2009 (7) TMI 1167 - HC - VAT and Sales Tax

Whether dealers who have collected sales tax are entitled to retain it as an incentive? Held that - Notification SRO No. 1729/93 and the previous notifications providing for exemption to small-scale industrial units gave an option to such industrial units to collect tax and retain the same with them as loan later repayable to the Government. Admittedly the petitioner has not opted for collection of tax to avail of it as a loan repayable later. On the other hand, the petitioner chose to avail of exemption which denies the petitioner the right to collect tax and if collected, the tax so collected will be forfeited to the Government in terms of section 46A(1) of the Act. Annexure E judgment relied on by the petitioner does not lay down the correct law because the decision is rendered without reference to relevant statutory provisions namely, section 46A(1) and (2) and the provisions of the notifications abovereferred to. We, therefore, uphold the order of the Tribunal and dismiss the revision petitions filed by the petitioner.

Summary

Issues: Interpretation of section 46A(1) of the Kerala General Sales Tax Act, 1963 regarding forfeiture of excess tax collected by dealers enjoying sales tax exemption.

In this judgment, the court was tasked with determining the correctness of a previous Division Bench decision regarding the entitlement of dealers who have collected sales tax to retain it as an incentive. The petitioner, a small-scale industrial unit enjoying sales tax exemption, had collected tax along with the price of goods supplied to the Civil Supplies Department. The Sales Tax Department found this collection to be illegal and directed the petitioner to deposit the tax collected. The petitioner claimed refund but was denied as being exempted from tax collection. The court analyzed the statutory provision of section 46A(1) of the KGST Act, which provides for the forfeiture of tax collected by dealers not liable to pay it. The petitioner argued for the right to retain collected tax as an incentive based on a government order and exemption certificates. However, the court held that the petitioner's exemption status meant they were not entitled to collect tax, and any collected tax should be forfeited to the government as per the law.

The court emphasized that the petitioner's choice to avail of sales tax exemption under specific notifications meant they forfeited the right to collect tax and retain it as an incentive. The court rejected the petitioner's argument that they were entitled to retain the collected tax based on a government order and exemption certificates. The court pointed out that the relevant statutory provisions, including section 46A(1) and (2) of the Act, and the exemption notifications, did not support the petitioner's claim. The court upheld the Tribunal's order, dismissing the revision petitions and overruling the previous Division Bench decision that allowed dealers to retain collected tax as an incentive.