1. These two petitions under article 226 of the Constitution of India, filed by the Trustees of the Port of Bombay, a body corporate constituted under the Bombay Port Trust Act, 1879 (Bom. Act No. 6 of 1879), against the Sales Tax Officer, A Ward, Unit III, Bombay, and the State of Maharashtra, raise common questions of law. The material facts which have given rise to the questions in both these petitions are the same. We have, therefore, though it convenient to dispose of both these petitions by a common judgment.
2. In the course of carrying out their functions under the Bombay Port Trust Act, the petitioners buy machinery, plant, wagons and other equipments, etc. When these articles become obsolete the petitioners disposed them of by public auction. Further, when goods have been landed from the ships and have been lying in the custody of the petitioners and are not removed from the docks within a certain time, the petitioners are under a statutory obligation to dispose of these goods by public auction after following the procedure prescribed in section 64A of the Bombay Port Trust Act. The petitioners also run a canteen on their premises.
3. On 18th January, 1960, the petitioners applied for registration as dealer under the Bombay Sales Tax Act, 1959 (hereinafter for the sake of brevity referred to as 'the Act'). In their said application, the petitioners showed themselves as dealers in (1) sales of uncleared goods, (2) sales of old machinery and (3) canteen stores. The sales tax authorities, however, did not recognise the petitioners as dealers in uncleared goods or old machinery and issued to them a certificate of registration in respect of canteen stores and as retail dealers in respect thereof at the place of business mentioned in the said certificate. During the period 1st April, 1966, to 31st March, 1967, the petitioners disposed of obsolete machinery by public auction. The petitioners collected from the purchasers of such obsolete machinery a sum of Rs. 1,20,001, being the amount equivalent to the amount of sales tax and general sales tax payable under the said Act on these sales, were these sales exigible to tax under the said Act. Under the said Act, a dealer is required to file quarterly returns with the Sales Tax Officer and, accordingly, the petitioners filed their quarterly returns. In the returns so filed, the petitioners included these sales in their taxable turnover. In separates statements filed along with these returns, the petitioners showed the amounts of sales tax and general sales tax recovered by them. Though, in their petition (in Miscellaneous Petition No. 318 of 1971), the petitioners have averred that these returns did not include the sums so recovered, the admitted position between the parties is that the statements annexed to the returns did show these sums, and copies of the said returns have been produced and exhibited by consent. In the course of their assessment proceedings, the petitioners contended that the disposal of the obsolete machinery was not liable to sales tax as these sales were causal sales. This contention was accepted by P. D. Karandikar, Sales Tax Officer, A Ward, Unit III, Bombay, who is the first respondent in Miscellaneous Petition No. 318 of 1971. Thereafter, the said Sales Tax Officer issued a notice dated 31st March, 1971, against the petitioners calling upon them to show cause why the said sum of Rs. 1,20,001 should not be forfeited, being the amount of tax collected by them on casual sales in contravention of the provisions of section 46 of the said Act. In reply to the said show cause notice, the petitioners raised various contentions in the written statement filed by them. By his order dated March 31/April 2, 1971, the said Sales Tax Officer rejected those contentions. He held that the petitioners had collected tax on auction sales which were claimed by him as casual sales and that they had neither paid the amount of tax collected by them to the Government nor had they returned such amount to the purchasers concerned, and he thereupon directed forfeiture of the said amount to the Government under sub-section (2) and (3) of section 37 read with section 46 of the said Act. By a notice dated 31st March, 1971, the said Sales Tax Officer called upon the petitioners to pay a sum of Rs. 80,523.77, being the balance amount payable by them after adjusting against the said sum of Rs. 1,20,001, a sum or Rs. 39,477.23, being the amount of refund due to the petitioners. By another order dated 31st March, 1971, the said Sales Tax Officer adjusted the said amount of refund towards the liability of the petitioners in respect of the said sum of Rs. 1,20,001 ordered to be forfeited by him. Miscellaneous Petition No. 318 of 1971 has been filed challenging the legality of these two orders and the notice of demand.
