1978 (7) TMI 237 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Tribunal was justified in law in holding that the collection of Rs. 6,361.31 made by the opponent under the head 'sales tax paid to the manufacturer' was not made 'by way of tax'.
2. Whether the power of forfeiture under section 37(1) of the Bombay Sales Tax Act, 1959, could be invoked and to what extent.

Detailed Analysis:

Issue 1: Justification of Tribunal's Holding on Collection 'By Way of Tax'
The Tribunal concluded that the collection of Rs. 6,361.31 by the assessee under the head 'sales tax paid to the manufacturer' was not made by way of tax. The Tribunal based its decision on the fact that the sales were resales of goods purchased from a registered dealer, and thus, no tax was payable on these sales. The Tribunal referenced the decision in Kantilal Babulal and Bros. v. H.C. Patel, where it was held that any excess collection would be a matter of contract and not liable to be forfeited under the Act. The Tribunal opined that the collection was not made by way of tax as it was not in excess of the amount of tax payable by the assessee.

However, the High Court disagreed with the Tribunal's reasoning, stating that the collection was indeed made by way of tax, regardless of the fact that it was on account of sales tax paid to the manufacturer. The Court emphasized that the nature of the collection remains that of tax, whether it is a tax already paid to the seller or a tax to be paid to the State. The High Court found the Tribunal's conclusion to be based on erroneous reasoning and a misconstruction of the relevant bills, which clearly stated that the amounts of sales tax had been collected by the assessee.

Issue 2: Invocation and Extent of Forfeiture Power under Section 37(1)
The High Court examined whether the power of forfeiture under section 37(1) of the Bombay Sales Tax Act, 1959, could be invoked and to what extent. Section 37(1) imposes a penalty for contravening certain provisions, including the collection of any amount by way of tax in excess of the tax payable by the dealer. The Court noted that the scheme contained in section 46, read with section 37, prohibits the collection of any amount by way of tax in excess of the amount payable by a registered dealer.

The High Court held that the assessee's collection of Rs. 6,361.31 was in excess of what it was liable to pay under the Act, as the sales were resales of goods purchased from registered dealers, and thus, no tax was payable on these sales. The Court emphasized that the entire excess amount collected by way of tax is liable to be forfeited under section 37(1).

The Court also referred to the Supreme Court's decision in R.S. Joshi v. Ajit Mills Limited, which highlighted that forfeiture should operate only to the extent of the total collections less what has been returned to the purchasers. The High Court suggested that the Tribunal should consider whether the entire amount of Rs. 6,361.31 is liable to be forfeited, taking into account the guidelines prescribed by the Supreme Court in Ajit Mills' case.

Conclusion:
The High Court answered the reference in the negative, holding that the Tribunal was not justified in concluding that the amount of Rs. 6,361.31 collected by the assessee was not by way of tax. The Court directed the Tribunal to adjust its decision in light of the Supreme Court's guidelines in Ajit Mills' case and determine whether the entire amount is liable to be forfeited. The reference was accepted, and there was no order as to costs.