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TMI Blog1960 (9) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... India (B.R.L. Iyengar and T.M. Sen, Advocates, with him), for the appellants (in all the four appeals). V.L. Narasimhamurthy and S.N. Andley, J.B. Dadachanji and Rameshwar Nath, Advocates of Messrs Rajinder Co., for the respondents (in C.As. Nos. 75 and 76 of 1957). A.V. Viswanatha Sastri, Senior Advocate (S.N. Andley, J.B. Dadachanji and Rameshwar Nath, Advocates of Messrs Rajinder Narain and Co., with him), for the respondents (in C.As. Nos. 355 and 356 of 1957). -------------------------------------------------- The Judgment of the Court was delivered by RAJAGOPALA AYYENGAR, J.- Civil Appeals 75 and 76 of 1957 have been filed by the State of Mysore and the Sales Tax Officer, Bangalore, while in Civil appeals 355 and 356 of 1957 the Commissioner of Sales Tax in Mysore, Bangalore, is the appellant. Both the sets of appeals have been filed on certificates granted by the High Court of Mysore under Article 133(1)(c) of the Constitution. The question of law involved in all these appeals is as regards the proper construction of section 11 of the Mysore Sales Tax Act, 1948 (hereinafter referred to as the Act). Civil Appeals 75 and 76 of 1957 arise ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appropriate charging sections of the Sales Tax Act. Against the order of the Sales Tax Officer the company preferred an appeal to the Deputy Commissioner which was dismissed on the same reasoning and similarly a revision to the Commissioner of Sales Tax, but the latter officer referred on July 19, 1951, the question of law raised by the company to the High Court for determination by it under section 16 of the Act. The question referred was: "Whether the sum of Rs. 130-15-5 collected by the petitioner company in the quarter ended December 1951 in its bills under the head 'deposit' at 3 pies per rupee on the above to cover sales tax subject to refund, if any, as stated in the revision petition in the circumstances set out therein attracts the provisions of section 11 of the Mysore Sales Tax Act and therefore the petitioner company was liable to pay the said amount to the Government. If not whether the petitioner company is entitled to refund of the said amount of Rs. 130-15-5 already paid by it under protest." Before this reference came on for hearing, the Mysore Spinning and Manufacturing Co., which is the respondent in Civil Appeal No. 75 of 1957, filed Writ Petition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed thereby. As admittedly in both the proceedings before them, the sale transactions in question were either not liable to tax or to tax at the rate collected under the relevant charging provisions of the Act, the claim of the tax authorities to payment over was negatived. The State of Mysore and the Sales Tax Officer applied to the High Court for the issue of certificates to enable appeals to be filed in this Court and the same having been granted under Article 133 the appeals are now before us. Before dealing with the contentions raised in the appeals, it would be convenient to set out briefly the facts in Civil Appeals 355 and 356 of 1957. The Cement Marketing Co. of India Private Ltd., is the appellant in both the appeals, which arise out of a common order of the High Court of Mysore in two connected references under section 16 of the Mysore Sales Tax Act. Civil Appeal 356 of 1957 is against the order in Civil Petition 223 of 1953, the facts giving rise to it being as follows: During the year 1948-49, the company acted as agents for the sale of cement manufactured by the Mysore Iron and Steel Works, Bhadravati. The sales were effected to purchasers outside the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs when they themselves ruled that such tax is not due under the Act". While this reference-Civil Petition 223 of 1953-was pending decision, another reference relating to the same company, for the accounting period 1950-51-Civil Petition 124 of 1954-was made to the High Court. The relevant facts in this later reference were nearly similar, except that the sales related to cement manufactured by the Associated Cement Co. at its factory at Mathukarai in Coimbatore district of the Madras State. The questions referred to the High Court in Civil Petition 124 of 1954 from which Civil Appeal 355 of 1957 has been brought ran: "(1) Whether in view of the decision that the sales of 'Nilgiri brand cement' by the petitioner during the period 1st April, 1950, to 31st March, 1951, are not liable to sales tax under the Mysore Sales Tax Act, 1948, the petitioners were nevertheless liable to pay to the Government a sum of Rs. 6,585-2-0 collected by them from their constituents conditionally and on the express undertaking that such amounts would be refunded to their constituents in the event of Sales Tax Authorities holding that the sales were not liable to the tax, and (2) Whether they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay in full the amount or amounts collected by him by way of tax or taxes to the Government on or before the 31st July of the year succeeding that in which such collection is made. 11.. (8) The assessing authority may call for and examine the accounts of the registered dealer for the purpose of satisfying himself that the dealer has paid in full the amount or amounts collected by him by way of tax or taxes, as required by condition (ii) in sub-rule (7): Provided that this power shall be exercised before the end of the year next succeeding that in which the collections were made. 11.. (9) If the assessing authority is satisfied that any amount or amounts collected by the dealer by way of tax or taxes have not been paid by him to the Government in any year as required by condition (ii) in sub-rule (7), the assessing authority shall issue a notice to the dealer in Form IX-2 specifying therein the total sum so withheld by the dealer and the dealer shall pay such sum at the time and in the manner specified therein." The construction which the High Court adopted of the section and of the rules may be thus expressed: Section 11(1), though couched in the negative, in effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11(1), these words when they occur in sub-section (2) ought to receive a wider meaning, as including not merely the collections of tax on a transaction brought to charge by the Act, by having to be included in the taxable turnover of the dealer, but also any sums collected in the guise or under the name of sales tax-and that it was only such a construction, that would in conceivable cases leave an "excess" over the tax liability of the dealer, and give full scope to the words of rule 11(7)(ii)-"he shall pay in full the amount or amounts collected by him by way of tax or taxes to the Government.............". The appeal originally came on before a Division Bench of this Court when the arguments just now summarised were urged and it was then submitted on behalf of the respondents, that if section 11(2) were construed in the manner contended by the learned counsel for the appellants, the direction to pay over to the Government, money belonging to the dealer which could not lawfully be and was not in fact charged to tax under the Act would violate the fundamental rights guaranteed by Articles 19(1)(f) and 31 of the Constitution. By reason of this contention being raised the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeds of the sales in question were not within the taxable turnover of the company, the beneficial ownership became vested in the depositors and the company ceased to have any right to continue to hold the moneys. The fact that the physical control of the moneys passed from the "depositor" to the "dealer" did not render the receipt a "collection" within section 11(2) of the Act. We should not be understood as saying that collections by a dealer from a purchaser of amounts not lawfully demandable by him are not "collections" within section 11, merely because the purchaser could in law make a claim for refund and enforce that right in appropriate proceedings. But such a case is far removed from the onus before us, where the payment by the purchaser was conditional and made on an express contract that the sum would be refunded in the contingency of the dealer being held not to be assessable in respect of the relevant turnover. On the facts of these appeals we are unable to hold that there has been any "collection" by way of tax of any amount under section 11(2) of the Mysore Sales Tax Act, 1948. So far we have been dealing with the facts of the cases in which "references" ..... 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