4. During the period 1st April, 1967, to 31st March, 1968, the petitioners sold by public auction not only obsolete machinery but various consignments of goods lying uncleared in the docks. In respect of such sales, the petitioners collected from the purchasers amounts representing the amount of sales tax and general sales tax which they would have to pay were these sales exigible to tax under the said Act. For this period also the petitioners filed their quarterly returns with statements showing the amounts of tax so collected by them. In the course of the assessment proceedings, the petitioners raised the same contentions in respect of these sales as they had done in the course of the earlier assessment proceedings in respect of sales of obsolete machinery. It appears that A. N. Patil, who was at that time holding the office of the Sales Tax Officer, A Ward, Unit III, Bombay, and who is the first respondent in Miscellaneous Petition No. 224 of 1972, was inclined to uphold the petitioners' contention that these sales were casual sales and he, accordingly, issued to the petitioners a notice dated 27th December, 1971, to show cause why the amounts aggregating to Rs. 92,187.65 collected by the petitioners by way of tax should not be forfeited on the ground that they, being a registered dealer, had collected the said amount in excess of the amount of tax payable by them in contravention of section 46 of the said Act. In reply, the petitioners raised identical contentions as were raised by them in respect of the notice for the earlier assessment period. By a composition order of assessment and forfeiture of the amount of tax collected, the said Sales Tax Officer held that the sales of uncleared goods and obsolete machinery were casual sales and were not exigible to tax. He further held that the said sum of Rs. 92,187.65 was collected by the petitioners in respect of these sales in contravention of section 46 of the said Act and that, they not having refunded the amount so collected to their purchasers, the said sum was liable to be forfeited to the Government and he, accordingly, ordered it to be so forfeited. After giving credit to the petitioners for the sum of Rs. 11,640.12 deposited by them along with their quarterly returns and adding thereto the amounts of Rs. 65.47 payable by the petitioners as purchase tax, the said Sales Tax Officer by his notice of demand dated 5th February, 1972, called upon the petitioners to pay a sum of Rs. 80,613 to the Government. Miscellaneous Petition No. 224 of 1972 has been filed by the petitioners challenging the validity and legality of the said order dated 31st January, 1972, and the said notice of demand dated 5th February, 1972.
5. Though a number of grounds have been taken in these petitions before us, Mr. Kolah, the learned counsel for the petitioners, has confined himself to urging five points only. These points are :
(1) Sub-section (1) of section 37 and section 46 of the said Act are unconstitutional as being beyond the legislative competence of the State Legislature and as depriving a person of his properly without compensation and thus infringing the provisions of sub-clause (f) of clause (1) of article 19 and of clause (2) of article 31 of the Constitution.
(2) Sub-section (1) of section 37 and section 46 of the said Act apply only toe dealers liable to pay tax under the said Act and do not apply to persons other than these dealers.
(3) If the provisions of sub-section (1) of section 37 and section 46 of the said Act are to be construed as apply to persons other than dealers liable to pay tax under the said Act, to that extent, these provisions are unconstitutional as being beyond the legislative competence of the State.
(4) The amounts ordered to be forfeited by the Sales Tax Officer were not collected by the petitioners by way of tax but with the intention of refunding them to the purchasers in case these sales were held not to be exigible to tax and, therefore, these amounts were not liable to be forfeited.
(5) Mens rea was an essential ingredient of sub-section (1) of section 37 of the said Act and, that ingredient being absent in the petitioners, the said amounts were not liable to be forfeited.
6. In order to appreciate the submissions made at the Bar in support of the above contentions, it becomes necessary to set out the relevant statutory provisions. Under the Constitution of India, sales tax is a State subject. Entries 54 and 64 in List II of the Seventh Schedule to the Constitution are as follows :
'54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.
64. Offences against laws with respect to any to the matters in this List.'
List I contains the subjects or topics on which the Union Parliaments alone can legislate. Entry 92A of that List provides :
'Taxes on the sales or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.'
