1956 (4) TMI 38 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of tax liability under the Hyderabad General Sales Tax Act, 1950 based on withholding of sums by a selling commission agent for resident and non-resident principals.

Analysis:
The case involved an appeal against the decision of the Deputy Commissioner, Appellate, regarding the assessment of sales tax liability under the Hyderabad General Sales Tax Act, 1950. The appellant, a selling commission agent, withheld sums from payments to both resident and non-resident principals under section 18(3) of the Act, based on uncertain tax liability on the turnover subject to sales tax. The appellant retained amounts from non-resident principals for purchases completed outside the State, which were not liable for sales tax under the Act.

It was argued that the withheld amounts cannot be considered as tax under the Act as they were not lawfully leviable and collected in excess by the dealer. Citing legal precedents such as Minerva Mills, Tata Iron Steel Co., and M/s Cement Marketing Co. of India Ltd., it was established that only tax lawfully leviable and collected in excess is payable to the Sales Tax Department. The court rejected the contention that any amount collected in the name of tax should be paid to the Government, emphasizing the need for lawful authority for tax collection under Article 265 of the Constitution of India.

The court differentiated its interpretation from the rulings of other High Courts, including the Travancore-Cochin High Court, and held that the appellant was not obligated by law to remit the withheld sums to the State but was required to refund them to the principals. The appeal was partly allowed, with the appellant not bound to remit the amount withheld from non-resident principals. The institution fee was ordered to be refunded to the appellant, while the amount collected from resident principals was not contested and was not required to be remitted.

In conclusion, the judgment clarified the tax liability of a selling commission agent under the Hyderabad General Sales Tax Act, emphasizing the necessity for lawful authority for tax collection and the distinction between amounts lawfully leviable as tax and those subject to refund to the principals.