TMI Blog1962 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... has collected or collects any amount by way of tax under this Act, on or after the 1st day of April, 1947, shall pay over to the State Government within such time and in such manner as may be prescribed, all amounts so collected by him if they are in excess of the tax, if any, paid by him for the period during which the collections were made." The words in section 8-B(2), "and in default of such payment, the amounts may be recovered as if they were arrears of land revenue" were deleted by section 7 of Madras Act 15 of 1956. In Tata Iron and Steel Co. Ltd. v. State of Madras[1954] 5 S.T.C. 382., a Division Bench of this Court (Satyanarayana Rao and Rajagopalan, JJ.) held that what a registered dealer was empowered to collect from purchasers under section 8-B(1) of the Madras General Sales Tax Act was only what was lawfully leviable as tax and that a collection by a registered dealer from his purchasers under a mistaken conception of the liability of his transaction to be assessed under the Act was not liable to be paid over to the State Government as the collection was not a realisation by way of tax. At page 393. Rajagopalan, J., observed thus: "What section 8-B(2) requires of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether he, the collector, is liable to be assessed under the Act or not. By reason of the decision in Tata Iron and Steel Co., Ltd. v. State of Madras[1954] 5 S.T.C. 382., referred to above, persons who had illegally and unauthorisedly collected amounts under the guise of tax from their purchasers obtained immunity from payment to the State Government. It is quite obvious that the amendment was brought in to do away with the effect of that decision. The intendment of the legislation is that any amount collected in the name of tax should be paid over to the State Government by the person collecting the amount independently of his liability to be assessed to tax. Does the legislative competence of the State extend to enact such a measure, is the question that is mooted now. Mr. K.V. Venkatasubramania Iyer, learned counsel appearing for some of the aggrieved assessees, submits that Entry 54, List II, Schedule VII of the Constitution-"taxes on the sale or purchase of goods other than newspapers"-claimed to be the root of the State's power to legislate the impugned provision cannot permit the State to collect any amount, which is not tax under the Act, from any person. Learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit themselves as they were not inside the Act. This situation was anomalous, and, indeed, called for stern action, lest persons should exploit the public-the consumers in general who bear the brunt of the taxations. To suffer illegal payments in the name of tax is nothing but detestable extortion. The State, therefore, stepped in particularly after the decision in Tata Iron and Steel Co., Ltd. v. State of Madras[1954] 5 S.T.C. 382., to remedy the baneful consequences resulting from the Act and enacted the impugned measure, not with a view to improve the resources of its exchequer by transgressing its limits of taxing power, but to interdict unscrupulous persons from abusing the statute to serve their ends and purposes. The exercise of power in introducing the amendment is well within the topic of "tax on sale and purchase" in Entry 54, List II, Schedule VII of the Constitution, as it is a power necessary, incidental and ancillary to the primary and main power. The amendment is in the nature of a penal provision to curb the illegal activities under cover of the Act, and is essential to the effectiveness of the power to legislate on tax on sale and purchase. The proper interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts is to be read in a narrow or pedantic sense, and that each general word should be held to extend to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in it." This observation is quoted with approval by Kapur, J., in the recent decision of the Supreme Court already referred to, namely, Chaturbhai M. Patel v. Union of India(2). In a statute falling within the enumerated topic of legislation, provisions enacted to ensure and achieve the effectiveness of the Act should not be treated as alien to the subject-matter of the legislation. The competency of the Legislature to make such provisions cannot be tested as if they stand apart and are severable from the main enactment. A matter not otherwise within the enumerated powers may be legislated upon as an incident to the exercise of an enumerated power. "What is 'incidental' in any given case depends upon the main legislation and the circumstances of the particular case the question of 'incidentality', must of course be as Griffith, C.J., observed in Australian Steamships Ltd. v. Malcolm19 C.L.R. 298., be determined ab extra, irrespective of Parliamentary assumption on the matter" (Wynes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he plain words of the amendment, is only to put a check upon persons misusing the Act to their own advantage. We can use a familiar expression and say that the pith and substance of the amendment is not to levy an ad hoc tax on transactions which are not sales or purchases, but to introduce a measure in the nature of forfeiture or confiscation of the unlawful gains made by persons who found themselves in a position to take undue advantage of the Act. We shall now refer to the decisions cited on behalf of the petitioners. In State of Bihar v. H.R.M.L. Jute Mills[1960] 11 S.T.C. 17., the validity of the proviso to section 14-A of the Bihar Sales Tax Act, 1947, was in issue. The proviso reads thus: "Provided that if any dealer collects any amount by way of tax, in contravention of the provision of this section or the conditions and restrictions prescribed thereunder, the amount so collected shall, without prejudice to any punishment to which the dealer may be liable for an offence under this Act, be forfeited to the State Government, and such dealer shall pay such amount into the Government