TMI Blog1977 (8) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants in C.A. Nos. 533, 1004 and 1410 and 1671-1685 of 1975. F.S. Nariman Senior Advocate (M.N. Shroff and Miss Radha Rangaswami, Advocates, with him), for the intervener (State of Maharashtra) in C.A. No. 1410 of 1975. B. Sen, Senior Advocate, (in C.A. No. 533 of 1975), and I.N. Shroff, Advocate, for the respondent No. 1 in C.A. No. 533 of 1975 and the respondents in C.A. Nos. 1673-1675, 1677-1678, 1680 and 1682-1683 of 1975. -------------------------------------------------- The judgment of M. H. BEG, C. J., Y. V. CHANDRACHUD, P. N. BHAG- WATI, V. R. KRISHNA IYER, N. L. UNTWALIA and S. MURTAZA FAZAL ALI, JJ., was delivered by V. R. KRISHNA IYER, J. P. S. KAILASAM, J., delivered a separate judgment. KRISHNA IYER, J.- This bunch of appeals brought by the State of Gujarat by certificate has a pan-Indian impact, as the sales tax project which has been struck down by the High Court may adversely affect cousin provisions in like statutes in the rest of the country. Contradictory verdicts on the constitutionality of a certain pattern of sales tax legislation, calculated to counter consumer victimisation by dealers, have been rendered by different High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned with is the Bombay Sales Tax Act, 1959 (Bombay Act LI of 1959) (for short, the Act), applicable during the relevant period to the Gujarat State, although the State of Maharashtra itself has since modified the law, as pointed out by Shri Nariman, who intervened on behalf of that State, to supplement and substantiate the validity of the legislation. The statutory provisions which have succumbed to unconstitutionality (as expounded by the High Court) are sections 37(1) and 46 of the Act. The High Court of Maharashtra, however, has taken a diametrically opposite view and other High Courts have ranged themselves on one side or the other in this controversy, while dealing with more or less similar statutes. We confine our judgment to the Act that is before us and do not go into the validity of the other statutes which have been incidentally referred to in the Court. The point involved is so critical, yet delicate, that, even short but significant variations in the scheme of the statute may well spell a result which is opposite. We will now proceed to project preliminarily the factual-legal setting in order to appreciate whether the legicidal blow delivered by the High Court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Act. Of course, one who is not a registered dealer, cannot collect any sum by way of tax from any other person. In short, there is a triple taboo writ into section 46. This prohibitory project is made operational, as stated earlier, by two other provisions, one sounding in criminal and the other in departmental proceedings. Section 63(1)(h) makes it an offence to contravene the provisions of section 46 (read above) and imposes, on conviction, a punishment of simple imprisonment (up to 6 months) with or without fine (up to Rs. 2,000). We may excerpt section 63(1)(h) since that may have to be referred to later: "63. (1)(h) Whoever contravenes any of the provisions of section 46, shall, on conviction, be punished with simple imprisonment which may extend to six months or with fine not exceeding two thousand rupees, or with both; and when the offence is a continuing one, with a daily fine not exceeding one hundred rupees during the period of the continuance of the offence." Section 37(1) relates to imposition of penalty departmentally for contravention of section 46. It reads: "37. (1)(a) If any person, not being a dealer liable to pay tax under this Act, collects any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner. Shri B. Sen, appearing for the respondent in Civil Appeal No.533 of 1975, had a more sorrowful tale to tell. The honest dealer made a return of the total sums collected by him on the turnover and it was discovered by the Sales Tax Officer that certain items were not taxable and, therefore, refund was due. He directed refund and followed it up with an ironic post-script, as it were, forfeiting that amount under section on 37(1)(a) of the Act. Certainly, these illustrations do emphasise that the scope of section 37(1)(a) is not restricted to sums collected along with the price by dealers by way of tax with a touch of turpitude but also innocently on the strength of the actual or anticipated (albeit erroneous) view of the tax officers themselves. Certainly, the fiscal minions of Government, if they blatantly misuse power and overtax to bring discredit to a benignant State, must be publicly punished since respect for the law is not a one-way street. We will bear this in mind when discussing the vires of the challenged provisions, although even here we must mention that a large number of dealers for whom the legislation is made apparently envisage guilty levies under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k