2003 (11) TMI 573 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the plaintiff is entitled to recover a sum from the defendant for sales tax collection.
2. Whether the defendant, a nationalized bank, is authorized to collect sales tax.
3. Whether the defendant has paid the tax collected to the State Government.
4. Relief sought by the plaintiff.

Analysis:
The plaintiff, a dealer in non-ferrous metal scrap, filed a suit against the defendant, a nationalized bank, for recovery of a sum related to the sales tax collected by the defendant. The defendant contended that as a nationalized bank, it was entitled to collect sales tax and had already remitted the tax amount to the State Government. The trial court framed issues including the maintainability of the suit, the defendant's right to collect sales tax, and payment of tax to the government.

The plaintiff and defendant presented witnesses and documents during the trial. The central question was whether the defendant, a banking company, could be considered a dealer under the Sales Tax Act. The relevant sections of the Karnataka Sales Tax Act were examined, particularly emphasizing that a non-registered dealer cannot collect tax. The Act also allows specific entities like the Central Government or local authorities to collect tax, which does not include a banking company like the defendant.

The judgment highlighted that the defendant had not provided evidence of remitting the tax collected to the State Government. The defendant's argument that it had paid the tax was refuted due to the lack of supporting documentation. The court ruled that the defendant, having admitted to collecting tax from the plaintiff, should not benefit unjustly by retaining the amount without proof of payment to the government.

Ultimately, the High Court allowed the appeal, setting aside the trial court's decision and decree. The plaintiff's suit was decreed in full, emphasizing that the defendant, as a banking company, was not entitled to collect tax from the plaintiff for the goods sold. The judgment concluded with each party bearing their own costs in the appeal.