7. In pursuance of the power conferred upon it by the said entries 54 and 64, the State Legislature has passed the said Act. Section 2 of the said Act is the definition section. Clause (11) of section 2 defines the term 'dealer' as meaning (omitting the unnecessary words) 'any person who whether for commission, remuneration or otherwise carries on the business of buying or selling goods in the State'. Clause (19) of section 2 defines the term 'person' as including 'any company or association or body of individuals, whether incorporated or not, and also a Hindu undivided family, a firm and a local authority'. Under section 3, every dealer whose turnover in any year exceeds the limit prescribed in that section becomes liable to pay tax under the said Act. Section 22 casts an obligation upon such dealer to get himself registered as a dealer. Any dealer failing to get himself so registered commits an offence under section 63. Section 37, as it stood at the relevant time, provided as follows :
'37. Imposition of penalty for contravening certain provisions. - (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 amounts by way of tax in excess of tax payable by him, or otherwise collects tax in contravention of the provisions of section 46, or
(b) being a dealer liable to pay tax under this Act, or being a dealer who was required to do so by the Commissioner by a notice served on him fails in contravention of sub-section (1) of section 48 to keep a true account of the value of the goods purchased or sold by him, or fails when directed so to do under that section to keep any accounts or record in accordance with the direction.
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 section 46 shall be forfeited to the State Government.
(2) If the Commissioner in the course of any proceedings under this Act or otherwise has reason to believe that any person has become liable to a penalty or forfeiture or both penalty and forfeiture of any sum under sub-section (1), he shall serve on such person a notice in the prescribed form requiring him on a date and at a place specified in the notice to attend and show cause why a penalty or forfeiture or both penalty and forfeiture of any sum as provided in sub-section (1) should not be imposed on him.
(3) The Commissioner shall thereupon hold an inquiry and shall make such order as he thinks fit.
(4) No prosecution for an offence under this Act shall be instituted in respect of the same facts on which a penalty has been imposed under this section.'
8. Sub-section (1) has been substituted by a new sub-section by Maharashtra Act No. 40 of 1969. We are, however, not concurred with this amendment. In sub-section (2), the words 'a penalty or forfeiture or both penalty and forfeiture' have been substituted with retrospective effect by the said amending Act of 1969. Section 38 of the said Act deals with payment of tax. By the amending Act of 1969, a new sub-section, namely, sub-section (6), was inserted in the said section with retrospective effect. That sub-section is as follows :
'(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 section 46, is forfeited to the State Government under section 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 raised 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. On receipt of any such application, the Commissioner shall hold such inquiry as he deems fit, and if the Commissioner is satisfied that the claim is valid and admissible and that the amount so claimed as refund was actually paid in Government treasury or recovered, and no drawback, set-off, refund or remission in respect of that amount was granted, he shall refund the sum or any part thereof, which is found due to the person concerned.'
Sub-sections (1) and (2) of section 46 provide as follows :
'46. Prohibition against collection of tax in certain cases. - (1) 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.
(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.'
9. There is a proviso to sub-section (2) of section 46 with which we are not concerned. In sub-section (2), the words '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' have been inserted with retrospective effect by Maharashtra Act No. 21 of 1962.
10. On the question of legislative competence it was submitted by Mr. Kolah, the learned counsel for the petitioners, that, by the said entry 54, the State Legislature was empowered to legislate with respect to the levy of tax on the sale or purchase of goods only and and that it had no power, in the guise of imposing a penalty, to take away from a person any amount wrongfully collected by him from another. So far as we are concerned, the matter is concluded by a decision of the Supreme Court in R. S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited : 1SCR338 . Before we come to this decision, it may be mentioned that sales tax laws of various States contain provisions for forfeiture in the same or similar terms. Some of these matters went up to the Supreme Court. The criterion laid down in those cases for testing the legislative competence of a statutory provision of this nature is that the court should see whether the forfeiture was levied for the purpose of enforcement of the enactment or whether it was for the purpose of collecting the amount which was wrongly collected by the assessee and the use of the word 'forfeiture' was merely a device to get at the sum which had been collected in contravention of the provisions of the said Act. In the first case, the statutory provision would be within the legislative competence of the State Legislature. In the second case, it would be beyond the power of the State Legislature inasmuch as the intention of the State was to secure for itself a sum which had been collected by the assessee which was not exigible as a tax. In Ajit Mills' case : 1SCR338 , the question was of the vires of sections 37(1)(a) and 46(2) of the said Act, as in fore in the State of Gujarat. The said Act as in force in Gujarat did not contain the amendment which had been made with retrospective effect in the said Act so far as regards the State of Maharashtra. The High Court of Gujarat held the provisions of sections 37(1)(a) and 46(2) to be ultra vires as being beyond the legislative competence of the State Legislature. In appeal, the Supreme Court reversed the judgment of the High Court and held that these provisions did not suffer either from any legislative incompetence or any constitutional defect. The Supreme Court held that the State Legislature has the power to levy a penalty for the proper enforcement of the taxing statute, that such a power is ancillary, incidental and necessary to the power of taxation conferred upon the State Legislature and that, on a proper reading and interpretation of the impugned statutory provisions, they did not amount to a device to take away for the State exchequer amounts wrongfully collected by the assessee but were a penalty imposed upon the assessee.
