1974 (7) TMI 105 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of section 18(1) of the Karnataka Sales Tax Act, 1957 regarding penalty for collecting sales tax on non-taxable transactions.

Analysis:
The High Court of Karnataka heard a revision petition under section 23(1) of the Karnataka Sales Tax Act, 1957, concerning the assessment year 1967. The case involved a dealer who collected sales tax on iron and steel rails, even though he was not liable to pay tax as the second dealer in the chain. The commercial tax authorities imposed a penalty equal to the tax collected, alleging a violation of section 18(1) of the Act. The Tribunal overturned this penalty based on a previous court decision. The State challenged this decision, arguing that the amendment to section 18(1) did not change the legal position established in previous cases. The court referred to precedents and held that a penalty cannot be levied on a dealer who collected tax erroneously, citing the Supreme Court's view that such provisions are unconstitutional. As a result, the court dismissed the revision petition, upholding the Tribunal's decision and denying the penalty imposition.

In summary, the judgment revolved around the interpretation of section 18(1) of the Karnataka Sales Tax Act, 1957, regarding the imposition of penalties for collecting sales tax on transactions not subject to tax. The court clarified that a penalty cannot be imposed on a dealer who collected tax erroneously, citing constitutional principles and Supreme Court precedents. The decision upheld the Tribunal's ruling and dismissed the State's revision petition, emphasizing that provisions compelling dealers to pay tax collected erroneously are unconstitutional.