1982 (12) TMI 176 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of section 46(2) of the Bombay Sales Tax Act, 1959 regarding forfeiture of collected amount by a registered dealer.

The judgment of the Bombay High Court in this case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, regarding the interpretation of section 46(2) of the Act. The question submitted for determination was whether the forfeiture of an amount collected by the respondent company was justified under the provisions of section 46(2). The respondent company, a registered dealer, had purchased goods and provided certificates to vendors, exempting them from paying sales tax. However, goods worth Rs. 15,871 purchased were not used in the manufacture of taxable goods, leading to liability under section 14 of the Act. The Sales Tax Officer forfeited an amount collected by the respondent company as purchase tax, which was challenged in appeals leading to the reference before the High Court.

The Special Bench of the Tribunal held that the excess tax collected under section 46(2) should be determined based on the aggregate amount collected during the year compared to the tax payable on turnover of sales for that year. However, the High Court disagreed with this interpretation based on a previous judgment in Ramkrishan Kulwantrai v. Commissioner of Sales Tax [1979] 44 STC 117. The High Court emphasized that the legislative intent was to prohibit the collection of tax on transactions not liable to tax, and merely deducting the tax payable from the aggregate amount collected would go against this intent. Therefore, the High Court held that the Tribunal's order of remand was unsustainable in law.

In the present case, the High Court found that the respondent company had collected an amount equivalent to the purchase tax payable under section 14, as indicated in the debit notes issued by the company. The High Court concluded that there was no contravention of section 46(2) by the respondent company, and the amount forfeited by the Sales Tax Officer was not justified. The High Court ruled in favor of the respondent company, stating that the forfeiture was not warranted, albeit for reasons different from those considered by the Tribunal. The High Court directed the applicant to pay the costs of the reference to the respondent company, thereby resolving the issue in favor of the assessee and against the department.