to whom it belongs, and not to the State. Nor is there any legislative entry which arms the State to sweep all illegal levies connected with sales from the merchant community into its coffers. This is the kernel of the submission which has appealed to the High Court. The counter-argument which has been urged by Shri S. T. Desai, for the State, reinforced by added glosses by Shri Nariman, is that the State has the right not merely to impose tax on sales but to ensure that the sales tax law is not misused by the commercial community to fob off pseudo-fiscal burden upon the consumer community. It is elementary economic theory that while the legal burden of sales tax falls upon the dealer, the fiscal impact is eventually on the consumer. A welfare State, with its logos and legend as social justice, has a sacred duty while it exercises its power of taxation to police the operation of the law in such manner as to protect the public from any extra burden thrown on it by merchants under cover of the statute. Bearing in mind the quintessential aspects of the rival contentions, let us stop and take stock. The facts of the case are plain. The professed object of the law is clear. The moti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the listed entries concerned. If then we feed this programme into the judicial cerebration with the presumption of constitutionality superadded, the result tells us whether the measure is ultra vires or not. The doctrine of ancillary and incidental powers is also embraced within this scheme of interpretation. An overview of the relevant string of rulings of this Court may now be undertaken. The basic ratio, if we may condense the legal test that divides the constitutional from the unconstitutional, is that if all that the legislation means to do is to take over, whatever the verbal veils worn, the collections which were ex hypothesi not sales tax but were illegal additives as if sales tax were due, charged along with the price by the dealer, then such an expropriation of the expropriators (putting it in a morally favourable, though exaggerated, light for the State) is beyond entry 54 and, therefore, ultra vires. On the other hand, all real punitive measures, including the dissuasive penalty of confiscating the excess collections, are valid, being within the range of ancillary powers of the legislature competent to exact a sales tax levy. The punitive impost in section 37(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o bring it within the legislature's constitutional powers. If these questions can be answered affirmatively, the law is valid. Malice or motive Is beside the point, and it is not permissible to suggest parliamentary incompetence on the score of mala fides. So much is well-established law. Therefore, if the dealers in the appeals before us charge the enactment with the vice of colourability, they must make out that in pith and substance the impugned legislation does not fall within entry 54 read with entry 64 of List II, that it is not embraced even by the expansive connotation of ancillary powers and that it is not possible to save the law even by reading down some of the wide expressions used. In the present case, the narrow issue is as to whether the forfeiture clause in section 37(1) is bad because of the besetting sin of colourability. If it is a punitive measure to protect public interest in the enforcement of the fiscal legislation, it falls squarely within the area of implied powers. Therefore, the finer point stressed by Shri Kaji is that the expression "forfeiture" is a ritualistic recital to cover up a secret design to snatch from the traders sums which cannot be reache ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individuals, the word 'forfeit' is construed to be the language of contract, because contract is the only mode in which one person can become liable to pay a penalty to another for breach of duty, or the failure to perform an obligation. In legislative proceedings, however, the construction is otherwise, and a forfeiture is always to be regarded as a punishment inflicted for a violation of some duty enjoined upon the party by law; and such, very clearly, is the meaning of the word in the act in question." The same connotation has been imparted by our Court too. A Bench Bankura Municipality v. Laiji Raja Sons A.I.R. 1953 S.C. 248 at 250., has held: "According to the dictionary meaning of the word 'forfeiture' the loss or the deprivation of goods has got to be in consequence of a crime, offence or breach of engagement or has to be by way of penalty of the transgression or a punishment for an offence. Unless the loss or deprivation of the goods is by way of a penalty or punishment for a crime, offence or breach of engagement it would not come within the definition of forfeiture." This word "forfeiture" must bear the same meaning of a penalty for breach of a prohibitory directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asury, he