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Mahesh Medical and General Agencies Vs. Commissioner of Sales Tax and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Petition No. 800 of 1982
Judge
Reported in[1983]54STC249(MP)
AppellantMahesh Medical and General Agencies
RespondentCommissioner of Sales Tax and ors.
Appellant AdvocateH.S. Shrivastava, Adv.
Respondent AdvocateA.M. Mathur, Adv.-General
DispositionPetition dismissed
Cases ReferredSales Tax Officer v. Ajit Mills Ltd.
Excerpt:
.....against appellant can be raised, it cannot be said that onus shifts exclusively and heavily on him to prove his innocence. conviction of appellant is liable to be set aside. - the effect of the principal part of section 16 is that these notifications are retrospectively expressly restricted to sales tax and purchase tax leviable under section 6 and section 7 of the sales tax act making them clearly inoperative for reducing turnover tax or surcharge leviable under section 7-b. it is well-settled that while levying a tax the legislature can make incidental and ancillary provisions. the classification is reasonable and is intended to give relief to those dealers who under some mistaken notion failed to include turnover tax or surcharge as part of the price. they have given cogent..........it to the government shall be liable to pay it to the government and similarly a dealer who has collected turnover tax or surcharge and has paid it to the government shall not be entitled to claim a refund of the amount so paid. by clause (2) the burden of proving that no turnover tax or surcharge was collected is placed on the dealer.4. as earlier mentioned by us, the two notifications under section 12 of the sales tax act with which we are concerned in these petitions were issued respectively on 28th march, 1969 and 4th march, 1976, before insertion of section 7-b. the intention in issuing those notifications could not be of reducing turnover tax or surcharge which was then not a part of the sales tax act. although the notifications specify the reduced rate of tax at 4 per cent.....
Judgment:
ORDER

G.P. Singh, C.J.

1. This order will also dispose of Miscellaneous Petitions Nos. 639 of 1980, 670 of 1980 and 468 of 1980. In these petitions the petitioners challenge the validity of Section 16 of the M.P. General Sales Tax (Amendment) Act, 1979 (Act No. 19 of 1979).

2. By the Madhya Pradesh Vikraya Rashi Tatha Kraya Rashi Bar Kar Adhiniyam, 1972 (Act No. 8 of 1972) provision was made for imposition of a tax similar to sales tax which is known as turnover tax. From 1st May, 1976, the turnover tax became a part of the M.P. General Sales Tax Act, 1958, by insertion of Section 7-B by Ordinance No. 5 of 1976 which also repealed Act No. 8 of 1972. New Section 7-B was substituted in the Sales Tax Act by Act No. 23 of 1977 with effect from 1st May, 1977. Under the new Section 7-B nomenclature of tax has been changed from turnover tax to surcharge. Section 12 of the Sales Tax Act authorises the Government to grant exemption in whole or in part from payment of tax under the Act. The expression 'tax' is defined in Section 2(q) to mean tax payable under the Act. By notifications dated 28th March, 1969 and 4th March, 1976, issued under Section 12 of the Act tax on leaf springs and medicines was reduced to 4 per cent. There was a doubt whether these notifications and similar other notifications which were issued before the insertion of Section 7-B in the Sales Tax Act would also have the effect of reducing turnover tax or surcharge leviable under that provision. To remove that difficulty the State Legislature enacted Section 16 of the M.P. General Sales Tax (Amendment) Act, 1979 (Act No. 19 of 1979). It is the validity of this Section which is challenged by the petitioners in all these petitions. Section 16 is as follows :

16. Payment of turnover tax and surcharge in certain cases.-Notwithstanding the fact that the expression 'tax' as defined in Clause (q) of Section 2 of the principal Act as it stood on or after the 1st May, 1976, includes therein turnover tax or surcharge, as the case may be, under Section 7-B of the principal Act as it stood, from time to time, after the said date, the notifications specified in Part-A of the Schedule which were issued prior to the said date but continued to be in force after the said date and the notification specified in Part-B shall, for the purpose of exemption of tax granted thereunder, be deemed to have been amended as from the said date or date of issue, as the case may be, as if for the word 'tax', the words and figures 'tax under Section 6/or Section 7' were substituted therein and it is hereby declared that nothing in the said notifications shall be construed to grant exemption from payment of turnover tax or surcharge as the case may be, under Section 7-B, at any time after the 1st May, 1976, during the operation of the said notification and accordingly,-

(1)(a) a dealer who has collected the turnover tax or surcharge but has not paid it to Government shall be liable to pay it to Government;

(b) a dealer who has not collected the turnover tax or surcharge shall not be liable to pay the same to the Government;

(c) a dealer who has collected the turnover tax or surcharge and has paid it to Government shall not be entitled to claim a refund of the amount so paid on the ground that he was not liable to pay the same during the relevant period by virtue of the notification aforesaid.

