1970 (9) TMI 90 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge against the penalty imposed by the Commercial Tax Officer under section 18-A of the Mysore Sales Tax Act, 1957.
2. Interpretation of section 18(1) of the Act regarding the collection of amounts by dealers.
3. Determination of whether the deposit made by purchasers with the petitioner constitutes collection by way of tax or purporting to be by way of tax.

Analysis:
The writ petition challenged the penalty imposed by the Commercial Tax Officer under section 18-A of the Mysore Sales Tax Act, 1957. The petitioner, a commission agent, was assessed to sales tax on the turnover of chillies sold during a specific period. However, following an appeal, the turnover of chillies was exempted from sales tax. The issue arose when the first respondent imposed a penalty on the petitioner for collecting a sum of money as a deposit on the sale of chillies, alleging it to be by way of tax or purporting to be by way of tax. The petitioner contended that the collection did not contravene section 18 of the Act, as the amount collected was a deposit and not tax. The court referred to a previous judgment to analyze the provisions of section 18(1) both before and after an amendment. The court emphasized that the addition of the clause "purporting to be by way of tax" in the amended section does not alter the essence of the provision.

The court analyzed the nature of the deposit made by purchasers with the petitioner. The petitioner argued that the deposit should be considered an entrustment, not a collection by way of tax. The court agreed with the petitioner's interpretation, stating that when a customer deposits an amount with a dealer to meet a contingency, it does not constitute the collection of tax by the dealer. The court clarified that in such cases, the dealer acts as a trustee for the amount deposited, and it cannot be construed as a collection by way of tax or purporting to be by way of tax. Based on these findings, the court concluded that the petitioner did not contravene the provisions of section 18, rendering the penalty imposed as illegal.

In the final judgment, the court allowed the writ petition, thereby quashing the order imposing the penalty. The court held that based on the facts presented, the petitioner had not violated section 18, leading to the decision to invalidate the penalty. The judgment highlighted the distinction between a deposit and tax collection, emphasizing that the former does not fall within the scope of section 18 of the Act.