filed a writ petition questioning the validity of section 11(2) of the Hyderabad General Sales Tax Act, 1950, which was the authority relied on by the Government to make the direction. The problem and the answer thereto were squarely stated by Shri Wanchoo, J., speaking for the Court. We may excerpt that portion which formulates the question and furnishes the answer: "The first question therefore that falls for consideration is whether it was open to the State Legislature under its powers under entry 54 of List II to make a provision to the effect that money collected by way of tax, even though it was not due as a tax under the Act, shall be made over to Government. Now it is clear that the sums so collected by way of tax are not in fact tax exigible under the Act. So it cannot be said that the State Legislature was directly legislating for the imposition of sales or purchase tax under entry 54 of List II when it made such a provision, for on the face of the provision, the amount, though collected by way of tax, was not exigible as tax under the law. The provision however is attempted to be justified on the ground that though it may not be open to a State Legislature to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant taxing entry to ensure that the tax is levied and collected and that its evasion becomes impossible. We are therefore of opinion that the provision contained in section 11(2) cannot be made under entry 54 of List II and cannot be justified even as an incidental or ancillary provision permitted under that entry." The Court proceeded to refer to an attempt made to justify the provision as providing for a penalty, but found nothing in the text to justify the impugned sub-section (2) of section 11, as a penalty for breach of any prohibition under the Act. On the other hand, in the setting of the statute, the Court came to the contrary conclusion: "Section 11(2) In our opinion has nothing to do with penalties and cannot be Justified as a penalty on the dealer. Actually section 20 makes provision in clause (b) for penalty in the case of breach of section 11(1) and makes the person committing a breach of that provision liable, on conviction by a Magistrate of the first class, to a fine ...... In this connection we may refer to clause (c) of section 20, which provides that any person who fails 'to pay the amounts specified in sub-section (2) of section 11 within the prescribed time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..This was a naked seizure of money collected by the dealer, there being no prohibition and no penalty and no obligation for the Government to return such sums to the purchasers from whom they were taken. In Ashoka Marketing Co. [1970] 26 S.T.C. 254 at 261 (S.C.); [1970] 3 S.C.R. 455 at 463-464., the provision in section 20A went further. While the illegal collections were to be made over to the Government treasury it was further provided that such amounts shall be held by the State Government in trust for the person from whom it was realised by the dealer and the dealer himself on depositing these sums into Government treasury shall be discharged from his obligation to return the sums to the purchasers. There was an incidental direction that, on a claim being made by the aggrieved buyers, these driblets shall be refunded. The scheme of clause (8) of section 20A made it clear that the legislation was in public interest, that while suits against dealers to recover paltry sums by a large number of customers would lead to endless and expensive litigation, a simpler process of returning those sums on application by the relevant purchasers would protect the common buyer while depriving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods". We respectfully disagree. In a developing country, with the mass of the people illiterate and below the poverty line, and most of the commodities concerned constitute their daily requirements, we see sufficient nexus between the power to tax and the incidental power to protect purchasers from being subjected to an unlawful burden. Social justice clauses, integrally connected with the taxing provisions, cannot be viewed as a mere device or wanting in incidentality. Nor are we impressed with the contention turning on the dealer being an agent (or not) of the State vis-a-vis sales tax; and why should the State suspect when it obligates itself to return the moneys to the purchasers. We do not think it is more feasible for ordinary buyers to recover from the common run of dealers small sums than from Government. We expect a sensitive Government not to bluff but to hand back. So, we largely disagree with Ashoka [1970] 26 S.T.C. 254 at 259 (S.C.); [1970] 3 S.C.R. 455 at 461., while we generally agree with Abdul Quader [1964] 15 S.T.C. 403 (S.C.); [1964] 6 S.C.R. 867. We must mention that the question as to whether an amount which is Illegally collected as sales tax can be fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other rulings of this Court like Maneklal [1967] 3 S.C.R. 65., George Oakes [1961] 12 S.T.C. 476 (S.C.); [1961] 2 S.C.R. 570., Jhaveri [1973] 2 S.C.R. 691. and Abdulla [1971] 27 S.T.C. 1 (S.C.); [1971] 2 S.C.R. 817., have only a peripheral relevancy. While we have listened, perused and reflected over these citations, we have screened them from specific reference In this judgment since these decisions were cited by counsel merely to drive home the significance of some stray thought expressed in these judgments having but marginal meaningfulness. Skilful submissions were made on the construction of the text of section 37(1) of the Act to convince us that the sub-section itself made a distinction between penalty and forfeiture, suggesting that forfeiture was not regarded as a penalty. Side references to a few other sections were made to reinforce this thesis. The identity of the forfeit and the illegal collection was also urged by the assessee as a tell-tale circumstance to contend that it could not be a penalty. Moreover, the express penalty in section 37(1)(a) had a ceiling while the additive forfeit was unlimited. A penny worth of penalty and a pound worth of forfeiture pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court itself has rejected the plea as not pressed. Shri Kaji has urged that the dealers will, under the scheme of the Act, have the worst of both the worlds and that is unreasonable. The State forfeits the whole illegal (often erroneous) collections and the purchasers can demand back the very same sums. There is injustice here. Without holding that article 19(5) is violated, we think the ends of justice can be met by reading down the forfeiture clause interpretatively. Section 37(1) does say that "any sum collected by the person by way of tax ... shall be forfeited.....". Literally read, the whole sum goes to the State. Let us suppose the dealer has returned the whole or part of the collections to the customers. Should the whole amount, regardless of such repayment, be forfeited. We think not. Section 37(1) uses the expressions, in relation to forfeiture, "any sum collected by the person ... shall be forfeited". What does "collected" mean here? Words cannot be construed effectively without reference to their context. The setting colours the sense of the word. The spirit of the provision lends force to the construction that "collected " means "collected and kept as his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s order embraces penalty and forfeiture. Therefore, the Commissioner is vested with a discretion to forfeit the whole or any lesser sum or none at all. We limit the sense of "shall be forfeited" as meaning "shall be liable to be forfeited". This signification of "forfeiture" as "liability to forfeiture " saves the equity of the statute. The Commissioner must have regard to all the circumstances of the case, including the fact that amounts illegally collected have been returned to the purchasers to whom they belong before passing the final order. We are clear in our minds that the forfeiture should operate only to the extent, and not in excess of, the total collections less what has been returned to the purchasers. We may go a step further to hold that it is fair and reasonable for the Commissioner to consider any undertaking given by the dealer that he will return the amounts collected from purchasers to them. The humanism of a provision may bear upon its constitutionalism. Counsel have argued, is it not unreasonable to forfeit huge sums and still to expose the dealer to several actions. Is it not discriminatory to make the departmental punishment disproportionately onerous vis-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended. The penalty for deviance from these norms is the peril to the order passed. The effect of mala fides on exercise of administrative power is well-established. In strict legality, once the money is forfeited to the State, there is no obligation to make it over to the purchaser, but in the welfare orientation of our State and certain constitutional emanations we leave unexplored, such an obligation should be voluntarily undertaken. A fairly exhaustive survey of case-law has been made, consuming considerable industry of counsel and presenting a sky-view and groundview of judicial mentation in this branch of sales tax law, bedrocked on constitutional law. While we are edified by the immense project undertaken, in these crowded days of explosive docket backlog, the fine art of miniaturization, without traumatization, may well be a creative Darwinian mutation in forensic submissions for the survival of the great judicial institution. Moreover, small can be beautiful, both in judgments and arguments. But we must append our appreciation of the thoroughness, thoughtfulness, perspicacity and persuasiveness of Sarvashri Kaji, B. Sen, S.T. Desai and F.S. Nariman (for the