treasury in accordance with a direction issued to him by the Commissioner or any officer ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State. According to the learned counsel, the registered dealer, who is clothed with the right under Section 8-B(1) to collect the tax from his purchaser, has a Statutory right inhering in himself and the amount that may be collected by him represents his own moneys, in respect of which he is not liable to account to the State, though, if he were to be assessed under the Act the transaction in respect of which he had collected the tax would also be included in the taxable turnover. The learned Advocate-General, however, contends that the person who is authorised to collect the tax payable by him to the State from other persons occupies a fiduciary position not far different from that of an agent. In support of this contention, he referred us to the decision in Reading v. Attorney General[1951] A.C. 507.. In that case, one Reading was a sergeant in the British Army on active service in Egypt. Wearing military uniform, he accompanied civilian lorries transporting illicit spirits to specified destinations By his accompanying the convoy of illicit transport he avoided inspection of the goods conveyed under the lorries. For these services, he received in all 20,000. The military a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relationship. If the position of the State were held to be that of a principal and the position of the dealer that of an agent, the Legislature cannot permit either the principal or the agent to collect taxes by, an illegal levy. If the relationship between the State and the dealer is not that of a principal and an agent, even then, the Legislature cannot, in exercise of its power to enact a tax law on sale and purchase, permit an illegal levy. We are therefore of opinion that the position of the State vis-a-vis the dealer is not a relevant criterion to be taken into account to comprehend the State's powers of legislation to enact the amendment. The learned Advocate-General referred us to the following decisions of the Supreme Court of the United States. In United States v. Jafferson Electric Manufacturing Co.73 L. Ed. 859., it was held that a federal statute conditioning the right to a tax-refund on a showing by a claimant that lie alone had borne the burden of the tax did not infringe the due process clause of the fifth amendment. In 93 American Law Reports (Annotated). Jafferson Electric Manufacturing Co.'s case is referred to, and it is observed that that case puts at rest th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls Ltd., was an assessee under the Orissa Sales Tax Act. They were manufacturers of paper and paper boards, and were registered as dealers under the Act. They used to collect tax from the purchasers on all sales effected by them including sales to dealers in other States. For the quarters ending 31st March, 1950, 30th June, 1950, 30th September, 1950, etc., they paid sales tax on their turnover. which included outside sales. After the decision of the Supreme Court in the United Motors' case[1953] 4 S.T.C. 133., they applied for refund, under section 14 of the Act, of tax paid in respect of goods despatched for consumption outside the State of Orissa, contending that, according to the law expounded by the Supreme Court, the transactions of sales outside the State were not taxable under the Act. Refund was refused by the Assistant Sales Tax Officer and the order was confirmed by the Board of Revenue. In the view of the taxing authorities, the order of assessment had become final on the dates on which they were made and were not liable to be reopened, merely on the ground that the law applicable to the transactions was not correctly appreciated by the taxing authorities. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are ancillary or subsidiary to the primary head. 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 canvasser by counsel for the assessees. If competence to legislate for granting refund of sales tax improperly collected be granted, is there any reason to exclude 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? We see none. The question is one of legislative competence and there is no restriction, either express or implied, imposed upon the power of the Legislature in that behalf." We are aware of the fact that, to some extent, a concession was made in that case in urging the contention regarding the competency of the Legislature. But this, in our view, does not really affect the ratio of the decision. There is another decision of the Supreme Court. C.A. No. 494 of 1960, Burmah Construction Co. v. State of Orissa and OthersSince reported in [1961] 12 S.T.C. 816., in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain refund of tax illegally collected by imposing a period of limitation. The Orissa Act was enacted by the Orissa Legislature in exercise of legislative authority conferred upon it by Item 48 of List II of Schedule VII of the Government of India Act, 1935. The Supreme Court quoted the passage extracted above from their decision in Orient Paper Mills Ltd. v. State of Orissa[1961] 2 S.C.J. 610; 12 S.T.C. 357., and observed thus: "If the power to legislate in respect of tax comprehends the power to legislate in respect of refund of tax improperly or illegally collected, imposition of restrictions on the exercise of the right to claim refund will not be beyond the competence of the Legislature. Granting refund of tax improperly or illegally collected and the restriction on the exercise of that right are both ancillary or subsidiary matters relating to the primary head of tax on sale of goods. The provisions of section 14 of the Act are therefore not ultra vires the State Legislature." The principle of this decision can properly be invoked to decide the vires of the impugned provision under the Madras General Sales Tax Act, There is another view of the matter tending to uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 481/58 1955-56 up to 6-9-1955 8,630 1 3 7,337 6 3 The