The court established that the surcharge on sales tax is a tax on the sale of goods and is justified by Entry 54 in List II of the Constitution. The court also clarified that the lack of previous recommendation by the Governor for the Act did not invalidate it.

1. The petitioner is a dealer in radios and electrical goods. It was assessed to sales-tax for the year 1963-64 by Ext. P1 order and the sales tax payable by it was fixed at Rs. 64,546-97 and on this surcharge at 5 % was levied. It is admitted that the turnover of the petitioner exceeded Rs. 30,000/-and the question for consideration is whether the levy of surcharge is valid. Petitioner's counsel contended that the Kerala Surcharge on Taxes Act, 1957, Act XI of 1957, hereinafter called the Act, is invalid for the reason that the State Legislature had no power to enact the same and therefore the imposition of surcharge in pursuance to the provisions of the Act is unauthorised.

2. The only question for consideration, therefore is whether the State Legislature had power to enact the Act. Petitioner's counsel contended that the only entry which may possibly justify this legislation is Entry 54 in List II in the seventh Schedule to the Constitution but that that Entry would not take in a levy like the one in question. S.3 of the Act provides as follows:

"(1) The tax payable under the Travancore-Cochin General Sales Tax Act, 1125 or the Madras General Sales Tax Act, 1939 shall in the case of a dealer whose turnover exceeds thirty thousand rupees in a year, be increased by a surcharge at the rate of two and a half per centum of the tax payable for that year and the provisions of the Travancore-Cochin General Sales Tax Act, 1125 or the Madras General Sales Tax Act, 1939, shall, as the case may be, apply to the levy and collection of the said surcharge:

Provided that where in respect of declared goods as defined in clause (c) of S.2 of the Central Sales Tax Act, 1956, the tax payable by such dealer under the Travancore-Cochin General Sales Tax Act, 1125 or the Madras General Sale Tax Act. 1939, together with the surcharge payable under this sub-section exceeds two per ceutum of the sale or purchase price, the rate of surcharge in respect of such goods shall be reduced to such an extent that the tax and the surcharge together shall not exceed two per centum of the sale or purchase price.

(2) Notwithstanding anything contained in sub-section (1) of S.11 of Travancore-Cochin General Sales Tax Act, 1125, or in sub section (1) of S.8 B of the Madras General Sales Tax Act, 1939, no dealer referred to in sub-section (1) shall be entitled to collect the surcharge payable under the said sub section".

On the basis of the provisions of sub-section (2) of S.3 it was argued that since the dealer cannot pass on the incidence of surcharge on sales tax to the purchaser, surcharge is not a tax on the sale of goods, but a tax on the dealer and that Entry 54 in List II would not justify the legislation in question. In other words, the argument was that surcharge is a tax on tax, that Entry No. 54 in list II will justify only a legislation imposing a tax on sale of goods, that tax on sale of goods is a tax on the sale itself and that since the dealer cannot pass on the incidence of surcharge to the purchaser or consumer, surcharge is really a tax on the dealer himself and not a tax on the sale of goods. This argument has no substance in it. The Supreme Court in Kodduri Buchirajalingom v. State of Madras 9 STC. 397 has observed:

'It is then said that the sales tax is essentially an Indirect tax and therefore it cannot be demanded of the appellant without allowing him to recoup himself by collecting the amount of the tax from the persons with whom he deals. This Court has already decided in the case of Tata Iron and Steel Co. Limited v. The State of Bihar (9 STC. 267) that in law, a sales tax need not be an indirect tax and that a tax can be a sales tax though the primary liability for it is put upon a person without giving him any power to recoup the amount of the tax payable, from any other party."

This observation will clearly show that in law sales tax need not be an indirect tax and that a tax can be a tax on the sale of goods though the primary l