intervener), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty of an amount not exceeding two thousand rupees or double the sum collected by way of tax-whichever is less. (ii) Where there has been a contravention referred to in clause (a)(ii) or (ii-a) or clause (b), a penalty of an amount not exceeding two thousand rupees, and in addition, any sum collected by the person by way of tax in contravention of sub-section (2) of section 15A-I or section 46 shall be forfeited to the State Government. When any order of forfeiture Is made, the Commissioner shall publish or cause to be published a notice thereof for the information of the persons concerned giving such details and in such manner as may be prescribed." Section 46(1) prohibits collection of tax in certain cases by providing that no person shall collect any sum by way of tax in respect of sales of any goods on which by virtue of section 5 no tax is payable. Sub- section (2) which is held to be ultra vires runs: "46. (2) No person, who is not a registered dealer and liable to pay tax in respect of any sale or purchase, shall collect on the sale of any goods any sum by way of tax from any other person and no registered dealer shall collect any amount by way of tax in excess of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees or double the sum collected by way of tax -whichever is less; (2) in certain other cases a penalty not exceeding two thousand rupees, and in addition, any sum collected by the person by way of tax in contravention of sub-section (2) of section 15A-I or section 46 shall be forfeited to the State Government. The rest of the section prescribes the procedure for levy of penalty or forfeiture. It is thus provided that a contravention would incur levy of a penalty of an amount not exceeding two thousand rupees in addition to the sum collected by way of tax being forfeited to the State Government. If the forfeiture is levied for the purpose of enforcement of the enactment, it would be valid but if the forfeiture is for the purpose of collecting' the amount which is wrongly collected by the assessee, the use of the word "forfeiture" would be merely a device to get at the sum which had been collected in contravention of the provisions of the Act, and beyond the power of the State Legislature as the intention of the State is to secure the sum which has been collected by the assessee which is not exigible as a tax. While the contention of the State is that it is within the compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclude the power to declare that refund shall be claimable only by the person from whom the dealer has realised the amount as sales tax or otherwise. Dealing with the power of the State under entry 54, List II, it held: "The Legislature of the Orissa State was therefore competent to exercise power in respect of the subsidiary or ancillary matter of granting refund of tax improperly or illegally collected, and the competence of the legislature in this behalf is not canvassed by counsel for the assessees." It was further held that if the legislature was competent to legislate for granting refund of the sales tax improperly collected, there is no reason why the power to declare that refund shall be claimable only by the person from whom the dealer has actually realised the amounts by way of sales tax or otherwise, should be excluded. It was thus found that the State Legislature is competent in granting refund of tax unauthorisedly collected and to declare that refund is claimable only by the person from whom the dealer realised the amount. In fact, the competence to legislate for granting the refund of the sales tax improperly collected was not questioned. This decision did not cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment in the manner prescribed. This Court held that as the sums collected by way of tax are not in fact tax exigible under the Act, It cannot be said that the State Legislature was directly legislating for the Imposition of sales or purchase tax under entry 54 of List II. As what was collected was not tax exigible under the Act, though collected as a tax, this Court held that the amount collected cannot be recovered as tax. The position is explained thus: "We do not think that the ambit of ancillary or incidental power goes to the extent of permitting the legislature to provide that though the amount collected-may be wrongly-by way of tax is not exigible under the law as made under the relevant taxing entry, it shall still be paid over to Government, as if it were a tax." Referring to Orient Paper Mills Ltd. v. State of Orissa [1961] 12 S.T.C. 357 (S.C.); [1962] 1 S.C.R. 549., the Court held that the decision had no application to the facts of the case before them on the ground that the matter dealt with the question of refund and observed that "it cannot be doubted that refund of the tax collected is always a matter covered by incidental and ancillary powers relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent