1988 (8) TMI 367 - SC - VAT and Sales Tax

Whether excess realisation was of sales or purchase tax thus incurring penal liability under sub-clause (qq) of sub-section (1) of section 15-A or it was excess realisation of price over and above that the assessee was entitled to charge from its customers under Notification No. 4602 of the Essential Commodities Act? Held that - Appeal dismissed. Penalty can be levied or is leviable for realisation of excess of tax legally payable and not for contravention of section 8-A(2)(b). Realisation of excess amount is not impermissible but what is not Permissible is realisation of excess amount as tax. The High Court noted that the assessee did not act fairly in this case. By way of price it realised from its customers more than what it was entitled to under Notification No. 4602 but in order to avoid any consequences under the Essential Commodities Act such as suspension or cancellation of its licence, etc., the excess realisation was shown as amount covered by Explanation II of the notification. On these facts the High Court found that the provisions of section 15-A(1)(qq) were not applicable. It has to be borne in mind that the imposition of a penalty under the Act is quasi-criminal and unless strictly proved, the assessee is not liable for the same. There is no scope for interference under article 136 of the Constitution.

Summary

Issues:
1. Interpretation of section 15-A(1)(qq) of the U.P. Sales Tax Act, 1948.
2. Imposition of penalty for excess realisation of tax.
3. Examination of excess realisation as sales or purchase tax.
4. Applicability of penalty provisions under the Act.
5. Realisation of excess amount as tax legally payable.

Analysis:
The judgment by the Supreme Court of India in this case revolves around the interpretation and application of section 15-A(1)(qq) of the U.P. Sales Tax Act, 1948. The appeal related to the assessment year 1976-77 under the Act concerning a dealer operating a roller flour mill. The issue at hand was the imposition of a penalty by the Revenue for the excess realisation of tax by the dealer. The Revenue contended that the dealer collected amounts as sales tax, purchase tax, and octroi, which were considered part of the turnover and subject to tax. However, the Assistant Commissioner imposed a penalty under section 15-A(1)(qq) for the excess realisation of tax, leading to subsequent appeals and revisions.

The High Court analyzed the situation and differentiated between excess realisation of tax and excess realisation of price. It emphasized that penalty under section 15-A(1)(qq) is leviable for excess realisation of tax legally payable under the Act. The court highlighted that the realisation must be of tax and not merely an excess amount charged from customers. In this case, the High Court found that although the dealer charged sales tax at a specific rate, there was no evidence to suggest that it exceeded the tax legally payable under the Act. Therefore, the excess amount charged was in contravention of provisions but not enough to warrant a penalty under section 15-A(1)(qq).

Moreover, the High Court examined section 8-A(2)(b) of the Act, emphasizing that penalty is applicable for the realisation of excess tax legally payable, not for contravention of this section. The court noted that the dealer's actions, while not entirely fair, did not amount to excess realisation of tax as required under section 15-A(1)(qq). It concluded that the penalty provisions were not applicable in this case, considering the quasi-criminal nature of penalty imposition and the strict burden of proof required. Therefore, the High Court's decision was upheld by the Supreme Court, dismissing the appeal and emphasizing the lack of interference under Article 136 of the Constitution.

In summary, the judgment clarifies the distinction between excess realisation of tax and excess realisation of price, highlighting the necessity for realisation to be of tax legally payable under the Act for penalty imposition under section 15-A(1)(qq). The case underscores the importance of strict adherence to legal provisions and the burden of proof in penalty proceedings under tax laws.