R.N. Misra, J.
1. The petitioner-company is a registered dealer under the Orissa Sales Tax Act, 1947 (hereafter referred to as the 'Act'), and bears Registration Certificate Number RL-297. It was assessed to sales tax for the year 1969-70 under Section 12(2) of the Act. The Sales Tax Officer found that the petitioner had realised a sum of Rs. 19,702.65 by way of sales tax on railway freight. As the taxing officer considered this to be an unauthorised realisation he proceeded to levy penalty of double the amount as provided under Section 9-B(3) of the Act and required the company to pay a sum of Rs. 39,405.30 on that count. The petitioner has challenged the vires of Section 9-B(3) of the Act as also the imposition of penalty in the facts of the case.
2. In the counter-affidavit, the levy of penalty under Section 9-B(3) of the Act has been contended to be just and proper and Section 9-B(3) is claimed to be intra vires the Constitution.
3. On the contentions raised and pressed before at the time of hearing, two questions arise for determination :
(i) Is the provision under Section 9-B(3) of the Act ultra vires the Constitution being beyond the legislative competence of the State Legislature and
(ii) Is the levy of penalty justified in the facts of the case ?
4. For convenience, we proceed to deal with the second question first. It is the petitioner's case that the exigibility of sales tax in regard to freight was a disputed question until the Supreme Court settled the matter in the case of Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh  24 S.T.C. 487 (S.C.). The judgment in the aforesaid case was delivered on 19th February, 1969, and towards the later part of the year this decision got reported in Law Reports and gathered publicity. Not being sure of the position in law, sales tax had been charged on the freight and in due course had even been deposited into Government treasury. This was long before the question came to be raised in connection with assessment proceedings. The amendment of the Orissa Sales Tax Act in 1968 whereunder the earlier provision of Section 9-B(3) of the Act was substituted by a new provision was also not very much known to the officers of the petitioner-company and, therefore, due care was not exercised so as to avoid imposition of penalty. The conduct of the petitioner is far from either being contumacious or in flagrant disregard of the statutory provisions. The collection had been made in view of the unsettled position in law and more with a view to not suffering a loss than for committing a breach of the mandate in the statute and abuse the privilege conferred under Section 9-B(1) of the Act.
The learned standing counsel for the department takes the stand that 'sale price' has been defined in Section 2(h) of the Act and where freight is separately charged, it does not merge into sale price for the purposes of imposition of sales tax. According to the learned standing counsel, in view of this definition as also the earlier decision of the Supreme Court in the case of Tungabhadra Industries Ltd. v. Commercial Tax Officer  11 S.T.C. 827 (S.C.), there was no scope for any ambiguity regarding liability for payment of sales tax in respect of freight.
5. Section 9-B was introduced into the Act under Orissa Act 24 of 1950 and Sub-section (3) thereof prior to the amendment under Orissa Act 15 of 1968 provided:
The amount realised by any person by way of tax shall, notwithstanding anything contained in any other provision of this Act, be deposited by him in a Government treasury within such period as may be prescribed, if the amount so realised exceeds the amount, if any, payable by him as tax.
A similar provision in the Hyderabad General Sales Tax Act was struck down by the Supreme Court in the case of Abdul Quader and Co. v. Sales Tax Officer  15 S.T.C. 403 (S.C.). By Orissa Act 15 of 1968, Sub-section (3) of Section 9-B was substituted and the new provision is to the following effect:
Where any person-
(i) not being a registered dealer realises any amount by way of tax, or
(ii) being a registered dealer realises any amount by way of tax in excess of the amount payable by him as tax under this Act, the Commissioner may, notwithstanding anything contained in this Act, direct that such person shall pay in the prescribed manner, by way of penalty, a sum not exceeding twice the amount so realised by such person :
Provided that no penalty shall be imposed under this sub-section without giving the person concerned a reasonable opportunity of being heard.
This amendment came into force in July, 1968.
