1963 (4) TMI 37 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the respondents collected sales tax on second sales of auto spare parts.
2. Whether the tax collected by the respondents is recoverable under section 8-B(2) of the Act.
3. Interpretation of the nature of the tax collected by the respondents.
4. Applicability of section 8-B(2) in the case of tax collection on second sales.

Analysis:

1. The respondents, dealers in motor spare parts, claimed a sum representing second sales of auto spare parts. The assessing authority found that the respondents had charged tax at 6 per cent. on the sale value of the goods covered by this turnover. The Appellate Assistant Commissioner held that the tax was collected by the respondents on second sale transactions, even though second sales were not liable to tax. The Tribunal, however, concluded that the respondents did not collect any amount purporting to be sales tax. The State challenged this decision through a revision petition.

2. The Government Pleader argued that the respondents collected 6 per cent. tax on their sale price, which included the tax on the first sale they had already paid. The bills presented by the respondents indicated a separate entry for "Tax paid to first seller," raising questions about the nature of the amount charged. The Court examined whether the sale value quoted by the respondents included the sales tax paid to the first seller and whether the respondents had charged any profit margin. The Court found discrepancies in the tax calculation, indicating that the tax shown as paid to the first seller exceeded the actual tax paid.

3. The respondents contended that they did not collect the amount as tax but as reimbursement for tax paid to the first seller. However, the Court found this argument unsubstantiated, as the bills clearly showed tax calculated on the sale price at which the goods were sold, not on the purchase price. The Tribunal's view that no sales tax was collected on second sales was deemed erroneous, as the tax collected was based on the sale transaction and price.

4. The Court emphasized the applicability of section 8-B(2), which requires a person collecting any amount purporting to be tax to pay it over to the State Government. Even if no tax is due on the transaction, the collected amount must be remitted. The Court clarified that the tax collected by the respondents, though labeled as paid to the first seller, was in fact not so. The Tribunal's order was set aside, and the petition was allowed without costs.

In conclusion, the judgment clarified the nature of tax collection by the respondents on second sales of auto spare parts, emphasizing the applicability of section 8-B(2) and overturning the Tribunal's decision based on factual misconceptions.