1955 (12) TMI 33 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the orders and notices issued by the Sales Tax Authorities.
2. Whether the petitioners, as sales managers, are liable to pay sales tax.
3. Entitlement of the State to amounts collected conditionally by the petitioners from customers.

Issue-wise Detailed Analysis:

1. Legality of the orders and notices issued by the Sales Tax Authorities:
The petitioners sought a writ of certiorari, mandamus, and/or prohibition to quash the orders of the Sales Tax Authorities dated 18th January, 1955, 16th March, 1955, and 26th May, 1955, and the notices of demand dated 28th January, 1955, 18th February, 1955, 16th March, 1955, and 26th May, 1955. They also sought to prohibit the Sales Tax Officer from enforcing these orders and notices and from continuing to levy assessments and issue notices of demand month by month. The court found that the orders and notices under which the petitioners had been assessed to sales tax were illegal and without jurisdiction. Consequently, these orders and notices were deemed to have been and were hereby quashed by the issuance of a writ of certiorari.

2. Whether the petitioners, as sales managers, are liable to pay sales tax:
The petitioners contended that they were merely sales managers for the Associated Cement Companies Ltd. and Patiala Cement Co., and were not independently constituted legal entities effecting purchases from these companies. The court noted that the Deputy Sales Tax Commissioner had held that the petitioners were merely sales managers acting on behalf of the Associated Cement Companies Ltd., getting remuneration, and were not liable for sales tax. The court agreed, stating that the petitioners, as sales managers, could not be made liable for a second sales tax on transactions entered into on behalf of the Associated Cement Companies Ltd. Clauses (1) and (2) of the agreement dated 21st April, 1954, supported this view, indicating that the petitioners were solely acting as sales managers and not as independent dealers.

3. Entitlement of the State to amounts collected conditionally by the petitioners from customers:
The court examined whether the State was entitled to direct the petitioners to remit amounts collected conditionally from customers on the basis that they were collected under the Hyderabad Sales Tax Act. The court referred to analogous provisions in the Travancore-Cochin General Sales Tax Act and the Madras General Sales Tax Act. It noted that the Madras High Court, in Tata Iron & Steel Co., Ltd. v. The State of Madras, held that amounts collected without legal authority could not be claimed by the Government. The court agreed with this view, stating that if a tax is not leviable under the Act and has been collected, the Government can have no claim to it. The court concluded that the Sales Tax Authorities were not entitled to call upon the petitioners to remit amounts collected conditionally from customers, as these amounts were refundable to customers if their appeals succeeded.

Conclusion:
The court allowed the application, directing that the petitioners were not liable to pay sales tax as dealers other than as sales managers on behalf of the Associated Cement Companies Ltd. The demand for payment of sales tax by the department was deemed illegal, and the respondents were directed not to demand sales tax from the petitioners for sales made on behalf of the Associated Cement Companies Ltd. The application was allowed with costs fixed at Rs. 100. Application allowed.