2009 (4) TMI 20 - HC - Income Tax

Seller of alcoholic liquor and other goods liable to collect from the buyer a sum equal to the percentages set out u/s 206C interim relief granted by this Court whereby the petitioner herein was restrained from collecting the tax from the purchasers - even though it can be said that a duty had been cast on persons like the petitioner to collect the tax by virtue of the interim relief he could not collect the tax for the relevant period therefore Section 206C would not be attracted

Summary

Issues:
1. Constitutional validity of Section 206 of the Income Tax Act.
2. Legality of orders dated 26th September, 1994 and 25th February, 1994.
3. Interpretation of Section 206-C regarding tax collection by the seller.
4. Applicability of Section 206C(6) when the seller was restrained from collecting tax.
5. Compliance with statutory duty to collect tax during the period of stay.

Analysis:
1. The petitioner challenged the constitutional validity of Section 206 of the Income Tax Act, which was later upheld. The focus shifted to the legality of specific orders dated 26th September, 1994 and 25th February, 1994, along with consequential reliefs sought by the petitioner.

2. Section 206-C mandates sellers to collect tax from buyers on specified goods. The petitioner, a liquor manufacturer, faced challenges regarding tax collection. Interim relief was granted, restraining tax collection pending further court decisions. The key question was whether the seller, under restraint, had to account for the uncollected tax.

3. The court analyzed Section 206-C provisions, emphasizing the duty of sellers to collect tax and deposit it with the government. The petitioner's obligation to collect tax from purchasers was hindered by the interim relief, raising concerns about liability for uncollected amounts.

4. The interpretation of Section 206C(6) was crucial in determining the seller's responsibility during the period of restraint. The court deliberated on whether the seller, under a collection ban, could be considered to have failed in tax collection, thus invoking penalties under the Act.

5. The court ruled that the seller's inability to collect tax during the stay period absolved them of liability under Section 206C(6). Compliance with statutory duties was impossible due to the court's order, preventing tax collection. The judgment highlighted the legal error in holding the seller accountable for uncollected tax during the restrained period.