TMI Blog1983 (1) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... entry 24 in Schedule A,- (i) when sold at a price exceeding Ten paise in Ten paise in the Rs. 15 but not exceeding Rs. 30 the rupee. rupee. per pair; (ii) when sold at a price exceedFifteen paise Fifteen paise in ing Rs. 30 but not exceeding in the rupee. the rupee. Rs. 45 per pair; (iii) when sold at a price exceedTwenty paise Twenty paise in ing Rs. 45 per pair; in the rupee. the rupee." The applicants had entered into an agreement on 26th August, 1977, with Messrs. K.M. Dohadwala of Bombay, wholesalers, for sale of their footwear to them. In pursuance of the said agreement the applicants sold to the said Messrs. K.N. Dohadwala one pair of Anjan shoes. The price of the said pair was Rs. 15.80, but the applicants, in pursuance of the said agreement gave a trade discount of Rs. 1.34, that being the discount at the rate of 8.5 per cent which they gave to wholesalers who purchased from them. Thus the net price charged by them to the said Messrs. K.M. Dohadwala was Rs. 14.46. In respect of the said sale, the applicants issued to the said Messrs. K.M. Dohadwala their invoice dated 7th February, 1978. In the said invoice, they charged the said Messrs. K.M. Dohadwala Re. 0.73 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l was correct in holding that the sales tax collected by the dealer from customers and shown separately in the invoice forms part of the 'sale price'?" Both the Commissioner and the Tribunal in their respective orders have relied upon two decisions of the Supreme Court, namely, George Oakes (Private) Ltd. v. State of Madras [1961] 12 STC 476 (SC) and Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore [1971] 28 STC 331 (SC). Mr. Dada, learned counsel for the applicants, has submitted before us that these two decisions were under different Sales Tax Acts, and they have no application to a case arising under the Bombay Sales Tax Act, 1959. Mr. Dada also relied upon two other decisions of the Supreme Court and two decisions of this High Court in support of his submission. The two decisions of the Supreme Court relied upon by Mr. Dada were R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited [1977] 40 STC 497 (SC) and Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax [1980] 46 STC 477 (SC). The two decisions of the Bombay High Court relied upon by Mr. Dada were Commissioner of Sales Tax v. Poona Municipal Corporation [1977] 40 STC 468 and Mahalaks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum collected by way of tax, whichever is less. Under section 63 of the Bombay Sales Tax Act, 1959, whoever without reasonable excuse contravenes the provisions of section 46 commits an offence punishable with imprisonment as also fine. Bearing in mind the above statutory provisions, we will now examine the authorities cited at the Bar. The question before the court in the case of George Oakes (Private) Ltd. v. State of Madras [1961] 12 STC 476 (SC) was of the constitutional validity of the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954. Prior to the passing of the impugned Act, several assessments had been made under the Madras General Sales Tax Act, 1939, in which the amount of tax collected by a dealer was treated as forming part of the sale price. In Deputy Commissioner of Commercial Taxes, Coimbatore Division v. M. Krishnaswami Mudaliar Sons [1954] 5 STC 88, the Madras High Court held that the amount collected by a registered dealer from the consumer by way of sales tax and paid over to the Government should not be included in the turnover of the registered dealer as part of the sale price of the goods sold and was not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sales tax payable by him and thus the seller had passed on his liability to the purchaser. In the case of Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore [1971] 28 STC 331 (SC), after examining the provisions of the Madhya Pradesh General Sales Tax Act, 1958, the Supreme Court held that there was no provision in the Act from which it could be gathered that the Act imposed any liability on the purchaser to pay the tax imposed on the dealer and if the dealer passed on his tax burden to his purchaser, he could only do it by adding the tax in question to the price of the goods sold and in that event the price fixed for the goods including the tax payable became the valuable consideration given for the goods purchased by him. The court observed (at p. 334) that section 7-A of the Madhya Pradesh Act prohibited a dealer from collecting any amount by way of sales tax or purchase tax from a person who sold agricultural or horticultural produce grown by himself. The Supreme Court held that it was not necessary to examine the relevance of that provision for deciding the appeals before them. The court further held that the said section 7-A did not give any statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls to be considered is