11. So far as the second limb of the attack on the vires of the said sections is concerned, namely, the challenge under articles 19(1)(f) and 3(2) of the Constitution, in the aforesaid Supreme Court case : 1SCR338 , the vires of the aforementioned statutory provisions were also challenged on the ground of being violative of articles 14 and 19(1)(f). Both these challenges were negatived by the Supreme Court. So far as the challenge under article 31(2) is concerned, it was submitted that the effect of this article was to deprive a person of his property without compensation. It was further submitted that the impugned orders thus deprive the petitioners of their property without compensation. It was somewhat surprising to hear such an argument advanced, because, throughout, the petitioners have been contending that they had only collected these amounts because they were not sure whether these transactions of sale were exigible to tax or not that, if there transactions were held in assessment proceedings to be not exigible to tax, they would refund these amounts to their purchasers. If so, the amounts held by them cannot be said to be their own property. Apart from that, such an argument is somewhat strange. If such an argument, namely, that a person who wrongfully obtains money should not be deprived of it as a punishment without being compensated for it, were to be accepted, it would follow that the provisions of criminal law under which stolen property when recovered is directed by the court to be returned to its rightful owner are also ultra vires as being violative of articles 31(2) because the thief could contend that he was deprived of the property which he had wrongfully obtained without being compensated for it. There is thus no substance in the constitutional challenge levelled by the petitioners against the vires of sections 37(1)(a) and 46(2) of the said Act.
12. This now brings us to the second point urged at the Bar on behalf of the petitioners, namely, that, on a proper interpretation, these provisions apply only to dealers liable to pay the tax and not to any other person. A similar question fell for consideration of this very Bench in Commissioner of Sales Tax v. Poona Municipal Corporation  40 S.T.C. 468. That was a reference under section 61(1) of the said Act and the question referred to us was : 'Whether, on a true and proper interpretation of the first part of sub-clause (2) of section 46 of the Bombay Sales Tax Act, 1959, the Tribunal was correct in law in holding that the word 'person' occurring therein applies only to a person who is a dealer and not to a person who is not a dealer in respect of the transactions and, therefore, the order forfeiting the amount of tax collected on casual sale was bad in law ?' In that case, the Poona Municipal Corporation, which were registered as dealers, made certain casual sales of scrap materials, etc. They also collected tax on these sales from persons to whom these articles were sold. These sales were held in the assessment proceedings to be casual sales and the amount ordered to be forfeited. The Tribunal held that the assessee, in that case, not being dealers in these items, did not fall within the prohibition contained in section 46(2) of the said Act and these amounts were, therefore, not liable to be refunded. The question referred to us arose from that decision of the Tribunal and was answered by us in the negative. In our judgment delivered in that case, we referred to the scheme of the said Act in these terms :
'The scheme of the said Act is that persons, who carry on the business of selling or buying goods, once their turnover exceeds the limits prescribed by section 3 of the said Act, become liable to get themselves registered as dealers and pay the tax under the said Act. The said Act also permits them 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 authorisation 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 section 46 of the said Act, which prohibits collection of tax except by certain persons. Thus, sub-section (1) of section 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 section 5 of the said Act. Sub-section (2) contains a dual restriction. Finally, 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 any amount by way of tax in excess of the amount of tax payable by him under the said Act. Sub-section (3) prohibits a dealer, who has been permitted by the Commissioner of Sales Tax to pay in respect of any period a lump sum payable instead of the amount of tax payable by them under the provisions of the said Act, from collecting any amount by way of tax on sales of goods made during the period to which such lump sum payment applies. 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 recoup such amount from his purchasers, and in respect of those who collect tax in contravention of these provisions, section 37 prescribes forfeiture of the amount of tax so collected as also a levy of penalty.'
