The main legal point established in the judgment is that the sales tax collected by a registered dealer cannot be considered as a part of his turnover under the Travancore-Cochin General Sales Tax Act, 1125.

The Judgment of the Court was delivered by

M. S. MENON, J. - The question involved in this appeal is whether the sales tax collected from a purchaser by a registered dealer can be considered as a part of his turnover and thus assessable to sales tax under the Travancore-Cochin General Sales Tax Act, 1125. Subramonia Iyer, J., came to the conclusion that it was not possible to do so and this appeal is from his judgment - [1953] 4 S.T.C. 338 - negativing the contention of the State in O.P. No. 69 of 1952. The reasoning adopted by the learned Judge has since been quoted with approval by a Division Bench of the Madras High Court in Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Krishnaswami Mudaliar & Sons ([1954] 5 S.T.C. 88), wherein it was held that the amount collected by a registered dealer from a purchaser by way of sales tax did not form part of his turnover and was not liable to be taxed under the corresponding provision of the Madras General Sales Tax Act, 1939.

2. Our attention has been drawn to the fact that the decision of the High Court of Madras has apparently been accepted as correct by that State by its choice of legislative action to confine the effect of the decision to the collections of tax subsequent to the 1st April, 1954. The Statement of Objects and Reasons appended to the Bill introduced for the purpose (Fort St. George Gazette, Part IV-A, Extraordinary, dated the 4th May, 1954) reads as follows :-

"It has been the practice in the Commercial Taxes Department, in assessing a dealer to tax under the Madras General Sales Tax Act, to include in his turnover amounts collected by him by way of tax under the Act. In its judgment, dated 7th January, 1954, the Madras High Court has held that such assessment and levy are ultra vires in so far as they are based on inclusion in the turnover, of amounts collected by way of tax. The assessments and levy were made in good faith and have to be legalized. It is, at the same time, proposed to accept, with effect from the 1st April, 1954, the statement of the law made by the High Court and not to include in the turnover of a dealer, for purposes of assessment, amounts collected by way of tax subsequent to the 1st April, 1954. The Bill is intended to give effect to these objects."

Such legislative conduct, however, whether it spells acceptance or abundant caution, will not in any way aid or abrogate our duty to interpret an enactment as it stands.

3. Rule 7(1) of the Travancore-Cochin General Sales Tax Rules, 1950, provides :-

"The tax or taxes under Section 3 or 5 or the notification or notifications under Section 6 shall be levied on the net turnover of a dealer. In determining the net turnover, the amounts specified in clauses (a) to (k) shall, subject to the conditions specified therein, be deducted from the gross turnover of a dealer."

In the sub-rule as it originally stood the tax collected by a registered dealer was not one of the permitted items of deduction but by a notification dated the 31st March, 1951, the following clauses was added as clause (1) to the said sub-rule :-

"All amounts of sales tax collected by the dealer."

The amendment does not in terms apply to the present case as the period with which we are concerned is anterior to the date of the amendment; but it was contended by the State that the introduction of the amendment would itself indicate that but for such amendment the tax collected by a registered dealer would have been amenable to sales tax. We cannot agree. The amendment can mean no more that that in the opinion of the rule-making authority such an amendment was necessary either to clarify the position or to ensure an exemption.

4. Sales tax is a tax on turnover. The term "turnover" is defined in Section 2(k) of the Travancore-Cochin General Sales Tax Act, 1125, as "the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration" a