1998 (5) TMI 392 - HC - VAT and Sales Tax

Summary

Issues:
1. Excess levy of composition fee under taxing law.
2. Delay in approaching the court.
3. Legality of composition fee exceeding the statutory limit.
4. Applicability of legal principles on composition fee.

Issue 1: Excess levy of composition fee under taxing law
The petitioner, a trader in sugar, was assessed to sales tax and was directed to pay a sum as entry tax. The petitioner challenged the demand of Rs. 91,053 as entry tax and Rs. 25,000 as composition fee, alleging that the compounding fee should not exceed Rs. 1,000 as per the statute. The department contended that the petitioner voluntarily paid the composition fee and is not entitled to a refund. The court held that the excess composition fee was illegal as it placed the petitioner in a worse position than if prosecuted, violating the statutory provisions.

Issue 2: Delay in approaching the court
The Government Pleader argued about the delay in filing the writ petition, citing a previous judgment. However, the court differentiated this case from the previous one, stating that the petitioner pursued an incompetent appeal, justifying the delay. The court found no inordinate delay and concluded that the petitioner had a bona fide explanation for approaching the court challenging the levy.

Issue 3: Legality of composition fee exceeding the statutory limit
The court analyzed the statutory provision under section 23 of the Entry Tax Act, stating that the power to compound an offense is limited to a maximum composition fee of Rs. 1,000. Any collection exceeding this amount is ultra vires and arbitrary. The court emphasized that any collection in excess of the stipulated amount is illegal and without the authority of law, mandating a refund of the excess amount collected.

Issue 4: Applicability of legal principles on composition fee
The court referred to a previous decision to support the petitioner's contention that collecting an amount beyond the statutory limit is illegal, even if the dealer had agreed to pay to avoid prosecution. The court held that the principles of this decision applied to the instant case, allowing the writ petition and directing the refund of the excess composition fee collected. The court emphasized that the legality of the levy should align with the statutory provisions, and any excess collection is unjustified and must be refunded promptly.

In conclusion, the court allowed the writ petition, directing the refund of the excess amount collected as composition fee, emphasizing adherence to statutory limits and principles governing such levies.