13. The Supreme Court in Ajit Mills' case : 1SCR338 has placed the same interpretation on section 46. In that case, Krishna Iyer, J., observed as follows :
'Although there is no specific provisions enabling the dealer to pass on the tax on the customers, there is a necessary implication in section 46 authorising such recovery, it being optional for him do so or not. The primary liability to pay the tax is on the dealer but it is a well-established trade practice, which has received express or implied legislative cognisance, that the dealer is not prohibited from passing on the tax to the other party to the sale. Such a usage is implicit in section 46 of the Act although what is explicit in the provision is that nothing shall be collected by way of tax in respect of sale of any goods exempted under section 5 and no registered dealer shall exact by way of tax any sum exceeding what is payable under 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.'
14. What is couched in a prohibitory form in section 46 is given positive effect by section 37(1) of the said Act. The object of section 37 is to deprive a person who has collected any amount by way of tax in contravention of the provisions of section 46 from keeping it himself by forfeiting the amount in his hands. To hold that section 46 applies to all persons, whether dealers or not, and in the same breath to say that section 37(1), in spite of its wide language, applies only to dealers liable to pay the tax is to render nugatory the penal provisions of section 37(1) and to leave scot-free all persons other than dealers who have collected amounts by way of tax from their purchasers on an incorrect or false representation, whether express or implied, that they were liable to pay the tax on their transactions of sales to the Government. In Ajit Mills' case : 1SCR338 , Kailasam, J., said as follows :
'Section 46 imposes prohibition against collection of tax in certain cases. Section 46(1) prohibits any person whether dealer or not from collecting any sum by way of tax in respect of sales on which by virtue of section 5 no tax is payable. If, however, any person collects any sum by way of tax on sales by him of such goods he is by operation of section 37(1) liable to pay penalty and also penalty by way of forfeiture. This punitive measure affected all persons who sell non-taxable goods.'
15. There is no reason for holding, nor has any argument been advanced before us which has convinced us so to hold, this punitive measure should not extend to all persons who collect tax on other transactions of sale which are not exigible to tax. Clause (a) of section 37(1) of the said Act dealer with three categories of offenders, namely, (1) any person 'not being a dealer liable to pay tax under this Act' collecting any sum by way of tax, (2) any person 'being a registered dealer' collecting 'any amount by way of tax in excess of tax payable by him' and (3) any person otherwise collecting 'tax in contravention of the provisions of section 46'.
16. It was further argued on behalf of the petitioners that since under clause (11) of section 2 of the said Act a 'dealer' means any person who carried on the business of buying or selling goods, whether the word 'person' occurs, it must be read as it by it, it was meant a dealer carrying on the business of buying or selling goods. This submission, difficult as it is to understood, was made more difficult of comprehension by a further argument that the separate definition of 'person' given in clause (19) of section 2 was subject to the governing words, like all the other definition clauses in that section, namely, 'In this Act, unless the context otherwise requires' and, therefore, the definition of 'person' was given only for the purposes of understanding the word 'person' used in the definition of the term 'dealer'. It is unnecessary to deal at any length with such an argument. What the governing words of section 2 mean is that wherever in the said Act any of the expressions defined by any of the clauses of section 2 occurs, it must be given the meaning as defined by that clause unless the context in which such expression occurs requires otherwise. Thus, in the said Act, wherever the word 'person' occurs, whether in the definition of the term 'dealer' or in any other section of the said Act, that word must be given the meaning attributed to it under clause (19) of section 2. It is only if the context in which the word 'person' occurs in any particular section or sub-section necessitates it, that a different meaning is required to be given to that word. There is nothing in any part of section 37(1) for the court to give to the words 'any person' used therein a meaning different from that contained in clause (19) of section 2. On the contrary, even if the definition of 'person' were not given in clause (19), the word 'person' would require almost the same meaning to be given to it by reason of the provisions of clause (35) of section 3 of the Bombay General Clauses Act, 1904. Apart from it, a bare reading of this sub-section is enough to show that the words 'any person' cannot bear the narrow and restricted meaning canvassed for on behalf of the petitioners but must be given a general meaning if this section is to be effective.
