1. These are two references under section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act'), made at the instance of the applicants-assessees. Sales Tax Reference No. 8 of 1976 pertains to the period 1-1-1964 to 31-12-1964 and Sales Tax Reference No. 23 pertains to the period 1-1-1965 to 31-12-1965 The same questions have been referred to us in these two references and the material facts are the same. Both these references have been made by a common order and on a common statement of facts. In these circumstances, we are disposing of the said references by a common Judgment.
2. The assessees are a private limited company and are manufacturers of glass bottles. The assessees are dealers registered under the said Act. In February 1960 the Public Relations Officer of the sales tax department issued a Bulletin wherein it was stated that empty glass bottles would be covered by entry 22 of Schedule E to the said Act, the said entry being the residuary entry. The Commissioner of Sales tax, by his determination order dated 20th August 1963, in a proceeding under section 52 of the said Act taken out by some other dealer, also held that glass bottles were covered by entry 22 of Schedule E to the said Act. Under the impression that this was the correct position in law, the assessees, who were selling glass bottles at a rate below Re. 1/- per bottle, collected sales tax at 3% and general sales tax at 2% on the sales of bottles during the relevant periods, as provided in entry 22 of Schedule E to the said act. Thereafter on 4th January 1966 the Commissioner of Sales tax, in some other determination proceedings, made at the instance of some other dealer, held that glass bottles sold at a rate below Re. 1/- per bottle would be covered by entry 14 of Schedule C to the said Act, and hence no general sales tax was liable to be collected in respect of such sales. The Sales tax Officer assessing the assessees held that the general sales tax collected by the assessees, in excess of the tax which the assessees were liable to pay, was liable to be forfeited under section 37 read with section 46 of the said Act. The assessees preferred two appeals against the decision of the Sales Tax Officer in respect of the aforesaid two assessment periods. But these appeals were dismissed by the Assistant Commissioner of Sales tax. The assessees then preferred two second appeals to the Sales tax Tribunal, which also dismissed these two appeals. Two applications for reference were made by the assessees and the following two questions have been referred to us for our determination by the Tribunal by a common order of reference, as we have already stated above. The said two questions are as follows :-
1. Whether on the facts and in the circumstances of the case and on the true and correct interpretation of S. 46 read with S. 37 the Tribunal was correct in holding that the order forfeiting the amounts of Rs. 29,070-50 in the first period and of Rs. 22,744-04 in the second period were justified in law
2. Whether on the true and correct interpretation of S. 37 the element of mens rea is necessary for attracting the provisions of forfeiture
3. Before going into the controversy raised at the bar, it might be useful to refer to certain provisions of the said Act. The relevant portion of S. 37, as it stood at the material time, read thus :
'(1) If any person -
(a) not being a dealer liable to pay tax under this Act, collects any sum by way of tax, or being a registered dealer collects any amount by way of tax in excess of the tax payable by him, or otherwise collects tax in contravention of the provisions of S. 46, or
(b) xxx xxx xxx he shall be liable to pay, in addition to any tax for which he may be liable a penalty of an amount not exceeding two thousand rupees, or double the amount of tax which would have been payable had there been no such failure, whichever is less; and in addition, in the case of a contravention referred to in clause (a), any sum collected by the person by way of tax in contravention of S. 46 shall be forfeited to the state Government.'
S. 46 (2) of the said act, as amended retrospectively, reads thus :
'(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 the amount of tax payable by him under the provisions of this Act.'
There is a proviso to this sub-section, which is not material for the purpose of these references. The relevant portion of sub-S. (6) of S. 38, which has been inserted retrospectively, reads thus :
'(6) Notwithstanding anything contained in this act or in any other law for the time being in force, where any sum collected by a person by way of tax in contravention of S. 46, is forfeited to the State Government under S. 37 and is recovered from him, such payment or recovery shall discharge him of the liability to refund the sum to the person from whom it was so collected. A refund of such sum or any part thereof can be claimed from Government by the person from whom it was realised by way of tax, provided that an application for such claim is made by him in writing in the prescribed form to the Commissioner, within one year from the date of the order of forfeiture.'
