1954 (10) TMI 33 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of Section 11 of the Travancore-Cochin General Sales Tax Act, 1125 regarding collection and payment of sales tax. Determination of whether the amount collected by the petitioner from customers on sales outside the State, not attracting sales tax, should be paid over to the Government. Examination of whether the collection made by the petitioner was a precautionary measure and if the amounts collected should be refunded if no tax liability accrued.

Analysis:

The petitioner, a dealer in gunny bags and vegetables, challenged the assessment by the Sales Tax Officer, where he was directed to pay an amount collected from customers on sales outside the State. The petitioner contended that he should not be liable to pay sales tax on such sales outside the State under Section 286(1)(a) of the Constitution of India. The appellate order highlighted that the collections made by the petitioner were on behalf of the State and should be paid over to the State where the goods were delivered. The High Court held that the tax collected by the petitioner falls under the provisions of the Travancore-Cochin General Sales Tax Act, dismissing the appeal (1).

The judgment referenced a Supreme Court decision stating that the State where the goods are delivered for consumption is entitled to the sales tax. The court emphasized that the tax collected by the petitioner, even before the Supreme Court judgment, should be paid over to the State, as held in a previous High Court case (2). The court rejected the argument that the tax collected was beyond the Act's provisions, stating that the appellant was authorized to collect sales tax under Section 11 of the Act (1).

The court acknowledged a similar decision by the Madras High Court but declined to adopt its conclusion. It held that any amount collected by the petitioner from customers, whether actually due as sales tax or not, must be handed over to the State under the Act's provisions. The court emphasized that the petitioner's collection was considered a tax collection under the Act (2).

The court noted the petitioner's argument that the collection was a precautionary measure and should be refunded if no tax liability arose. It highlighted that this aspect was not considered by the Appellate Assistant Commissioner, leading to a quashing of the order for a fresh determination on this issue. The court directed a reevaluation of whether the collection was made solely as a precautionary measure and if it constituted a collection "by way of tax" under the Act (2).

In conclusion, the original petition was allowed partially, with the matter remanded for further consideration, without any order as to costs (1).

(1) [1954] 5 S.T.C. 58
(2) [1954] 5 S.T.C. 382