17. Coming now to the third point, namely, that if there sections are to be interpreted as applying to persons other than dealers also, they would, to that extent, be beyond the legislative competence of the State Legislature, the submission in that behalf only needs to be stated to be rejected. It was submitted that the State Legislature had the power to tax sales and purchases made by dealers only and not sales and purchases made by any other person. This argument is in the teeth of the express words of entry 54 in List II of the Seventh Schedule to the Constitution which confers upon the State Legislature the power to make laws with respect to taxes on the sales or purchases of goods subject to two qualifications, namely, (1) that they should not be taxes on the sale or purchase of newspapers and (2) that they should not be taxes on the transactions of sale or purchase taking place in the course of inter-State trade or commerce. Thus, it was open to the State Legislature to levy a tax on the sale of purchase of goods made not only by dealers but by each and every person and even what are known as casual sales. That the State Government has chosen to exercise its taxing power in part only does not deprive it of its legislative competence to legislate with respect to matters affecting its taxing power with respect to other sales and purchases. In N. K. Papiah & Sons v. Excise Commissioner : 3SCR607 , it was contended that section 19 of the Karnataka Sales Tax Act, 1957, was invalid as it purported to levy sales tax upon the sale of arrack made by the Government to licenses. The argument in support of this connection was that the definition of 'dealer' given in section 2 of that Act excluded the Government of Mysore and that by virtue of section 5(3) of that Act no tax could be levied on the sale of arrack by the Government to the appellants. The impugned section 19 empowered the Government of Mysore, notwithstanding anything contained in that Act in respect of any sale of goods effected by it, to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under that Act. The Supreme Court rejected this challenge to the validity of the said section 19 in these terms :
'This section makes it clear that notwithstanding anything contained in that Act, the Government shall in respect of any sale of goods effected by it be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under the Act [that is, the Mysore Excise Act, 1965 (sic)]. The section is clear that the Government could collect the tax on the sale made by it as if it were a registered dealer, notwithstanding anything contained in section 2 or section 5. The section itself creates a right in the State to recover and an obligation on the purchaser from the State to pay the amount. Any imposition of liability or obligation in respect of sale or purchase of goods will be covered by entry 54 of List II of the Seventh Schedule of the Constitution.'
18. The fourth point canvassed before us was that the amounts ordered to be forfeited were collected by the petitioners not by way of tax but because they were uncertain whether these transactions were exigible to tax or not and, therefore, they collected amounts, so that in case these transactions were exigible to tax, they would pay them over to the Government and, if they were not exigible to tax, they would refund them to the purchasers. In support of this contention, reliance was placed upon the following passage from the judgment delivered by Krishna Iyer, J., in Ajit Mills case : 1SCR338 :
'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 words. The spirit of the provision lends force to the construction that 'collected' means 'collected and kept as his' by the trader. If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return it if eventually it was not taxable, it was not collected. 'Collected', in an Australian Customs Tariff Act, was held by Griffith, C.J., not 'to include money deposited under an agreement that if it was not legally payable it will be returned' : (Words & Phrases, page 274). We therefore semanticise 'collected' not to cover amounts gathered tentatively to be given back if found non-exigible from the dealer.'
After considering the scheme of sub-sections (2) and (3) of section 37 of the said Act, the learned Judge proceeded to observed :
'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 the 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-vis criminal inflictions under section 64(1)(h) Based are they who are prosecuted, for the criminal law is benign ! These possibilities only underscore the necessity, even on conviction, of deprivation of illicit collections as on departmental penalty imposts, coupled with discharge fro dealers pro tanto plus inexpensive and prompt return of sums to purchasers by rough and ready verifications followed by money order remittances. While we uphold the legislation, we suggest such salvationary modifications, if constitutionality is to be impregnable. There is no last word in constitutional law.
For the nonce, we are satisfied that these speculative interrogations do not destabilize the constitutional position. Moreover, our construction obligates the State not to forfeit sums already returned, undertaken to be returned and the like. Our direction that the State shall disgorge the sums by some easy process, back to the buyers helps the dealer against claims from the former.'
