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2018 (11) TMI 1439 - HC - VAT and Sales TaxForfeiture of tax paid u/s 46A of KGST Act - Sale of SIM Cards - levy of service tax under the Finance Act, 1994 and sales tax under the KGST Act - inclusion of activation charges in levy of sales tax - whether there could be forfeiture of the collected tax under Section 46A of the KGST Act, when the collection was validly made? Held that:- Section 46A of the KGST Act has two limbs; one imposing penalty and the other a clause of forfeiture, which, later limb, does not bring with it the essential requirement of mens rea though penal in nature. Any collection by way of tax or purporting to be by way of tax in contravention of the provisions noticed therein, shall be liable to penalty not exceeding rupees five thousand which requires mens rea. The second limb speaks of such collection, either by way of tax or purporting to be by way of tax in contravention of the specified provisions, being liable for forfeiture to the Government. The measure of forfeiture though penal is also an enabling provision, the direct consequence of which is the consumer's right to seek refund by making an application in the prescribed form with the prescribed documents. The distinction in the two limbs of Section 46A of the KGST Act is further accentuated by the fact that the provision speaks of an order issued by the Assessing Authority after giving the person from whom such forfeiture is made, an opportunity to show cause why penalty or forfeiture shall not be ordered. If forfeiture necessarily resulted in penalty, then the words employed would have been penalty and forfeiture, in conjunction. The legislature contemplated situations in which forfeiture would be a necessity, but the act of collection being not contumacious or in direct defiance of the provisions of law, in which event the registered dealer being absolved of such consequence of penalty. The collection made by the dealer becomes one purporting to be by way of tax on the sale of SIM Cards in respect of which he is not liable to pay tax. This again brings the act of collection within the framework of forfeiture as contemplated in Section 46A of the KGST Act, a necessary consequence by reason of the declaration of the Hon'ble Supreme Court. The claim for refund, if any, would subsist only in the consumer and it is the State who is competent to make such refund as per the procedure prescribed - There can be no refund to the assessee who admittedly has collected the amounts paid to the State as tax from its consumer on sale of SIM Cards. In the facts and circumstances, however, the first limb dealing with imposition of penalty, cannot apply and there could be no penalty levied. An order of forfeiture without an order of penalty, as seen from the words employed in the provision, is eminently permissible. The forfeiture is perfectly valid as per Section 46A of the KGST Act, which is in pari materia with Section 72 of the KVAT Act. The matters shall stand remanded to the Division Bench to consider the revisions.
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