2011 (1) TMI 1288 - HC - VAT and Sales Tax

Order passed by the revisional authority under section 22A(ii) of the Karnataka Sales Tax Act, 1957, forfeiting the sales tax paid by the assessee to the Government and rejecting his request for refund of the wrongly collected amount challenged Held that - The Commissioner secured the sales bills and sales particulars of other dealers who are dealing with the very same products before acting on the said documents. He issued one more notice to the assessee bringing to her notice the aforesaid material and calling upon her to show cause as to why the said material should not be taken into consideration. The said material compared with the returns filed by the assessee clearly demonstrate that the amount collected by the assessee is more than what they had collected inclusive of tax and therefore he was of the view that though in the sales bill and account book this tax component is not mentioned the amount which is received as sales consideration was inclusive of tax component. From the aforesaid material we are satisfied that the finding recorded by the Commissioner is based on legal evidence, in accordance with law and do not call for any interference. The right of appeal has to be worked out within the four corners of law. When the law provides for a statutory appeal against the order of the Commissioner it is not open to the assessee to contend that he should have a right of first appeal, second appeal or revision as provided against the assessment order and therefore we do not see any merit in the said contention. Appeal dismissed.

Summary

Issues Involved:
1. Forfeiture of sales tax paid by the assessee.
2. Entitlement of the assessee for a refund of wrongly collected sales tax.
3. Examination of whether the assessee collected tax from customers.
4. Validity of the Commissioner's order based on extraneous materials.
5. Legal procedure and rights concerning appeals and revisions.

Detailed Analysis:

1. Forfeiture of Sales Tax Paid by the Assessee:
The primary issue was whether the sales tax paid by the assessee should be forfeited by the government. The revisional authority under section 22A(ii) of the Karnataka Sales Tax Act, 1957, had ordered the forfeiture of the sales tax amounting to Rs. 8,60,801 paid by the assessee for the assessment year 1997-98. The Commissioner concluded that the assessee had wrongly collected this amount from customers and remitted it to the government, making it liable for forfeiture.

2. Entitlement of the Assessee for a Refund of Wrongly Collected Sales Tax:
The assessee argued for a refund of the sales tax paid, claiming it was wrongly collected. Initially, the Deputy Commissioner of Commercial Taxes accepted this argument, stating that since the tax was not collected on the sales bills, it should be refunded. However, the Commissioner, upon revising the order, determined that the tax was indeed collected from customers, thus negating the refund claim.

3. Examination of Whether the Assessee Collected Tax from Customers:
The crux of the dispute was whether the assessee had passed on the tax liability to customers. The Commissioner examined the sales bills and account books, noting that the tax component was not explicitly mentioned. However, the Commissioner relied on the fact that the sachets of pan parag gutkha sold by the assessee stated that the price was inclusive of all taxes, indicating that the tax was collected from customers. The Commissioner also compared the assessee's records with those of other dealers in the same business, further supporting the conclusion that the tax was collected.

4. Validity of the Commissioner's Order Based on Extraneous Materials:
The assessee contended that the Commissioner had relied on extraneous materials in concluding that the tax was collected from customers. The court found that the Commissioner had indeed considered various documents and records, including statements of purchase and sales, profit and loss accounts, and comparative data from other dealers. The court held that the Commissioner's findings were based on legal evidence and not mere assumptions or guesswork, thus validating the Commissioner's order.

5. Legal Procedure and Rights Concerning Appeals and Revisions:
The assessee argued that the Commissioner should have remanded the matter back to the assessing authority, allowing for a proper appeal process. The court dismissed this argument, stating that the Commissioner had the statutory power to revise the order if it was prejudicial to the revenue. The court emphasized that the right of appeal is statutory and must be exercised within the framework of the law. The court concluded that the Commissioner's order was legally sound and did not deprive the assessee of any legal remedies.

Conclusion:
The High Court of Karnataka upheld the Commissioner's order, dismissing the assessee's appeal. The court found that the assessee had indeed collected the tax from customers and remitted it to the government, justifying the forfeiture of the amount. The court also clarified that any excess tax paid beyond the actual liability should be refunded to the assessee, while the rest would be forfeited. This judgment reinforces the legal principles surrounding tax collection, forfeiture, and refund under the Karnataka Sales Tax Act, ensuring compliance with statutory obligations and protecting revenue interests.