19. To hold that the same interpretation must be placed upon the word 'collected' used in section 37 of the said Act, as was done by the Supreme Court upon the said expression 'any sum collected by the person ... shall be forfeited', as used in section 37(1), as in force in the State of Gujarat, is to ignore the context in which they occur in the legislation in force in this State. The reason for placing this narrow interpretation on the word 'collected' is expressly set out in the judgment of the Supreme Court. This was in order to meet the ends of justice that the forfeiture clause was given a narrow meaning or, as put by Krishna Iyer, J., 'we think the ends of justice can be met by reading down the forfeiture clause interpretatively', and, as expressly stated further down in the judgment, 'this was with reference to the context in which that word occurs'. The context was that section 37 of the said Act, which the Supreme Court had to interpret in that judgment, did not provide for nor did any other section in the Act, as in force in the State of Gujarat, contain any provision for refund of the amounts illegally collected to the purchasers. The argument advanced was that this enabled the State to retain the amounts for itself and exposed the dealer to a double liability, for he was bound to hand over the amounts to the State and at the same time to refund or reimburse the amounts so collected to the purchasers. The position before us is, however, radically different by reason of the amending Act No. 40 of 1969, which inserted sub-section (6) in section 38 with retrospective effect. Under this retrospective amendment, the State does not retain the amount for itself. It has taken over the obligation to refund it to the purchasers and thus see that persons wrongfully deprived of money by the illegal collection of tax by a dealer have been reimbursed with the amounts of which they have been so deprived. Further, under section 38(6) of the said Act, once the dealer pays over the amounts forfeited to the State Government or on his failure to do so on the amount forfeited being recovered from him, the dealer is discharged from all liability to refund the sum collected by him to the person from whom it was collected. During the course of the arguments in Ajit Mills' case : 1SCR338 , these retrospective provisions of the Act, as in force in the State of Maharashtra, were brought to the notice of the Supreme Court and, in connection therewith, Krishna Iyer, J., said :
'.... the Maharashtra legislation has a better sense of equity, the dealer being absolved from the purchasers' claims and Government squarely undertakings to repay them. We expect Gujarat to legislate not merely to forfeit but also to be fair to the dealer and buyer. The possible consequences of inaction, which we are not examining, will not be lost on that State, we hope.'
Again, while giving the narrow meaning to the word 'collected' used in section 37(1) of the said Act, Krishna Iyer, J., observed :
'While we uphold the legislation, we suggest such salvationary modifications, if constitutionality is to be impregnable.'
20. It would further appear from Ajit Mills' case : 1SCR338 that the Supreme Court felt that it would be more in the interests of unwary purchasers that the State undertakes the obligation to return the amount wrongfully collected than that the purchasers should be left to pursue their own remedies against the dealer. In this connection, Krishna Iyer, J., observed :
'We do not think it is more feasible for ordinary to recover from the common run of dealers small sums than from Government.'
21. The context in which the word 'collected' occurs in section 37(1) of the said Act, as in force in this State, is fundamentally different from the context in which it occurs in the section, as in force in the State of Gujarat, by reason of the insertion with retrospective effect of sub-section (6) in section 38. In the wider context in which the word 'collected' occurs in our section 37(1), we do not find it possible to place upon the word 'collected' a narrow meaning. The word 'collected' in our section 37(1) must, therefore, be construed in its natural and ordinary sense. here it is the State which has taken over the obligation to refund these amounts to the purchasers, and it is the State which will do so. We, however, make it clear that in a case, where before an order of forfeiture is passed, if a dealer refunds the amounts so collected or a part thereof to the purchasers, the amount so refunded by the dealer cannot be ordered to be forfeited. That the department has also placed this interpretation upon the word 'collected' is seen from the fact that one of the reasons given for forfeiting this amount was that the petitioners had not refunded the amounts to the purchasers.
