered by the petitioner a part of the sale 
price as defined in clause (o) of Section 2 of the Madhya 
Pradesh General Sales Tax Act, 1958." 
Herein we are concerned with. the assessment years 1961-1962, 
1962-1963 and 1963-1964. The assessee is-a dealer in Vanaspati. 
The facts found are that while selling Vanaspati, the assessee 
~barged the sales tax separately and collected the same from his 
buyers. To each of its buyer it issued a receipt in respect of 
each sale transaction wherein it showed the price of the goods as 
such and the sales tax payable on the price of those goods. In the 
turnover returned it did not include the sales tax collected by it 
from its buyers but the authorities under the Act as well as the 
High Court held that sales tax collected by it from its buyers was 
a part of the price of the goods sold and therefore the same. will 
have to be taken into consideration in computing its turnover. 
The assessee is challenging that conclusion. 
Section 4 of that Act is the charging section. Sub-s. (!) thereof 
says: 
"Every dealer whose turnover during a period of 
twelve months inJt:nediatelv preceding the commencement 
of this Act exceeds the limit specified in sub-section (5), 
shall from such commencement be liable to pay tax 
under this Act on his taxable turnover in respect of sales 
or supplies of goods effected

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