2003 (2) TMI 472 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of Section 18-AA of the Karnataka Sales Tax Act, 1957.
2. Applicability of Section 18-AA in the absence of mens rea.
3. Authority of the respondent to pass the impugned order.
4. Retrospective application of Section 18-AA.
5. Implementation and refund process under Section 18-AA(4).

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 18-AA:
The petitioner challenged the constitutional validity of Section 18-AA of the Karnataka Sales Tax Act, 1957, arguing it was ultra vires the legislative powers of the State Legislature. The court referred to the Supreme Court's decision in Kasturi Lal Harlal v. State of U.P., which upheld a similar provision in the Uttar Pradesh Sales Tax Act as constitutionally valid. The court emphasized that legislative entries must be read in their widest amplitude, allowing for ancillary or incidental provisions in aid of the main topic of legislation. The judgment stated, "The taking over of sums collected by dealers from the public under guise of tax solely with a view to return them to the buyers so deprived is necessarily incidental to tax on the sale and purchase of goods." Consequently, the challenge to the constitutional validity of Section 18-AA was rejected.

2. Applicability of Section 18-AA in the Absence of Mens Rea:
The petitioner argued that since the penalty was set aside by the Tribunal due to the absence of mens rea, the provisions of Section 18-AA should not apply. The court clarified that the doctrine of mens rea is expressly excluded in Section 18-AA. The provision mandates that any amount collected as tax, whether knowingly or not, must be deposited with the assessing authority, and any excess amount will be forfeited to the State Government for refund to the customer. The court stated, "The idea underlying the provision is not to condemn the defaulting dealer... but is to ensure an equitable speedy, statutory remedy to the customer-payer." Therefore, the absence of mens rea does not exempt the petitioner from the consequences under Section 18-AA.

3. Authority of the Respondent to Pass the Impugned Order:
The petitioner contended that the respondent was not the assessing authority in relation to the petitioner. The court found this issue inconsequential, stating that Section 18-AA(3) does not require an order to be passed by any specific authority. The provision itself mandates the forfeiture of excess collections by operation of law. The court explained, "Passing of order declaring forfeiture of the excess collections is merely ministerial nature," serving to facilitate recovery proceedings and enable the customer to claim a refund.

4. Retrospective Application of Section 18-AA:
The petitioner argued that the collections were made before the insertion of Section 18-AA by Karnataka Act 4 of 1992, and thus, the provisions should not apply. The court dismissed this argument, citing sub-section (5) of Section 18-AA, which explicitly applies the provisions to collections made before the commencement of the Amending Act. The court reiterated that Indian Legislature can legislate retrospectively, except in penal laws, and held that the impugned provisions are not penal in nature.

5. Implementation and Refund Process under Section 18-AA(4):
The court highlighted the importance of ensuring that the forfeited amounts are refunded to the customers, as intended by the legislation. It emphasized that the refund process requires:
- An application in writing in the prescribed form made to the Commissioner within two years from the date of the order of forfeiture.
- The Commissioner's satisfaction, pursuant to an inquiry, that the claim is valid.

The court stressed that the customer's right to claim a refund commences only from the date of the order of forfeiture and that the prescribed form must be readily available. The court directed that the person concerned should be notified through a notice and informed of their right to claim interest under Sections 13 and 13-A of the Act.

Conclusion:
The writ petition was dismissed with costs assessed at Rs. 1,000. The court directed that a copy of the order be handed over to the learned Additional Government Advocate for communication and necessary action.

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