whether under the Bombay Sales Tax Act the seller is authorised to collect the amount of tax which he becomes liable to pay to the Government. We have seen that under section 2(29), "sale price" means the amount of valuable consideration paid or payable to a dealer for any sale made. This definition must be construed in the light of the provisions of sections 37,46 and 63, which we have referred to earlier. If the amount of tax collected by a dealer from his purchaser were to form part of his sale price, the question of forfeiture under section 37 of a part of sale price cannot possibly arise. A seller is entitled to charge what he likes to his purchaser unless the maximum price is statutorily fixed, and if he charges a higher price-whether he charges a lump sum price or itemwise price by showing that a part of it is to reimburse him for the amount of tax which he would have to pay to the Government, he cannot be penalised for that. Similarly section 46 would also be meaningless if the amount collected by way of tax is to be treated as price. There could also be no prosecution under section 63 for collecting any excess amount by way of tax because if the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s urged by him that even if an excess amount was collected by the assessees on the footing that this would be the tax which the assessees would have to pay under the said Act, such excess amount would become part of the purchase price and the assessees were entitled to retain it. It was further urged by him that the expression 'any amount by way of tax' used in sub-section (2) of section 46 could refer only to an amount which the assessees could lawfully collect as tax. It was submitted by him that in view of the definition of the term 'tax' contained in the said Act, which is set out earlier, any amount in excess of the tax due collected by the assessees could not be said to be 'tax' at all, and hence such collection would not amount to contravention of sub-section (2) of section 46 of the said Act. In our view, this contention is totally unsound. In the first place, to accept the construction put forward by Mr. Sheth would be to render the provisions of sub-section (1) of section 37 of the said Act relating to forfeiture nugatory to a large extent, and to that extent to nullify the effect of the provisions of section 46(2) of the said Act. In our opinion, on the other hand, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Government. Such separate agreement is shown when the bill or the invoice shows the amount of tax separately. It is, however, optional for the dealer to collect or not to collect the amount of tax from his purchaser. When he does not collect it, he bears the tax liability himself and does not reimburse himself in respect thereof. Even if he fixes his sale price by taking into consideration, the amount of tax which he would have to pay by charging a lump sum price and not showing separately the amount collected by way of tax, such lump sum price would be the price of the goods because it would be impossible to determine whether or not the dealer had taken into account the amount of tax which he would have to pay. If there is any doubt in the matter, it is set completely at rest by rule 46-A of the Bombay Sales Tax Rules, 1959. The Bombay Sales Tax Act, 1959, came into force with effect from Ist January, 1960. Rule 46-A provides as follows: "46-A. Reduction of sale price for levy of tax.-A registered dealer may in respect of any sale on which the sales tax or the general sales tax is payable by him either- (i) exclude the amount, if any, collected by him separately by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arginal note appended to a section cannot be used for construing a section (see Commissioner of Income-tax, Bombay v. Ahmedbhai Umarbhai Co., Bombay AIR 1950 SC 134 at 141). The same principle would apply to the marginal note appended to a rule. The rule expressly talks in clause (i) about excluding from the sale price the amount of tax separately collected while in clause (ii) it speaks of deducting from the sale price a sum calculated in accordance with the formula given in the table thereto. For the reasons set out above, we hold that in respect of the impugned transaction the sale price in respect of which the applicants became liable to pay sales tax was Rs. 14.46 and not Rs. 15.19 and as the sale price was less than Rs. 15 the sales tax payable by the applicants was at the rate of five paise in the rupee and not at the rate of ten paise in the rupee. In the result, we answer the question submitted to us in the negative, that is in favour of the assessee and against the department. The respondents will pay to the applicants the costs of this reference. The applicants will be entitled to a refund of the fee of Rs. 100 paid by them. - - TaxTMI - TMITax - CST, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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