Undoubtedly, as the learned standing counsel has contended, the definition of 'sale price' occurring in Section 2(h) of the Act makes clear provision that where freight is separately charged, it shall not form part of the sale price and, therefore, such freight shall not be exigible to sales tax. The case of Tungabhadra Industries Ltd.  11 S.T.C. 827 (S.C.), before the Supreme Court dealt with the admissibility of a claim of exemption of sales tax in regard to the freight. The claim was not accepted as it was found that freight had not been separately charged. In the case of Hyderabad Asbestos Cement Products Ltd.  24 S.T.C. 487 (S.C.), the question for consideration was the admissibility of the claim for exemption from sales tax in regard to freight. The court found that the manner in which the bill was drawn was not determinative and the express term of the contract under which the sale was effected having provided that the freight was not to be merged into price, the claim of exemption was justified. According to the assessee, the provision of Section 9-B(3) of the Act, as amended, had recently come into force. Tax liability in regard to freight was not very clear. Therefore, sales tax had been collected and the same had also been credited to the Government treasury. There was no contumacy in the conduct nor was there the least intention to violate the law. Reliance has been placed on the decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa A.I.R. 1970 S.C. 253. The court was dealing with the question of penalty as provided under Section 12(5) of the Act and observed :.An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Those in-charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out.
The character of penalty under Section 9-B(3) of the Act is not different from the penalty leviable under Section 12(5) of the Act. The observations of the Supreme Court extracted above would, therefore, have application to levy of penalty under Section 9-B(3) of the Act. As we have already indicated, the amendment of Section 9-B(3) of the Act was recent. The Supreme Court delivered its judgment in Hyderabad Asbestos Cement Products Ltd.  24 S.T.C. 487 (S.C.), in February, 1969, which clarified the position in regard to exigibility of sales tax on freight. The company having realised sales tax on freight had deposited the same in a Government treasury which goes to show that it had not the slightest intention to abuse the benefit conferred on it under Section 9-B(1) of the Act, collect amounts in excess of tax due under the statute and misappropriate the same. Taking all these aspects into consideration, we are of the view that the principle indicated by the Supreme Court in Hindustan Steel Ltd.'s case A.I.R. 1970 S.C. 253 has full application and there was no justification for imposition of any penalty under Section 9-B(3) of the Act. The levy of penalty in the circumstances must stand annulled.
6. The next contention on behalf of the assessee is that the provision in Section 9-B(3) of the Act is ultra vires the Constitution. The ground of attack is on the score that the law made in exercise of legislative authority under entry 54 of List II of Schedule VII of the Constitution cannot make provision in regard to amounts not due by way of sales tax. On that ground only in Abdul Quader's case  15 S.T.C. 403 (S.C.), the Supreme Court declared the corresponding provision of the Hyderabad General Sales Tax Act ultra vires. The provision made under the amending Act of 1968 authorising imposition of penalty at twice the amount of such excess collection is nothing but a colourable provision. What could not be collected by way of tax is sought to be collected by way of penalty and at a higher rate. It is contended that entry 64 of List II of Schedule VII of the Constitution also would not cover a provision like Section 9-B(3) of the Act. In the absence of appropriate guideline in the matter of imposition of penalty, the provision is arbitrary, unreasonable, confiscatory and void as conferring unguided and unchannelled power on the assessing officer in the matter of levy of penalty. Long and interesting arguments have been advanced on both sides, but we do not think it appropriate to examine the vires of the statute in view of the fact that the petitioner has been able to avoid the levy of penalty on another count. The grievance was against the imposition of penalty and the cause of action of the petitioner in approaching this court was grounded upon the said imposition. If the imposition is vacated, we do not think it would be proper on our part to still proceed to examine the contention in relation to the vires of the provision. Their Lordships of the Supreme Court in the case of State of Bihar v. R. M. L. Jute Mills  11 S.T.C. (S.C.) were not inclined to examine the validity of a statutory provision once relief had been granted to the petitioner on another count.
In the case of Naresh v. State of Maharashtra A.I.R. 1967 S.C. 1, a similar view has also been taken. The court has indicated :.As this court has frequently emphasised, in dealing with constitutional matters, it is necessary that the decision of the court should be confined to the narrow points which a particular proceeding raises before it. Often enough, in dealing with the very narrow point raised by a writ petition wider arguments are urged before the court, but the court should always be careful not to cover ground which is strictly not relevant for the purpose of deciding the petition before it. Obiter observations and discussion of problems not directly involved in any proceeding should be avoided by courts in dealing with all matters brought before them ; but this requirement becomes almost compulsive when the court is dealing with constitutional matters...
In this view of the matter, it is not necessary to enter into an examination of the vires of Section 9-B(3) of the Act. We, therefore, decline to decide the second question canvassed before us.
7. The net result, therefore, is that the writ application shall succeed ; a writ of certiorari shall issue quashing the imposition of penalty. Parties are directed to bear their own costs.
K.B. Panda, J.
8. I agree.