Sub-s. (32) of S. 2 of the said Act defines the term 'tax' thus :
''tax' means a sales tax, general sales tax, purchase tax, or retail sales tax, payable under this act.'
4. The first submission of Mr. Sheth, the learned counsel for the assessees, is that in the present case at the time when the assessees collected amounts as sales tax and general sales tax from their purchasers they were entitled to collect these amounts as sales tax and general sales tax as the law at that time was that empty glass bottles were covered by entry 22 of Schedule E as per the aforesaid Bulletin issued by the sales tax department and the aforesaid determination of 20th August 1963 made by the Commissioner of Sales-tax. It was submitted by him that the law at the time when transactions were effected was that the said bottles sold by the assessees were covered by entry 22 of Schedule E to the said Act and hence the amounts which were collected or recovered by the assessee from their purchaser were properly collected on account of sales tax and general sales tax and that the said collections did not constitute any excess collection at all. It was urged by him that in view of this, there was no contravention of S. 46 (2) of the said Act made by the assessees. In our view, this contention is quite unfounded. It is common ground that the correct law is the law as expounded in he said determination made by the Commissioner of Sales Tax on 4th January 1966, that glass bottles sold at a rate below Re. 1 per piece were covered by entry 14 of Schedule C to the said Act. The determination of 4th January 1966 did not alter the law but merely expounded that the correct law was, and hence even at the time when these sales were made by the assessees, the tax which they were liable to pay and in turn collect from the purchasers was at the rate specified in entry 14 of Schedule C to the said Act. Under this entry they were entitled to collect only the sales tax but not the general sales tax. This submission of Mr. Sheth must, therefore be rejected.
5. The next submission of Mr. Sheth was that in the present case the amount collected by the assessee on account of general sales tax from the purchasers, and which they were not entitled to collect, could not be said to constitute 'any amount by way of tax' within the meaning of the expression in sub-S. (2) of S. 46 of the said Act. It was 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-S. (2) of S. 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 be said to be 'tax' at all, and hence such collection would not amount to contravention of sub-S. (2) of S. 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-S. (1) of S. 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 S. 46(2) of the said Act. In our opinion, on the other hand, the expression 'any amount by way of tax in excess of the amount of tax payable by him under the provision of this Act' used in sub-S. (2) of S. 46 of the said Act clearly shows that the legislature intended, inter alia, to deal with a situation where a registered dealer collects an amount from a purchaser on the ground that it represents the tax which the dealer would be liable to pay under the said Act when such amount or a part thereof is not so payable. It is significant that the expression used in S. 46 (2) is 'any amount by way of tax' and not 'any amount of tax.'
6. The construction which we have given above to the provisions of S. 46 (2) of the said Act, to some extent, finds passport from a decision of this Bench in Commissioner of Sales tax vs. Poona Municipal Corporation the judgment having been delivered by Mr. Madon J.). In that case, the Poona Municipal Corporation, a registered dealer, charged to their purchasers and collected from them certain amounts by way of sales tax and general sales tax which the corporation would have been liable to pay had the sales made by it been eligible to tax under the said Act. It was held by the Sales tax Officer that as these sales were casual sales, they did not form part of the taxable turnover of the Corporation and were not liable to tax. After giving notice to the corporation the Sales tax Officer passed orders under S. 37 (2) of the said Act forfeiting the amounts collected by the Corporation by way of taxes as aforesaid. The question raised in those references was whether this order of forfeiture was justified in law. In considering the scheme of the Act, we have in the said decision observed as follows :-
'....... The said Act also permits them (registered dealers) to recoup from the purchasers the amount which they would be liable to pay to the Government by way of tax provided their purchasers agree to so pay such amount to them. This is a facility given to a seller of goods, who is a dealer or in other words, a permission or an authorization granted to a seller to collect from his purchaser the amount of tax which the seller is liable to pay to the Government. This follows from S. 46 of the said Act which prohibits collection of tax except by certain persons. Thus, sub-S. 910 of S. 46 prohibits all persons from collecting any sum by way of tax in respect of sales of goods which are declared as non-taxable goods under S. 5 of the said Act. Sub-S. (2) contains a dual restriction. Firstly, it prohibits a person who is not a registered dealer and not liable to pay tax in respect of any sale or purchase from collecting on the sale of goods any sum by way of tax from another person, and secondly, it prohibits a registered dealer from collecting amount by way of tax in excess of the amount of tax payable by him under the said Act.
