2009 (12) TMI 884 - HC - VAT and Sales Tax

Whether the Tribunal was justified in holding that assessing authority can invoke powers vested under section 18AA of the Karnataka Sales Tax Act, in order to forfeit the excess tax paid under Central Sales Tax Act, pursuant to section 9(2) of the Central Sales Tax Act, 1956? Held that - In the instant case the sale attracts the purchase tax. It may affect the price of the seller. But the seller is liable to pay the tax demanded and the same has to be collected from the buyer and the seller is not expected to pay the tax from his pocket when the sale is inclusive of the cost of goods plus tax, the tax collected from the buyer has to be passed on to the Revenue and on same analogy the assessee cannot be permitted to revise the invoices to contend that excess tax collected by him from the customer would be the cost of the value of the material sold by him. In view of the same, we are of the view that it is a fit case to hold that the assessee as a after-thought has devised an idea to enrich himself in an unjust manner by collecting excess tax and seek refund of the same from the revenue. Such a thing cannot be permitted by any court of law. Revision petition is dismissed answering the question of law against the assessee.

Summary

Issues:
Challenge to order of Karnataka Appellate Tribunal under Karnataka Sales Tax Act, 1957 for year 2000-01, invoking powers under section 18AA to forfeit excess tax paid under Central Sales Tax Act, 1956.

Analysis:
The revision petition challenged the order passed by the Karnataka Appellate Tribunal, Bangalore, dismissing the appeal of the petitioner-assessee under section 22(1) of the Karnataka Sales Tax Act, 1957. The petitioner sought refund of extra sales tax paid after filing a revised return, claiming entitlement to readjustment of tax. The assessing officer rejected the request, stating the excess amount collected from customers led to unjust enrichment. The Joint Commissioner and the Tribunal upheld this decision. The petitioner contended that the revised return was legitimate, citing Commissioner of Central Excise v. Maruti Udyog Ltd. and Delhi Cloth & General Mills Co. Ltd. judgments to support the claim that excess tax collected could be refunded.

The Government Advocate argued that the petitioner collected tax at higher rates from customers and sought refund to enrich himself, justifying the decisions of the authorities below. The petitioner, in response, emphasized the right to seek adjustment and refund of excess tax collected. The court noted the dispute regarding tax collection rates, with the petitioner collecting more than required and remitting the excess to the Department. The court referenced Maruti Udyog Ltd. case, distinguishing it from the present scenario, emphasizing that the tax collected from customers must be passed on to the Revenue.

The court highlighted the principle that tax collected from buyers must be remitted to the Revenue, rejecting the petitioner's attempt to revise invoices to claim excess tax as part of the material cost. Quoting Delhi Cloth & General Mills Co. Ltd. case, the court emphasized that the seller cannot retain tax collected from buyers. The assessing officer's decision, as per the provided paragraph, was deemed appropriate, considering the implications of revising tax amounts after transactions were completed. Thus, the revision petition was dismissed, ruling against the petitioner on the question of law.

In conclusion, the judgment upheld the decisions of the lower authorities, emphasizing the obligation to remit tax collected from customers to the Revenue and rejecting the petitioner's attempt to claim excess tax as part of material cost. The court deemed the assessing officer's decision reasonable, dismissing the revision petition.