1982 (12) TMI 179 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 46(2) of the Bombay Sales Tax Act, 1959 regarding forfeiture of excess tax collected by dealers and the correctness of the Tribunal's decision in modifying the forfeiture amount.

Analysis:
The case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, initiated by the Maharashtra Sales Tax Tribunal at the instance of the Commissioner of Sales Tax. The respondents, registered dealers, purchased non-ferrous metal under tax-free sales certificates but resold them within Maharashtra, making them liable for purchase tax. The Sales Tax Officer noticed the excess tax collected by the respondents on these sales and forfeited the entire amount. The dispute arose regarding the forfeiture amount, leading to appeals and the present reference.

The primary issue revolved around the correct interpretation of section 46(2) of the Act concerning the forfeiture of excess tax collected by dealers. The Tribunal had held that only the excess amount over the tax liability should be forfeited, relying on a previous Special Bench decision. However, the High Court clarified that the dealer is authorized to collect only the tax amount payable to the Government on a specific type of sale. Any collection beyond this amount would contravene section 46(2) of the Act.

The Court emphasized that the prohibition in section 46(2) is violated if a dealer collects tax at a higher rate than what is due to the Government. The definition of "tax" under the Act includes various types of taxes, and collecting a different tax type than what is due constitutes a violation. In this case, the respondents had not paid the purchase tax before the assessment, and their plea to forfeit only the excess amount was deemed untenable.

The Tribunal's decision, based on the outdated judgment of a Special Bench, was overturned by the High Court. The Court highlighted a previous ruling that contradicted the interpretation followed by the Tribunal, establishing that the Tribunal's decision was not in line with prevailing legal principles. Consequently, both questions submitted for determination were answered in favor of the department and against the assessee.

In conclusion, the High Court ruled against the respondents, upholding the forfeiture of the entire amount collected in excess of the tax liability. The respondents were directed to pay the costs of the reference, emphasizing the correctness of the department's position in the matter.