xx xx xx The principle behind this section is thus clear. It is that a person who is not liable to pay tax to the Government in respect of the transaction in question should not be permitted to collect such amount from his purchasers, and in respect of those who collect any amount by way of tax in contravention of these provisions, S. 37 prescribes forfeiture of the amounts so collected as also a levy of penalty. By the amendment made with retrospective effect in S. 38, the amount so forfeited does not ensure for the benefit of the Government but the purchaser is given a right to apply that it should be refunded to him. The object underlying these sections is simple. It is based on the principle that a purchaser would agree to pay the amount by way of tax to a seller only when he is under the impression that the seller is liable to pay tax on the particular transaction of sale which he is entering into with him. If such an impression or belief has been wrongly induced in him and he is made to pay the amount in consequence thereof the Government, while not permitting the seller to retain the benefit of such erroneous impression, nevertheless would refund the amount to the person who has been wrongly so induced to part with his money.'
We may also refer to the decision of a Division Bench of this Court in Special Civil Application No. 818 of 1971 with Original Side Miscellaneous Petition No. 135 of 1969 decided by Deshpande & Vaidya JJ. on 25th November 1971. Deshpande J., in his judgment, has observed that S. 46 of the said Act prohibits all persons and registered or unregistered dealers from collecting taxes except in the manner provided under the Act or in excess of the amount payable by them to the State as tax S. 37 provides for the consequences of contravening certain provisions including S. 46 of the said Act. It has been inter alia held in the judgment that where a dealer collected by way of tax an amount in excess of the tax chargeable on the sale of the cinema carbons sold by him to his constituents, the action constituted a contravention of S. 46 of the said Act and that this amount was liable to be forfeited. It was observed that under the scheme of S. 37 of the said Act the recovery of the amount unauthorisedly collected by the dealer was a penalty by way of forfeiture thereof.
7. Mr. Sheth, in support of his aforesaid arguments, relied upon the decision of the Supreme Court in Sales-tax Officer vs. Tata Oil Mills Co. Ltd., where it has been, inter alia, held that any amount realised by a dealer in excess of tax leviable under the Kerala General Sales Tax Act, 1963, stands, for the purpose of determining the legislative competence under entry 54 of List II in the Seventh Schedule to the Constitution of India, on the same footing as an amount not due as tax under that Act. If the State Legislature cannot make a law under entry 54 directing the payment to the State of any amount collected as tax on transactions not liable to tax under that Act, it will likewise be incompetent to make a law directing payment to the State of an amount realised by a dealer in excess of the tax payable under that Act. In our view, this decision has no relevance to the question before us. In the first place, it is a decision on the question of legislative competence, with which we are not directly concerned. In the second place, it deals with the provisions of a different sales tax act with a different scheme. In particular, it is significant that the said Kerala Act which came up for consideration before the Supreme Court had no provision for refunding the excess amount collected by the dealer which under that act was to be paid over to the State. Finally in that case and provision was merely for the payment of the said excess amount to the Government and there was no provision for forfeiture by way of penalty as in S. 46(2) of the Bombay Sales Tax Act.
