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Commissioner of Sales Tax, Maharashtra State Vs. Bharat Trading Company - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberS.T.R. No. 35 of 1978
Judge
Reported in[1983]52STC232(Bom)
Acts Bombay Sales Tax Act, 1959 - Sections 2, 14(1), 46, 46(2) and 61(1)
AppellantCommissioner of Sales Tax, Maharashtra State
RespondentBharat Trading Company
Excerpt:
- - the record clearly shows that what the respondents have collected from their customers by way of tax was collected by way of sales tax and would be on the implied representation made to their customers that they were liable to pay sales tax to the government on these transactions of sale. this holds good if on a particular transaction of sale the seller were to collect tax at a higher rate than the rate at which he was liable to pay that tax to the government. we must point out that this judgment is no longer good law in view of the decision of this high court in ramkrishan kulwantrai's case [1979] 44 stc 117 where this high court has held to the contrary......calling upon them to show cause why the entire amount of rs. 2,095.93 collected by them on the resales of goods should not be forfeited to the government, and by his order dated 8th january, 1973, the sales tax officer forfeited the said entire amount. in appeal filed by the respondents, it was contended before the assistant commissioner of sales tax that as the respondents were liable to pay purchase tax aggregating to rs. 2,001, only the difference, namely, a sum of rs. 95.93 alone should be forfeited to the government. this plea was rejected by the assistant commissioner. in second appeal to the tribunal, the tribunal held that the department was only justified in forfeiting the excess amount and should not have forfeited the entire amount. it is against this order and judgment of.....
Judgment:

Madon, C.J.

1. This is a reference made under section 61(1) of the Bombay Sales Tax Act, 1959, by the Maharashtra Sales Tax Tribunal at the instance of the Commissioner of Sales Tax. The respondents carry on the business of purchasing non-ferrous metal and of reselling them. The respondents are registered as dealers under the said Act. They also hold an authorisation under the said Act. In pursuance of the certificates in form 14 given by the respondents by virtue of their being authorised dealers to their vendors, the respondents purchased non-ferrous metal of the value of Rs. 40,032 during the assessment period 1st April, 1967, to to 31st March 1968, in respect of which their vendors did not collect any amount by way of tax from them, because the sales made against form 14 were tax-free sales and the vendors were, therefore, not liable to pay tax on such sales made by them. The purpose for which the goods were being purchased by the respondents was stated in the said certificates as being resale in the course of inter-State sale or in the course of export. The respondents, in contravention of this declaration given in those certificates, resold the goods in question within the State of Maharashtra. They accordingly became liable to pay purchase tax under section 14(1) of the Act in respect of purchases of these goods made by them.

2. While reselling these goods, the respondents charged to their customers tax on their sales to them though no sales tax was payable by them to the Government in respect of these sales. On noticing this, the Sales Tax Officer issued a notice to the respondents calling upon them to show cause why the entire amount of Rs. 2,095.93 collected by them on the resales of goods should not be forfeited to the Government, and by his order dated 8th January, 1973, the Sales Tax Officer forfeited the said entire amount. In appeal filed by the respondents, it was contended before the Assistant Commissioner of Sales Tax that as the respondents were liable to pay purchase tax aggregating to Rs. 2,001, only the difference, namely, a sum of Rs. 95.93 alone should be forfeited to the Government. This plea was rejected by the Assistant Commissioner. In second appeal to the Tribunal, the Tribunal held that the department was only justified in forfeiting the excess amount and should not have forfeited the entire amount. It is against this order and judgment of the Tribunal that the present reference has been made at the instance of the Commissioner of Sales Tax. The questions submitted to us for our determination in this reference are :

'(1) Whether, on the facts and in the circumstance of the case and on a correct and proper interpretation of the provisions of the latter part of sub-section (2) of section 46 of the Bombay Sales Tax Act, 1959, the Tribunal was correct in law in holding that the operation of the said provision is restricted to totality of excess collection over payability only ?

(2) Whether the Tribunal was right in holding that in view of the Special Bench decision in the case of M/s. Kasamvali Mohamed Motiwalla, Second Appeal No. 571 of 1971, decided on 26th March 1974, the order of forfeiture of Rs. 2,096.93 has to be modified restricting the amount to be forfeited to Rs. 95.00 ?'

3. The pertinent point to bear in mind for answering these questions is that the respondents were not liable to pay any sales tax in respect of resales made by them, but were liable only to pay purchase tax in respect of their purchase of goods which were thereafter resold by them. The record clearly shows that what the respondents have collected from their customers by way of tax was collected by way of sales tax and would be on the implied representation made to their customers that they were liable to pay sales tax to the Government on these transactions of sale. In Ramkrishan Kulwantrai v. Commissioner of Sales Tax [1979] 44 STC 117 this Court pointed out that the prohibition contained in section 46(2) of the Act would be violated if in the case of particular transaction of sale only sales tax was payable but the registered dealer collects amounts by way of sales tax as also general sales tax on such transaction of sale and that the prohibition would be violated also where by reason of certain exemptions no tax was payable on a particular type of sale and the registered dealer collects an amount by way of tax on it. Mr. Patel, the learned counsel for the respondents, submitted that section 46 permits a dealer to collect by way of tax the amount of tax payable by him to the Government and if he collects any amount in excess of such amount, it is only the excess which could be forfeited. This holds good if on a particular transaction of sale the seller were to collect tax at a higher rate than the rate at which he was liable to pay that tax to the Government. But when the section authorizes a dealer to collect tax, it authorises him to collect by way of tax the amount of tax on that particular type of sale which he is liable to pay to the Government. Clause (32) of section 2 defines 'tax' as meaning 'sales tax, general sales tax, purchase tax, or retail sales tax payable under this Act', and as pointed out in Ramkrishan Kulwantrai's case [1979] 44 STC 177 even a dealer who is liable to pay one type of tax collects another type of tax, he contravenes the provisions of section 46(2). Even on the facts, the submission made by Mr. Patel is not tenable. The respondents did not in fact collect the amount by way of purchase tax which they would become liable to pay to the Government. The record shows that they had not paid any purchase tax on these transactions before filing the return, and a plea was advanced in the assessment proceeding that instead of forfeiting the entire amount, out of the said amount adjustment should first be made with respect to the purchase tax which the respondents were liable to pay and only the excess amount of tax should be forfeited. In our opinion, the Tribunal was in error in allowing the appeal of the respondents in part and in directing only the excess amount to be forfeited.

4. In arriving at its decision, the Tribunal followed a decision of the Special Bench of the Tribunal in Appeal No. 571 of 1971 - Kasamvali Mohamed Motiwalla v. State of Maharashtra decided on 26th March, 1974. In that case, the Tribunal held that it would be incorrect to interpret the second part of section 46(2) as restricting the operation thereof to individual sales and that the expression 'the amount of tax payable by him under the provisions of this Act' means the amount of tax levied on the turnover of sales of the registered dealer. We must point out that this judgment is no longer good law in view of the decision of this High Court in Ramkrishan Kulwantrai's case [1979] 44 STC 117 where this High Court has held to the contrary.

5. For the reasons set out above, we answer both the questions submitted to us in the negative, that is in favour of the department and against the assessee.

6. The respondents will pay to the applicant the cost of this reference.


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