contention raised by the assessee-company before the taxing authorities, as also before the Appellate Tribunal, was that these transactions were inter-State sales not liable to be taxed by the Madras State. It was also contended that. in any event, the property in the goods passed at Calcutta under the terms of the contract between the company and its purchasers and that the mere fact of delivery of the goods inside the State would not entitle the State to levy a tax on the sales. It was further contended that, though tax had been collected by the company, the State was not entitled to have the collected amounts under section 8-B(2) of the Act, as amended by Madras Act I of 1957, as the said provision is ultra vires. The Tribunal quite properly declined to go into the question of the vires of the legislation and hold that, irrespective of the fact that the property in the goods passed at Calcutta, the sales were within the ambit of section 22 of the Madras General Sales Tax Act, as delivery of the goods was for purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishers and sellers of law books. The firm is a registered dealer under the Madras General Sales Tax Act. During the period 1st April, 1957 to 30th June, 1957, the inter-State sales effected by the petitioner were not liable to sales tax either under the Madras General Sales Tax Act, 1939, or under the Central Sales Tax Act, 1956, as the sales of the books were completely exempted from tax under the Madras Act. The firm, however, had collected sales tax from its purchasers in respect of inter-State sales effected during that period. The amount so collected was Rs. 2,622-21. While assessing the turnover of the firm for the year 1957-58, the taxing authorities claimed to recover this sum of Rs. 2.622-21 tinder section 8-B(2). A demand having been made for payment over, the present writ petition has been filed. We have already held that section 8-B(2) is intra vires and it is therefore clear that the petitioner must submit to the demand of the State to pay over this sum of Rs. 2,622-21. Learned counsel for the petitioner argued that there was no separate demand under Form B-2 in respect of this amount and that therefore the amount could not be recovered. Even as a technical ground of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the State under that provision. It cannot be said that there was no case for the authorities to act under rule 18 of the Madras General Sales Tax Rules. The Assistant Commercial Tax Officer, in his original order of assessment dated 4th May, 1956, held that the taxable turnover of the petitioner was nil, and he also stated in that order of assessment that there was no demand under section 8-B(2) of the Act, clearly overlooking the fact that the petitioner had collected a sum of Rs. 9,442 by way of sales tax from its constituents. This was clearly a mistake apparent on the record. We are of opinion that rule 18 of the Madras General Sales Tax Rules applies and the Assistant Commercial Tax Officer had jurisdiction to rectify the mistake. It is urged on behalf of the petitioner that the original assessment order became final and could not be reopened. If there are grounds for the authorities to act under rule 18-and we have held that there are grounds for so acting the previous order of assessment cannot be said to have become indefeasibly final. Another argument is pressed upon us, and that is that an action by the State under section 8-B(2) of the Act can only be part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed with costs. Rule nisi is discharged. Counsel's fee Rs. 100. W.P. Nos. 817 and 818 of 1959: The petitioner in these two writ petitions prays for the issue of a writ of certiorari or other appropriate writ under Article 226 of the Constitution to quash the order of the Deputy Commercial Tax Officer, Mylapore, dated 3rd June, 1958, in A. 2/227/54-55 relating to the assessment year 1954-55. The petitioner is a firm of partnership carrying on business as building contractors. For the year 1953-54. the firm filed monthly returns in A.3 Form and paid in all the sum of Rs. 7,014-1-0. In the bills submitted by the firm to its customers. sales tax was included and claimed. In this manner, a sum of Rs. 4,578-44 was collected by the firm from its constituents. Similarly, for the year 1954-55 the firm paid tax to the department, amounting to Rs. 1,752. out of which the collection made by it from its constituents was the sum of Rs. 54315-0.0. Following the decision of this Court in Gannon Dunkerley's case(1)[1954] 5 S.T.C. 216. the Deputy Commercial Tax Officer, by his orders dated 29th September, 1956 for the year 1953-54 and 21st January, 1957 for the year 195455, excluded the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non Dunkerley and Co. v. State of Madras[1954] 5 S.T.C. 216.. The State went up on appeal to the Supreme Court but the decision of this Court was affirmed and the judgment of the Supreme Court is reported in State of Madras v. Gannon Dunkerley and Co.[1958] 9 S.T.C. 353. In consequence of the judgment of the Supreme Court. there was a revised assessment by the Deputy Commercial Tax Officer. The petitioner had collected sales tax in respect of these works contracts from its constituents and the amount so collected was Rs. 13,080-6-9. The tax due and payable by the petitioner in respect of the assessable turnover was Rs. 5,222-2-1. The excess of tax collected over the tax payable by the petitioner was Rs. 7,858-4-8. After making the revised assessment the taxing authorities withheld this sum of Rs. 7,858-4-8 and directed a refund of the balance due as the petitioner had already paid a total tax of Rs. 56.950. W.P. No. 1213 of 1959 is directed against this order of the Deputy Commercial Tax Officer. For the year 1950-51, the petitioner had collected tax from its constituents the sum of Rs. 17,979-14-6. But the tax payable by it to the department was only Rs. 3.594-6-0. The taxing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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