Judgment

A. K. SARKAR J. (on behalf of S. R. Das CJI., Venkatarama Aiyar, S. K. Das JJ. and himself). This appeal raises a question under the Hyderabad General Sales Tax Act, 1950. It is from a judgment of a Full Bench of the High Court at Hyderabad, dated 11th September 1953, which, by a majority, dismissed a petition by the appellant asking for the issue of certain writs.

2. In Warangal in Hyderabad State there was an Association of oil mill owners called the Warangal Subha Oil Mill Owners Association. The appellant was a member and the Vice-President of that Association. The members of the Association in the course of their business purchased ground-nuts for the purpose of converting them into oil and trading in the same.

3. The Hyderabad General Sales Tax Act came into force on 1st May 1950. The members of the Association who were "dealers" as defined in the Act, got themselves registered under its provisions. Soon after the Act came into force the Sales Tax Officer, Warangal verbally informed the members of the Association that they would have to pay tax on the purchase of ground-nuts made by them. Thereafter certain correspondence ensued between the Association and the taxing authorities in which the Association took up the position that the members should collect tax that they were called upon to pay, from the persons from whom they bought the ground-nuts including the actual growers thereof whom we shall hereafter refer to as the agriculturists. The Association requested the Market Superintendent at Warangal to assist its members in collecting the tax from the agriculturists according to the practice prevailing in Hyderabad. The Market Superintendent informed the Association that the members should not collect any tax from the agriculturists. The Association carried on further correspondence with the higher Sales Tax Authorities insisting that its members should be allowed to collect from the agriculturists the tax on the purchases made from them and requested that the collection of tax from the members should be suspended till a decision of the question of their right to collect the tax from the agriculturists, was arrived at. On 23rd December 1950, the Commissioner of Sales Tax, Hyderabad, wrote to the Association stating that a dealer had no right to collect the tax from an agriculturist and that the sale of agricultural produce by an agriculturist did not attract the liability to tax under the Act, and therefore the members of the Association could not collect any tax from the agriculturists and that the sale of agricultural produce by an agriculturist did not attract the liability to tax under the Act, and therefore the members of the Association could not collect any tax from the agriculturists. He added that under R. 5 (2) of the Rules framed under the Act, the turnover on which the tax was payable in respect of sales of ground-nuts was the amount for which the goods were bought and therefore the sellers of ground-nuts were not liable to pay any tax. He also intimate that a dealer in ground-nuts was at liberty to collect the tax paid by him on his purchases of ground-nuts, from the person to whom he subsequently sold the ground-nuts and in the cases in which he converted the ground-nuts into oil, he was entitled to include the tax in the price of the oil sold by him. The Association then addressed the Finance Minister of the Government of Hyderabad on the same question, on 9th January 1951. Before a reply was received from the Finance Minister the members of the Association were pressed by the local Tax Authorities to submit their returns and this they thereupon did, claiming in such returns a deduction of tax on ground-nuts purchased by them from the agriculturists. Assessments were duly made on these returns but the deductions claimed were not allowed. Demands for payment of tax were thereafter made on the members of the Association in terms of the orders of assessment. The assesses preferred appeals from the or