8. Mr. Sheth next relied on the decision of the Mysore High Court in V. B. Patil vs. Commercial T. O. That case arose under the provisions of the Mysore Sales Tax Act, 1957, and in particular, S. 18(1) and (2) and S. 18-A thereof S. 18(1) as it stood at the relevant time, inter alia, provided that no person who is not a registered dealer shall collect any amount by way of tax under that Act; nor shall a registered dealer make any such collection except in accordance with such conditions and restrictions, if any, as may be prescribed S. 18-A of the Act provided the penalty for collection in contravention of S. 18. In that case the petitioner was a dealer under that Act and carried on business on its own account and also as a commission agent on behalf of certain agricultural producers, being known principles. The petitioner, objected to the levy of sales tax on the turnover of sales of chilies effected by the petitioner as the commission agent of the said agricultural producers who were its known principles. The assessing authority rejected the objection, but on appeal, the objection of the petitioner was accepted and the turnover in dispute was exempted from sales tax. Under the aforesaid Mysore Act, sales by agriculturists of their agricultural produce were not taxable whether sales were effected by the producers or through commission agents. It was held that where a transaction is not exigible to tax under that Act or where a dealer is not liable to pay any tax on the transaction and as such is not entitled to make any corresponding collection, then the collection made by him would fall outside the scope of S. 18, but it does not amount to a contravention of any of the provisions of sub-S. (1) or (2) of S. 18. We are afraid that this decision also is not of much of help to Mr. Sheth. In the first place, the scheme of the Mysore Sales tax Act, 1957, is different from the scheme of the said Act which we are concerned. Moreover, in that case, the transactions in question were not exigible to tax at all under that Act, whereas in the case before us it is common ground that the sales of bottles made by the assessees were exigible to sales tax, although they were not exigible to general sales tax under the said Act. Hence, the principle laid down in this decision is not applicable to the case before us. Mr. Sheth has also drawn our attention to some other decisions under certain other sales tax acts whose schemes are different from the scheme of the said Act. In our view, those decisions are not at all relevant to the determination of the question raised before us and no useful purpose would be served by our referring to those decisions.
9. It is next pointed out by Mr. Sheth that in the present in the present case, as the assessees were under a bona fide impression, at the time when the relevant sales were effected, that these sales were covered by entry 22 of Schedule E to the said Act, they collected general sale tax believing that they would be liable to pay the same to the government. It was urged by him that in these circumstances there was no deliberate wrong doing or mens rea on the part of the assessees in collecting these amounts and hence no penalty, including the penalty of forfeiture under S. 37(2) of the said Act, could be levied against them. In our view, the contention also is liable to be rejected. An examination of the provisions of Ss. 37(2) read with S. 38 (6) of the said Act shows that the scheme of the said Act is that a registered dealer is entitled to recover or recoup from the purchasers, if the purchasers agree to it, only such tax or taxes as the registered dealer is liable to pay under the said Act. It a registered dealer recovers any amount from his purchasers on the basis that be would be liable to pay this amount as tax under the Act, whereas in fact such amount or a part thereof is not so payable, then he is not allowed to retain the benefit of such excess recovery. This excess is forfeited by the Government, but with a view to reimburse the same to the purchasers from whom these amounts were wrongly recovered. In view of this although the provision for forfeiture contained in S. 37(1) of the said Act is, in a sense, a provision of a penal nature, the object and the effect of the same is not to impose any additional liability on a dealer but merely not to allow him to retain the amount which is wrongfully colleted by him and to make a provision for refund of the same to the purchasers from whom the amount might have been wrongfully collected, on certain conditions being fulfilled. A provision of a penal nature of this kind cannot be compared with a provision which imposes a penalty, for example, like a fine, which clearly imposes an additional liability. It may be that where a penalty is sought to be levied which imposes an additional liability, an element of mens rea might be necessary. But, in a case like the penalty of forfeiture provided under S. 37(2) of the said Act, we see no reason why it should be an element of mens rea before this penalty could be imposed. In this connection, Mr. Sheth has relied on the decision of the Supreme Court in Hindustan Steek Ltd. vs. State of Orissa. In that case, it was held that the liability to pay a penalty under S. 9(1) read with S. 25(1)(e) of the Orissa Sales Tax Act, 1947, does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and a penalty will not ordinarily be imposed unless the party either acted deliberately in defiance of law or was guilty or conduct contumacious or dishonest, or acted in conscious disregard of its obligation. It is significant that the penalty in that case was imposed on the dealer in addition to the tax, for failure to register itself as a dealer, and thus it imposed a distinct and separate liability on the dealer. As we have already pointed out, such a penalty cannot be compared with the penalty of forfeiture provided under S. 37(1) of the said Act which merely deprives the dealer, as it were, of a gain wrongly made by him.
10. In the result, we answer question No. 1 referred to us in the affirmative and question No. 2 in the negative. The applicants to pay to the respondent the costs of these two references fixed at Rs. 300/- in all.