to which such dealer is liable to pay tax under this Act. (3) (a) Notwithstanding anything to the contrary contained in any law or contract or any judgment, decree or order of any tribunal, court or authority, if the prescribed authority has reason to believe that any dealer has or had, at any time, whether before or after the commencement of this Act, collected any such amount, in a case in which or to an extent to which the said dealer was or is not liable to pay such amount, it shall serve on such dealer a notice in the prescribed manner requiring him on a date and at a time and place to be specified therein, either to attend in person or through an authorised representative to show cause why he should not deposit into the Government treasury the amount so collected by him. (b) .............................. (4) Where any amount so collected by the dealer and deposited by him into the Government treasury has already been refunded to the dealer in pursuance of or as a result of any judgment, decree or order of any tribunal, court or authority, but the dealer has not refunded the amount to the person from whom he had collected it, the prescribed authority shall, notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is not for collection of an amount as tax which the State is not competent to levy or collect, it relied strongly on Orient Paper Mills' case [1961] 12 S.T.C. 357 (S.C.); [1962] 1 S.C.R. 549. Shah, J., speaking for the Court held that Orient Paper Mills' case [1961] 12 S.T.C. 357 (S.C.); [1962] 1 S.C.R. 549., had no bearing on the question whether the State was competent to enact section 20A of the Bihar Sales Tax Act as the case does not support the plea that the State Legislature is competent to legislate for demanding payment or for retaining amounts recovered by a registered dealer but which are not due as sales tax to the State. In Orient Paper Mills' case [1961] 12 S.T.C. 357 (S.C.); [1962] 1 S.C.R. 549., tax was collected on sales outside the State of Orissa and when refund was demanded by the assessees in consequence of the decision in State of Bombay v. United Motors (India) Ltd. [1953] 4 S.T.C. 133 (S.C.); [1953] S.C.R. 1069., which held that sales outside the State concerned were not taxable, the legislature intervened providing that the refund could be claimed only by a person from whom the dealer had realised the amount by way of sales tax. In Ashoka Marketing case [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bombay Sales Tax Act was void being violative of article 19(1)(f) of the Constitution. Section 12A(4), which is the relevant provision, reads as follows: "(4) If any person collects any amount by way of tax in contravention of the provisions of sub-section (1) or (2) or if any registered dealer collects any amount by way of tax in excess of the amount payable by him under this Act, the amounts so collected shall, without prejudice to any prosecution that may be instituted against such person or dealer for an offence under this Act be forfeited to the State Government and such person or dealer, as the case may be, shall within the prescribed period, pay such amount into a Government treasury and in default of such payment, the amount shall be recovered as an arrear of land revenue." Sub-section (4) provides for forfeiture to the State of any amount collected by the dealer by way of tax in excess of the amount payable by him under the Act. It was contended by the revenue that section 12A(4) is a penal provision as it provides for the imposition of a penalty on those who contravene section 12A(1) and (2) and that such a power was Incidental to the power to tax sales and as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(f). This decision cannot be understood as having held that a levy of penalty for contravention of the provisions of the Sales Tax Act is beyond the legislative competence of the State. State of U. P. v. Annapurna Biscuit Mfg. Co. [1973] 32 S.T.C. 1 (S.C.); [1973] 3 S.C.R. 987., is a decision by a Bench of two Judges of the Supreme Court. In this case the validity of section 29-A of the U. P. Sales Tax Act, 1948, was challenged. Section 29-A runs as follows: "Refund in special cases.