2015 (11) TMI 937 - HC - VAT and Sales Tax

Forfeiture of taxes collected by Petitioner - Collection and remittance of tax illegally - Penalty u/s 65 under Assam General Sales Tax Act, 1993. - Held that - Transaction between the petitioner on the one part and the Oil India and Gas Authority on the other, does not constitute a transaction of sale and purchase between the two oil companies for the periods, in question, because the Oil India and Gas Authority are declared to be oil companies only with effect from October 21, 2002. Prior to that, the Oil India and Gas Authority were not specified oil companies. The purchases made by the petitioners from the said two entities, cannot be treated as purchase from the oil companies; therefore, the question of exemption of tax did not arise. Accordingly, the petitioner paid the tax as per Schedule II of the Act. When the petitioner effected sale to its sellers, the petitioner collected the sales tax by way of reimbursement and some excess amount was collected. The excess amount, so collected, has been remitted to the Government and no part of the excess amount has been retained. When the goods are exempted from payment of tax, no person irrespective of a dealer, registered dealer or unregistered dealer shall collect tax in respect of goods, which are exempted from tax. The object is to prevent the consumer cheating, by dealers. If such contravention takes place and consumer cheating occurs then the penal provision, of forfeiture and penalty gets attracted. Here, in this case, the petitioner is a registered dealer. The petitioner has paid tax. The goods, in question, are taxable goods. The petitioner has paid tax to its seller, which was not a specified oil company at that time. The petitioner, therefore; has collected tax from its purchasers. The above facts clearly disclose that the petitioner has not committed any contravention of section 65A(1) since the goods, in question, are not exempted goods. Any person cannot collect tax on sale of goods, which is exempted from tax. In view of the clear distinction with regard to the proposition of law that is discernible from the provisions of section 65A(1), it cannot be said that the petitioner has contravened the provisions of section 65A(1). Therefore, the order of forfeiture and penalty is bad in law. The same is set aside. If any excess tax is collected by the petitioner, retained by him and not remitted, the assessing authority can verify and see that the excess tax collected and retained be collected by the Department. - Decided in favour of assessee.

Issues Involved:
1. Legality of tax collection by the petitioner.
2. Application of Section 65A of the Assam General Sales Tax Act, 1993.
3. Relevance of the Supreme Court's decision in T. Stanes and Co. Ltd. v. State of Tamil Nadu.
4. Forfeiture and penalty imposed by the assessing authority.

Detailed Analysis:

1. Legality of tax collection by the petitioner:
The petitioner, an oil company, purchased oil products from Oil India Limited and Gas Authority of India Limited during 1998-2002 and paid sales tax as per Schedule-II of the Assam General Sales Tax Act, 1993. The petitioner collected taxes from its dealers, including some excess tax, which was remitted to the Government. The assessing authority directed forfeiture of the taxes collected and proposed a penalty under Section 65A. The petitioner argued that since the products were taxable and the tax was paid to the sellers, the collection of tax from dealers was not illegal. The court found that the petitioner had not contravened Section 65A(1) as the goods were taxable and not exempted from tax.

2. Application of Section 65A of the Assam General Sales Tax Act, 1993:
Section 65A prohibits the collection of tax on goods where no tax is payable. Sub-section (1) states that no person shall collect tax on sales of goods on which no tax is payable. Sub-section (3) mentions the forfeiture of any tax collected in contravention of sub-section (1). The court observed that the petitioner, being a registered dealer, paid tax on taxable goods and collected the same from its purchasers. Hence, there was no contravention of Section 65A(1) as the goods were not exempted from tax.

3. Relevance of the Supreme Court's decision in T. Stanes and Co. Ltd. v. State of Tamil Nadu:
The Government Advocate cited the Supreme Court's decision in T. Stanes and Co. Ltd. v. State of Tamil Nadu to justify the forfeiture and penalty. However, the court noted that Section 22 of the T.N. General Sales Tax Act, 1959, which restricts unregistered dealers from collecting tax, is not pari materia with Section 65A of the AGST Act. The court distinguished the provisions, stating that Section 65A(1) prohibits tax collection on exempted goods, whereas the cited case dealt with unregistered dealers collecting tax. Thus, the Supreme Court's decision was not applicable to this case.

4. Forfeiture and penalty imposed by the assessing authority:
The court examined the provisions of Section 65A and found that the petitioner did not contravene sub-section (1) as the goods were taxable. The order of forfeiture and penalty was deemed bad in law and was set aside. However, the court observed that if any excess tax collected by the petitioner was retained and not remitted, the assessing authority should verify and ensure its collection by the Department.

Conclusion:
The petitions were allowed, and the order of forfeiture and penalty under Section 65A was set aside. The court emphasized that any excess tax collected and retained by the petitioner should be verified and collected by the Department.

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