1955 (7) TMI 25 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959.
2. Whether the collection by the assessee was "incidental charges" or unauthorized tax.
3. Applicability of previous judgments to the present case.

Detailed Analysis:

1. Levy of Penalty under Section 22(2) of the Tamil Nadu General Sales Tax Act, 1959:
The central issue in this case is whether the assessee's collection of Rs. 16,06,820 from Promar Sales Limited constitutes an unauthorized tax collection under section 22(2) of the Act. Section 22(2) penalizes any dealer who collects an amount "by way of tax or purporting to be by way of tax in contravention" of section 22(1).

2. Whether the Collection by the Assessee was "Incidental Charges" or Unauthorized Tax:
The assessee contended that the collection was made as "incidental charges" and not as tax. However, the Tribunal and the Appellate Assistant Commissioner found that the collection was indeed a tax on the value of the sale, disguised as incidental charges. The Tribunal noted that the collection was almost equivalent to sales tax, surcharge, and additional surcharge, thus concluding that it was not incidental charges but a tax collection.

The Appellate Assistant Commissioner also found that the assessee had collected Rs. 61,896 in excess of the tax suffered, indicating that the collection was not merely a recoupment of tax but an unauthorized tax collection on the sale value. The Tribunal's findings were supported by the affidavit of the director of Promar Sales Limited, which confirmed that the alleged incidental charges were calculated at the taxable rates applicable to the sales value.

3. Applicability of Previous Judgments to the Present Case:
The assessee relied on previous judgments, including Metal Sales Corporation v. Joint Commercial Tax Officer [1983] 52 STC 392 and Mather & Platt Ltd. v. State of Maharashtra [1983] 53 STC 104 (Bom). In Metal Sales Corporation, it was held that if tax suffered already had been collected, section 22(2) penalty is not attracted. However, the Tribunal distinguished this case by noting that the collection in the present case was not merely a recoupment of tax suffered but included an excess amount.

The Tribunal also referred to P. Ramasamy v. State of Tamil Nadu [1984] 57 STC 72 (Mad.), where it was held that collecting sales tax on the sales turnover, contrary to the provisions of the Act, attracts penalty under section 22(2). The Tribunal concluded that the present case was similar to Ramasamy, where the entire collection of Rs. 16,06,820 was considered as unauthorized tax collection.

The Tribunal further noted that the Bombay High Court's decision in Mather & Platt Ltd. did not help the assessee, as it distinguished between collections representing sales tax payable and tax already suffered. The Tribunal found that the present case involved unauthorized tax collection on the sale value, similar to Ramasamy.

Conclusion:
The Tribunal upheld the penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959, as the assessee's collection of Rs. 16,06,820 was found to be unauthorized tax collection disguised as incidental charges. The Tribunal's findings were supported by the Appellate Assistant Commissioner's observations and the affidavit of the director of Promar Sales Limited. The previous judgments cited by the assessee were distinguished based on the facts of the present case. Accordingly, the revision was dismissed, and the penalty was confirmed.