2012 (9) TMI 905 - HC - VAT and Sales Tax

Whether even in the absence of a provision under the Central Sales Tax Act, 1956 for forfeiture of excess tax collected by a registered dealer, forfeiture could be ordered by recourse to the provisions under the 1957 Act? Held that - Forfeiture being a process requiring a substantive provision and in the absence of any provision in the CST Act authorizing forfeiture of excess tax collected by a dealer but not remitted to the Revenue, no forfeiture could be ordered by the Revenue by reference to provisions of the State Sales Tax Act, in this case the 1957 Act. Provisions of the CST Act enable application of the local sales tax law as to the procedure in regard to assessment, collection of tax and enforcement of payment of tax and this regime takes in the scheme for forfeiture of excess tax collected and for reimbursement of the same to the buyers from whom it is collected

Summary

Issues:
1. Whether forfeiture of excess tax collected by a registered dealer can be ordered under the Andhra Pradesh General Sales Tax Act, 1957 (1957 Act) in the absence of a specific provision under the Central Sales Tax Act, 1956 (CST Act)?
2. Interpretation of provisions regarding forfeiture of tax under the CST Act and its applicability to state sales tax laws.
3. Comparison of judgments regarding the authority to order forfeiture of excess tax collected by a dealer.

Issue 1: The primary issue in this case is whether forfeiture of excess tax collected by a registered dealer can be ordered under the 1957 Act in the absence of a specific provision under the CST Act. The case involved the State Revenue filing revisions against the order of the Sales Tax Appellate Tribunal, Hyderabad Bench, allowing appeals by M/s. Hindustan Cables Limited, Cherlapally, regarding excess tax collections. The Tribunal held that the Revenue cannot invoke provisions of the 1957 Act to order forfeiture of excess tax collected, as there was no substantive provision for forfeiture under the CST Act.

Issue 2: The judgment delves into the interpretation of provisions under the CST Act and their applicability to state sales tax laws. Referring to the Supreme Court's decision in India Carbon Ltd. v. State of Assam, the court emphasized that only substantive law, namely the CST Act, should be applied by the state's sales tax authorities while passing orders of assessment related to the CST Act. The court reiterated that interest or forfeiture could only be levied or charged under the CST Act if there was a substantive provision authorizing such actions.

Issue 3: The judgment compared different judgments regarding the authority to order forfeiture of excess tax collected by a dealer. The learned Special Government Pleader cited a judgment of the Kerala High Court in Leo Engineering (India) v. State of Kerala, which concluded that provisions of the Kerala General Sales Tax Act, 1963, allowed for forfeiture of excess tax collected and reimbursement to the buyers. The court in the present case, however, relied on the absence of a substantive provision in the CST Act authorizing forfeiture of excess tax collected by a dealer to determine that no forfeiture could be ordered under the 1957 Act.

In conclusion, the judgment clarified that forfeiture of excess tax collected by a dealer requires a substantive provision, and in the absence of such provision in the CST Act, no forfeiture could be ordered under the state sales tax laws. The comparison of judgments highlighted the importance of adhering to substantive provisions under the relevant tax laws while determining the authority to order forfeiture or levy interest on delayed payments.