-Notwithstanding anything contained in this Act or in any other law for the time being in force or in any judgment, decree or order of any court, where any amount is either deposited or paid by any dealer or other person under sub-section (4) or sub-section (5) of section 8-A, such amount or any part thereof shall on a claim being made in that behalf in such form and within such period as may be prescribed, be refunded to the person from whom such dealer or the person had actually realised such amount or part, and to no other person." Following the decisions in Abdul Quader's case [1964] 15 S.T.C. 403 (S.C.); [1964] 6 S.C.R. 867., and Ashoka Marketing case [1970] 26 S.T.C. 254 (S.C.); [1970] 3 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to deposit the amount unauthorisedly collected, (2) an attempt by the State to demand and retain the amount unauthorisedly collected, and (3) the right to direct the refund of the amounts collected from the assessee. The question as to whether the amounts thus unauthorisedly collected can be forfeited is not considered in any of these cases. An attempt was made by the assessees to derive support from Ashoka Marketing case [1970] 26 S.T.C. 254 (S.C.); [1970] 3 S.C.R. 455., that it related to a notice issued by the Assistant Commissioner to the assessees under section 20A(3) of the Bihar Sales Tax Act requiring them to show cause why the sales tax on the railway freight which had become refundable should not be forfeited. Though the notice uses the word "forfeit" the provision of section 20A(3) only mentions that the amounts collected may be required to be deposited in the Government treasury. For deciding the question at issue it is unnecessary to consider the submissions made on behalf of counsel that the reasoning in Orient Paper Mills [1961] 12 S.T.C. 357 (S.C.); [1962] 1 S.C.R. 549., and Ashoka Marketing(1) cases is not consistent. In Abdul Quader's case [1964 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is by operation of section 37(1) liable to pay penalty and also penalty by way of forfeiture. This punitive measure affects all persons who sell non-taxable goods. In section 37(1)(b)(ii) in addition to penalty not exceeding rupees two thousand, the sum collected by way of tax is directed to be forfeited to the State Government. The words "penalty" and "forfeiture", according to the learned counsel, are different in their application and, in the present case, forfeiture relates to the amount which is the same as has been unauthorisedly collected and, therefore, it is only a device by the State to recover the amount so collected. The section proceeds to lay down the procedure for effecting the forfeiture by requiring the Commissioner to publish a notice, hear the parties as to why penalty or forfeiture or both as prescribed should not be imposed and make such order as he thinks fit. A distinction between penalty and forfeiture is maintained. I am unable to accept the plea that forfeiture is not a penalty. Forfeiture is one form of penalty. Forfeiture of property is one of the punishments provided for in the Indian Penal Code. For contravention of the sales tax law the section pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces can be visited on acts which are committed with or without a guilty mind. For proper enforcement of various provisions of law it is common knowledge that absolute liability is imposed and acts without mens rea are made punishable. Mr. Kaji as well as Mr. B. Sen, the learned counsel for some of the assessees, further brought to our notice cases in which by the application of the provisions of the sales tax enactment considerable hardship and Injustice has been caused to the dealers. It was submitted that where the assessee innocently collected amounts on the impression that tax was leviable, the amounts so collected were forfeited while his obligation to the purchasers to refund the amounts continued. If the assessee by a mistake failed to collect tax from the purchasers, tax was levied and collected from the assessee making him suffer in any event. When after a costly litigation, the assessee succeeded In establishing that sales tax cannot be collected on the railway freight on cement bags or inter-State sales, the Government promptly forfeited such amounts. I agree these are instances of hardships to the assessees and deserve Government attention. But for that reason the Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include "forfeiture" also, the section is clear that when proceedings are taken up under section 37, no prosecution can be instituted under section 63(1)(h) on the same facts. The plea as to contravention of article 14 has therefore to fail. Equally untenable is the plea that the provisions contravene article 19(1)(f). In Kantilal Babulal's case [1968] 21 S.T.C. 174 (S.C.); [1968] 1 S.C.R. 735., the Supreme Court held that section 12A(4) is not valid as forfeiture cannot be enforced without proper inquiry. That plea is no more available, for section 37(2) prescribes the procedure which makes it obligatory on the part of the Commissioner to give notice to enable the assessee to show cause against levy of penalty or forfeiture. Further, there are provisions for appeal and revision against any order made by the Commissioner. The plea based on article 19(1)(f) has to fail. It was submitted by the learned counsel for the assessees that apart from the question of legislative competence and the challenge based on articles 14 and 19(1)(f) certain questions of facts arise and they will have to be dealt with by the High Court. On ascertainment of such cases a direction will issue to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
