1971 (2) TMI 94 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 10 of the Central Sales Tax (Amendment) Act, 1969 regarding exemption from tax liability on inter-State sales.
2. Whether the petitioner is liable to pay back the tax collected on inter-State sales.
3. Effect of refunding wrongly collected tax on tax liability.

Analysis:

1. The petitioner, a dealer in rubber, collected sales tax on inter-State sales but later refunded the amount to one of the buyers following a Supreme Court decision. The main issue revolves around the interpretation of section 10 of the Central Sales Tax (Amendment) Act, 1969. The petitioner claimed exemption from tax liability under this section as he returned the tax amount before the Act came into force. The Government Pleader argued that the petitioner is not entitled to the exemption since he had collected the tax, regardless of the subsequent refund. The court analyzed the legislative intent of the provision and concluded that the petitioner should be exempt from tax liability as returning the wrongly collected amount rectified the error, aligning with the purpose of the Amendment Act.

2. During the assessment, the Sales Tax Officer demanded the petitioner to pay back the tax amount collected on inter-State sales, which the petitioner had already refunded to the buyer. The petitioner contended that he should not be liable to pay the tax again as he had returned the amount before the Amendment Act came into force. The court agreed with the petitioner's argument, emphasizing that the legislative intent behind the exemption provision was to relieve dealers who had not retained any amount collected as tax during the specified period.

3. The court referred to a Division Bench decision of the Madras High Court, which supported the petitioner's contention that refunding wrongly collected tax has the same effect as not collecting it at all. The court upheld this view, stating that the effect of refunding the tax amount is akin to not making the initial collection. Consequently, the court quashed the demand made on the petitioner to pay back the tax amount collected on inter-State sales, considering the refund made before the enactment of the Amendment Act.

In conclusion, the court allowed the writ petition, ruling in favor of the petitioner and rejecting the demand for payment of tax on inter-State sales that had already been refunded. The court emphasized the significance of the refund in rectifying the error of collecting tax on sales that were not taxable, in line with the provisions of the Central Sales Tax (Amendment) Act, 1969.