22. Even on the facts we find that there is no basis for the arguments advanced in support of this part of the case. It is alleged by the petitioners that as the position in law was doubtful as to whether these sales were liable to tax or not, the petitioners collected from their purchasers an amount equivalent to the amount of sales tax and general sales tax which they would be liable to pay to the State were these sales exigible to tax and that, in case, these sales were held not taxable, they intended to refund these amounts to the purchasers. There is many an intention which has remained and remains in the realm of intention and is never translated into action. There is no guarantee that this pious expression of intention would be carried out. Further, the facts belie the allegation that these amounts were collected because the petitioners felt a doubt as to the exigibility of these transactions of sale to tax. The quarterly returns filed by the petitioners include the turnover of these transactions in the petitioners' total taxable turnover. The statements filed along with these quarterly returns show the amounts collected by the petitioners by way of sales tax and general sales tax. There is not a word in either the returns or in the statements to show that the petitioners had collected these amounts by way of deposit, to be kept with them for the express purpose of refunding it to the purchasers, in case these transactions were held to be not exigible to tax. No agreement to this effect with the purchasers is pleaded. In Miscellaneous Petition No. 224 of 1972, the petitioners have averred that they had given an undertaking that the amounts would be refunded to the purchasers in the event of being held that the said sales were not liable to tax. However, at the Bar it was frankly conceded that there was no such undertaking and, the factual position with respect to the transactions involved in Miscellaneous Petition No. 224 of 1972 was the same as in Miscellaneous Petition No. 318 of 1971. To us it is clear that the contention that these transactions were not exigible to tax was an afterthought raised in the course of the assessment proceedings. In support of their alleged intention to refund these amounts to the purchasers, the petitioners have alleged that the auctioneers took down the names, addresses and registration numbers of the purchasers. The petitioners have filed with the department a statement showing the particulars of all these sales. These particulars show, and the position is admitted by the petitioners through their counsel, that these statements reveal that the addresses have not been taken down in a number of cases and, further, in quite a few cases, the names of the purchasers have also not been mentioned. Another interesting fact which emerges from the said statements is that in several of these transactions goods have been sold against certificates in form 14 or 15 or 16. A certificate in form 14 is to be given by a dealer holding an authorisation, a certificate in form 15 is to be given by a dealer holding a recognition and, a certificate in form 16 is to be given by a dealer holding a licence, when such dealer purchases goods from a registered dealer for certain purposes specified in the said certificates. In such a case, the sale to such dealer is either exempt from tax or is taxable at a reduced rate and, thus, such purchaser does not pay to his vendor any amount by way of tax or only pays the amount of such reduced tax. These goods could not have been sold by the petitioners to these dealers against these certificates given by their purchasers unless and until the petitioners had sold them on the strength of their registration certificate and, on the basis that, in doing so, these transactions would become exempt from tax or would become exigible to a reduce rate of tax, as the case may be. Another significant feature to be found from the said statements by the petitioners is that a large number of persons to whom these goods were sold were not registered as dealer. The fact thus clearly show that there was never any intention on the part of the petitioners, at the time of effecting these sales, of refunding any amount to the purchasers and, from the nature of things, it is not possible that they could do so to those purchasers whose addresses or whose names and addresses had not been taken down. It is was thus impossible for the petitioners to refund the amounts to these purchasers, justice and equity both require that the petitioners should not be allowed to profit from this by reason of their wrongful act. It is also pertinent to note that, in fact, the petitioners have not refunded any part of these amounts to their purchasers though they had an opportunity to do so. By the assessment order dated 30th June, 1970, the transactions in question effected in the course of the year 1966-67 were held not to be exigible to tax. Though between the date of the order of assessment and the date of the order of forfeiture ten months had elapsed, no effort whatever was made by the petitioners to refund any part of these amounts to their purchasers.
23. The last point urged by Mr. Kolah, the learned counsel for the petitioners, was that mens rea was an essential ingredient of the offence under sub-section (1) of section 37 of the said Act and that, this ingredient being absent in the case of the petitioners, the amounts were not liable to be forfeited. In Ajit Mills' case : 1SCR338 , the Supreme Court has categorically held that section 37 creates an absolute liability and the doctrine of mens rea has no place in it. We may mention that, prior to the decision in Ajit Mills' case : 1SCR338 , this Bench had taken the very same view in Mahalakshmi Glass Works Pvt. Ltd. v. Commissioner of Sales Tax  40 S.T.C. 488.
24. Apart from the five points dealt with above, no other point was urged or canvassed before us. We, therefore, find that the petitioners, who were registered dealers, had collected tax on transactions of sales of goods which were not exigible to tax and had thus contravened the provisions of section 46(2).
25. For the reasons given above, we hold that the amounts wrongfully collected by the petitioners by way of tax were rightly ordered to be forfeited to the Government.
26. The result is that these petitioners fail and are dismissed and the rule issued in each of them is discharged.
27. The petitioners will pay to the respondents the costs of these petitions.
28. Petitions dismissed.