Section 64-A of the Sale of Goods Act, 1930, allows a seller to add or deduct the amount of a tax from the contract price where the tax is imposed, increased, decreased, or remitted after the making of the contract.

1. The above second appeal has been filed by the defendant in O.S. No. 1300 of 1981 on the file of the Principal District Munsif, Tiruchirappalli, who succeeded before the learned Trial Judge but lost before the first appellate court. The respondent-plaintiff has filed the suit for a direction to the defendant-appellant to return or refund or pay the sum of Rs. 10,810 with subsequent interest thereon to the plaintiff.

2. The case of the plaintiff is that he is a contractor with the defendant-corporation, that he was the highest bidder in the matter of felling and collection of eucalyptus trees in Managiri forest in Udayarpalayam range and for which purpose, they have also entered into an agreement dated 6. 1976 marked as Ex.A-1 and 17. 1976 and in accordance with the same, the plaintiff claimed to have deposited a sum of Rs.29,455 and also Rs.1 1,090 as security. the contracts were said to have been duly fulfilled and when the plaintiff claimed for the return of the deposit, the defendant deducted Rs.7,894 and Rs.2,956.60 towards sales tax on the articles sold. The plaintiff contended that the defendant had no authority to collect sales tax because the defendant was not a dealer within the contemplation of sales tax law and the ‘timber’ cannot be an eucalyptus tree. Per contra, the appellant-defendant corporation filed a written statement contending that the plaintiff was the highest bidder in the auction held on 5. 5.1976 for collecting and removing eucalyptus tree, that the sale in favour of the plaintiff was confirmed and that he also paid the sums required. While admitting the deduction as contended by the plaintiff from the security deposit, it was claimed the same was in terms of Rule 24 (16) of the Sales Tax Rules, 1959 and as per item 84 of the first schedule to Tamil Nadu General Sales Tax Act, the plaintiff is liable to pay sales-tax, which has been paid by the defendant and consequently, the deduction was correct. The suit was also contended to be barred by time and the plaintiff is not entitled to any relief.

3. On the above claims and counter claims, the suit came to be tried and both oral and documentary evidence was adduced by both parties. On a consideration of the relevant materials on record, the learned trial Judge by the judgment and decree dated 23. 1982 dismissed the suit holding that the transaction in favour of the plaintiff was found to be taxable and the tax actually levied by the sale tax department has to be paid and therefore, the plaintiff is not entitled to the relief, the defendant has rightly deducted the amount paid towards sales tax on the transactions with the plaintiff. Aggrieved, the plaintiff pursued the matter on appeal in A.S. No. 156 of 1982 (originally A.S. No. 203 of 1982 on the file of the District Court, Tiruchirappalli) and the learned V Additional Subordinate Judge, Tiruchirappalli, has chosen to allow the appeal and decreed the suit as prayed for. The learned first appellate Judge was of the view that since the contract did not specifically contain any provision for payment of sales tax and the statute also does not provide for the collection of tax from the purchaser, the deduction was unwarranted. Hence, the above second appeal by the defendant corporation.

4. At the time of admission, the following substantial questions of law were formulated as arising for considering of this Court:

1. Whether on the facts and in the circumstances of the case, the interpretation placed on clause 45 of Ex.A-1 as not entitling the appellant to collect sales tax in addition to the price of the goods sold is correct?

2. Is the lower appellate court right in holding that the Tamil Nadu General Sales Tax Act, 1959, does not authorise a registered dealer to collect sales tax from the purchaser.

3. Whether the lower appellate court is right in holding that section 64-A of the Sale of Goods Act cannot help the appellant to collect sales tax suffered on the sale made to the respon