1982 (2) TMI 275 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the forfeiture of Rs. 27,104 under Section 37(1) read with Section 46(2) of the Bombay Sales Tax Act, 1959.
2. Interpretation of the term "inclusive of tax" in the sale bills.
3. Whether the assessee collected tax from customers on transactions where no tax was due.
4. Application of penalty under Section 37(1) read with Section 46(2) of the Bombay Sales Tax Act, 1959.

Detailed Analysis:

1. Legality of the Forfeiture of Rs. 27,104:
The primary issue in this case was whether the forfeiture of Rs. 27,104 by the Sales Tax Officer was lawful under Section 37(1) read with Section 46(2) of the Bombay Sales Tax Act, 1959. The Sales Tax Officer had determined that the assessee had collected this amount as tax from customers despite not being liable to pay any tax on those resales. The Tribunal upheld this decision, interpreting the sale bills indicating "inclusive of tax" as evidence that the assessee collected tax unlawfully. However, the High Court found that the Tribunal's interpretation was incorrect and that the term "inclusive of tax" did not necessarily imply that the amount collected was tax rather than sale price.

2. Interpretation of the Term "Inclusive of Tax":
The Tribunal had concluded that the term "inclusive of tax" in the sale bills indicated that the assessee collected tax from its customers. The High Court disagreed, stating that the phrase "inclusive of tax" could mean that the customers were not liable to pay additional tax and that any tax payable would be borne by the assessee. The High Court emphasized that the term could not be interpreted to mean that the entire amount collected was tax without concrete evidence.

3. Collection of Tax from Customers:
The department argued that the assessee collected Rs. 27,104 as tax from customers on transactions where no tax was due, based solely on the phrase "inclusive of tax" in the bills. The High Court found no other evidence to support this claim. The Court noted that the assessee was allowed to include any tax paid or payable in the sale price and that the term "inclusive of tax" was used uniformly for transactions irrespective of tax liability. Therefore, the Court concluded that the amount collected was part of the sale price and not an illegal tax collection.

4. Application of Penalty:
The Tribunal and the Sales Tax Officer had imposed a penalty on the assessee under Section 37(1) read with Section 46(2) of the Bombay Sales Tax Act, 1959. The High Court referenced the case of Hindustan Steel Ltd. v. State of Orissa, which established that penalties should not be imposed unless there was deliberate defiance of law or conscious disregard of statutory obligations. The Court found that the department failed to prove that the assessee acted dishonestly or in defiance of the law. Consequently, the High Court held that the penalty was not justified.

Conclusion:
The High Court concluded that the Tribunal erred in upholding the forfeiture of Rs. 27,104 and the imposition of penalties. The Court answered the reference in the negative, stating that the Tribunal was not right in law in upholding the order of forfeiture under Section 37(1) read with Section 46(2) of the Bombay Sales Tax Act, 1959. The decision was in favor of the assessee and against the department, with no order as to costs.