(2) for the purposes of Clause (1) the burden of proving that no turnover tax or surcharge was collected under the principal Act during the relevant period shall be on the dealer.

Schedule

(See Section 16)

S. No. Number and date of Government of Madhya PradeshSeparate Revenue Department Notifications.Part-A... ...14. 966/655/V-ST dated 28-3-69.23. 913/1358/V-ST dated 4-3-76.Part-B1. 1855-V-ST dated 25-5-76.

3. We are here not concerned with the notification in Part-B of the Schedule to Section 16 which was issued after insertion of Section 7-B in the Sales Tax Act. We are here concerned with notifications finding place in Part-A of the Schedule in particular those finding place at serial Nos. 14 and 23 and which were issued before the insertion of Section 7-B. The effect of the principal part of Section 16 is that these notifications are retrospectively expressly restricted to sales tax and purchase tax leviable under Section 6 and Section 7 of the Sales Tax Act making them clearly inoperative for reducing turnover tax or surcharge leviable under Section 7-B. However, having regard to the fact that it would be a hardship on a dealer who had not recovered turnover tax or surcharge as part of the price on the assumption that the aforesaid notifications had reduced that tax also, provisions are made in Clause (1) that a dealer who has not collected the turnover tax or surcharge shall not be liable to pay the same to the Government, whereas a dealer who has collected the turnover tax or surcharge but has not paid it to the Government shall be liable to pay it to the Government and similarly a dealer who has collected turnover tax or surcharge and has paid it to the Government shall not be entitled to claim a refund of the amount so paid. By Clause (2) the burden of proving that no turnover tax or surcharge was collected is placed on the dealer.

4. As earlier mentioned by us, the two notifications under Section 12 of the Sales Tax Act with which we are concerned in these petitions were issued respectively on 28th March, 1969 and 4th March, 1976, before insertion of Section 7-B. The intention in issuing those notifications could not be of reducing turnover tax or surcharge which was then not a part of the Sales Tax Act. Although the notifications specify the reduced rate of tax at 4 per cent without mentioning the name of the tax, it is obvious that the intention was to reduce the rates of sales tax and purchase tax under Sections 6 and 7 which were the only charging sections at the time of the issue of the notifications. By insertion of Section 7-B in the Act a new charge was created and it is impossible to accept that the Government could have intended that the notifications issued by it under Section 12 prior to the insertion of Section 7-B would have the effect of reducing or affecting the new charge. But as earlier mentioned by us, there was probably some doubt on that point and therefore, Section 16 was enacted as part of Act No. 19 of 1979 to make express which was already implicit. Section 16 makes the legal position clear that the notifications inserted in Part-A will not have the effect of affecting the liability under Section 7-B inserted from 1st May, 1976 and that the notifications will be operative only in reducing the tax liability under Section 6 or Section 7. However, to meet the hardship in those cases where the dealer had not collected turnover tax or surcharge under a mistaken notion that he was not liable under Section 7-B also because of the notifications, Section 16 makes provision that such a dealer will not be liable to pay turnover tax or surcharge to the Government. It is not in dispute that turnover tax or surcharge levied under Section 7-B partakes the character of sales tax and the State Legislature was competent to enact that section under entry 54 of List II. It is well-settled that while levying a tax the legislature can make incidental and ancillary provisions. The impugned Section 16 is such a provision and we do not find any invalidity in it.

