1978 (11) TMI 133 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 37(1) and Section 46 of the Bombay Sales Tax Act, 1959.
2. Applicability of Section 37(1) and Section 46 to persons other than dealers liable to pay tax.
3. Legislative competence of the State Legislature to enact provisions applicable to persons other than dealers.
4. Nature of amounts collected by the petitioners and their liability to forfeiture.
5. Requirement of mens rea for forfeiture under Section 37(1).

Detailed Analysis:

1. Constitutionality of Section 37(1) and Section 46 of the Bombay Sales Tax Act, 1959:
The petitioners contended that Section 37(1) and Section 46 were unconstitutional as they were beyond the legislative competence of the State Legislature and deprived a person of property without compensation, infringing Article 19(1)(f) and Article 31(2) of the Constitution. The court referred to the Supreme Court ruling in R. S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited, which upheld similar provisions in the Gujarat Sales Tax Act. The Supreme Court held that the State Legislature has the power to levy penalties for the enforcement of the taxing statute, and such provisions do not amount to taking away sums wrongfully collected by the assessee but are penalties imposed upon the assessee. The court found no substance in the constitutional challenge, stating that the petitioners' argument that they would refund the amounts to the purchasers if the sales were not taxable contradicted their claim of being deprived of their property without compensation.

2. Applicability of Section 37(1) and Section 46 to persons other than dealers liable to pay tax:
The petitioners argued that these provisions should only apply to dealers liable to pay tax. The court referred to its previous decision in Commissioner of Sales Tax v. Poona Municipal Corporation and the Supreme Court's interpretation in Ajit Mills' case, which clarified that Section 46 applies to all persons, whether dealers or not, and prohibits the collection of tax by persons not liable to pay it. The court emphasized that the object of Section 37 is to deprive any person who has collected tax in contravention of Section 46 from keeping it, thus applying to all persons who collect tax on non-taxable transactions.

3. Legislative competence of the State Legislature to enact provisions applicable to persons other than dealers:
The petitioners contended that the State Legislature could only tax sales and purchases made by dealers. The court rejected this argument, stating that Entry 54 in List II of the Seventh Schedule to the Constitution allows the State Legislature to legislate on taxes on the sale or purchase of goods by any person, not just dealers. The court cited the Supreme Court's decision in N. K. Papiah & Sons v. Excise Commissioner, which upheld the State's power to impose obligations related to the sale or purchase of goods.

4. Nature of amounts collected by the petitioners and their liability to forfeiture:
The petitioners claimed that the amounts collected were intended to be refunded to purchasers if the sales were not taxable. The court found no evidence to support this claim, noting that the petitioners included these amounts in their taxable turnover and did not indicate any intention to refund them. The court distinguished the context of the word "collected" in the Maharashtra Act from the Gujarat Act, emphasizing that the Maharashtra legislation includes provisions for refunding amounts to purchasers, thus justifying the forfeiture. The court concluded that the amounts collected by the petitioners were rightly ordered to be forfeited.

5. Requirement of mens rea for forfeiture under Section 37(1):
The petitioners argued that mens rea was an essential ingredient for forfeiture under Section 37(1). The court cited the Supreme Court's decision in Ajit Mills' case, which held that Section 37 creates an absolute liability, and the doctrine of mens rea does not apply. The court reiterated its previous stance in Mahalakshmi Glass Works Pvt. Ltd. v. Commissioner of Sales Tax, affirming that mens rea is not required for forfeiture under Section 37(1).

Conclusion:
The court dismissed the petitions, upholding the constitutionality and applicability of Sections 37(1) and 46 of the Bombay Sales Tax Act, 1959, and confirming the forfeiture of amounts collected by the petitioners. The petitioners were ordered to pay the costs of the petitions to the respondents.