5. The argument of the learned counsel for the petitioners is that Section 16 seeks to tax the collections made by the dealers of turnover tax or surcharge which they were not liable to pay to the Government. This argument proceeds on a misreading of Section 16. As earlier pointed out by us, the dealers were already liable for payment of turnover tax or surcharge under Section 7-B and that liability was unaffected by the notifications issued under Section 12 prior to 1st May, 1976. Section 16 clarifies this legal position but grants relief to those dealers who had not collected turnover tax or surcharge from the purchasers under an erroneous view of the scope of the notifications. Section 16 does not create a liability simply because a person had collected the tax to which he was not liable. Section 16 makes the dealers who were liable for payment of turnover tax or surcharge to pay the same to the Government if they had collected the same from the purchasers and grants relief to those dealers who had not so collected the tax under a mistaken notion. The learned counsel for the petitioners relied upon Abdul Quader and Co. v. Sales Tax Officer [1964] 15 STC 403 (SC), in support of his argument. This was a case in which certain amount which was collected by the dealers by way of tax which was not exigible as tax was directed to be paid to the Government. Such a provision was held to be invalid. As explained above, in the instant case the amount which the dealers are directed to pay to the Government under Section 16 is the amount for which they are liable under setcion 7-B and it is not a case where they are being made to pay the amount simply because they had collected the same. Moreover, the ruling in Abdul Quader's case [1964] 15 STC 403 (SC) has to be read in the light of the later ruling in Joshi, Sales Tax Officer v. Ajit Mills Ltd. [1977] 40 STC 497 (SC) which upheld the validity of an enactment providing for forfeiture of the amount collected by a dealer as tax which he was not entitled to collect. Section 16 with which we are concerned is neither a provision which taxes an amount simply because it had been collected nor a provision seeking to forfeit the collections illegally made by the dealers. Section 16 merely seeks to enforce the liability under Section 7-B by clarifying the notifications issued under Section 12 and it grants relief to those dealers who had not collected turnover tax or surcharge for which they were liable because of mistaken notion as to the effect of the notifications.

6. It was then contended that under the M.P. General Sales Tax Act as it was then in force, no dealer was authorised to collect any tax or surcharge and therefore, in no case can it be said that the dealer had collected the turnover tax or surcharge within the meaning of Section 16(1)(a) or 16(1)(c). It is true that during the period with which we are concerned in these petitions there was no provision authorising the dealers to collect tax. This authority was conferred by Section 45-B inserted in the Act with effect from 1st October, 1978. Before this date a dealer used to recover tax, whether sales tax, turnover tax or surcharge, as part of the price. In the context in which the words, 'has collected the turnover tax or surcharge' are used in Section 16, they can only mean collection of turnover tax or surcharge as part of the price and not as tax because as tax nothing could be collected by any dealer. If we accept the meaning submitted by the learned counsel for the petitioners, it would reduce Section 16 to a dead letter which itself shows that this could not be the intention of the legislature. What appears to have been intended by the legislature is that if the dealer added the amount of turnover tax or surcharge to the price and recovered the same, it would be held that he had collected the turnover tax or surcharge within the meaning of Clauses (1)(a) and (c) and would be liable for payment of the same to the Government. In cases where the dealer has specifically mentioned in the bills the amount of turnover tax or surcharge as part of the price, it would be apparent that he has collected the same. In other cases, however, a dealer can show that he has collected only that amount which was normally to be charged as price without taking into account the liability of turnover tax or surcharge. If he is able to show that it would be said that he did not collect the turnover tax or surcharge within the meaning of Section 16. The burden is, however, on the dealer to prove that he has not collected the turnover tax or surcharge in the manner explained above. If he is able to discharge that burden, he would not be liable to pay any turnover tax or surcharge, as provided in Clause (1)(b).

7. There was also some argument that the classification of dealers into those who had collected the turnover tax or surcharge and those who had not collected the same offends Article 14 of the Constitution. The classification is reasonable and is intended to give relief to those dealers who under some mistaken notion failed to include turnover tax or surcharge as part of the price. In our opinion, Section 16 is not violative of Article 14.

8. It was lastly submitted that the sales tax authorities in Misc. Petitions Nos. 800 of 1982, 539 of 1980 and 670 of 1980 wrongly came to the conclusion that turnover tax or surcharge was collected by the petitioners in these petitions. We have gone through the orders passed by the authorities. They have given cogent reasons for holding that the petitioners failed to prove that they did not collect turnover tax or surcharge as part of the price. In all these cases, the petitioners concerned deposited the tax and also submitted returns showing their liability for payment of turnover tax or surcharge. This circumstances was rightly held to raise a presumption that the petitioners had collected the turnover tax or surcharge. In any case, the findings reached by the authorities concerned are findings of fact and do not suffer from any apparent error of law. In Misc. Petition No. 468 of 1980, there is an appeal pending on the merits of assessment and therefore, we refrain from deciding whether the petitioner in that petition collected or did not collect turnover tax or surcharge.

9. All the petitions-fail and are dismissed but without any order as to costs. Security amounts be refunded to the petitioners.


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