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TMI Blog1954 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ommon ground that, though it was eventually established that the sales themselves were not liable to sales tax under the Act, the company had collected from the purchasers in Madras State amounts equivalent to the taxes that would have been payable, had the sales been liable to tax, that is, at 1% of the sale price up to 31st Decem- ber, 1947, and at 1-9/16% from 1st January, 1948, to 31st March, 1948. Such collections were treated by the company itself as collections under Section 8-B(1) of the Act and were shown as such in the monthly returns submitted by the company under rule 13(2) of the Turnover and Assessment Rules for the purpose of provisional assessment under the rules. In the final assessment, the assessing authorities declined to order a refund of the amount computed on the turnover in question, Rs. 52,59,112-15-0. The Appellate Tribunal upheld the contention of the State, that such collections were payable to the Government under Section 8-B(2) of the Act and were not refundable to the assessee. It was the revision of that decision that the assessee sought in this petition before us. The finding of the Appellate Tribunal was: "If the sales were outside the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, as may be prescribed:" (The proviso is omitted as it is not material for our present purposes.) Section 8-B(2) runs: "Every person who has collected or collects any amount by way of tax under this Act on or after the first day of April, 1947, shall pay over to the State Government within such time and in such manner as may be prescribed, all amounts so collected by him, if they are in excess of the tax, if any, paid by him for the period during which the collections were made; and, in default of such payment, the amounts may be recovered and if they were arrears of land revenue." Rule 5(A)(7) of the Turnover and Assessment Rules runs: "A registered dealer may collect amounts by way of tax or taxes under the Act subject to the following conditions: (i) He shall not collect any amount or amounts by way of tax or taxes under the Act at a rate or rates exceeding the rate or rates specified in Section 3 or 5 or notified under Section 6(1). (ii) He shall pay in full the amount or amounts collected by him by way of tax or taxes to the State Government on or before the 30th April of the year succeeding that in which such collection is made." Form A-8, which is the certificate of regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and (2) the tax is levied on, and is payable by, the dealer. The statute authorises the levy of the tax and it also empowers the State Government to collect the tax lawfully levied. It has, however, always been accepted both by economists and Courts that the ultimate economic incidence of the tax is on the consumer. That was also pointed out by the Supreme Court in State of Bombay v. United Motors (India) Ltd.(1) The basis of Section 8-B(1) and Section 8-C of (1) [1953] 4 S.T.C. 133 at p. 149. the Act is the statutory recognition of the real and economic incidence of the tax in the cases provided for by those sections. While under Sec- tion 3 the levy of the tax is on the dealer, and while the authority em- powered by the Act to collect that tax is the State Government, Section 8-B(1) empowers the registered dealer to collect the tax from the con- sumer or the purchaser. That, however, in no way alters the liability of the registered dealer under Section 3 to pay the tax assessed on his total turnover. Whether the registered dealer exercises or not his statutory right under Section 8-B(1) to collect the lawfully leviable tax from his purchasers, he cannot escape his liability und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under Section 8-B(1) is not itself the amount, the tax, for the levy of which Section 3 provides. Running through all the three sections, Sections 3, 8-B(1) and 8-C is the statutory requirement that what can be collected is only what is lawfully leviable as tax under the Act. That can never be altered, whichever is the col- lecting agency. Whatever is lawfully leviable and is lawfully levied under Section 3 of the Act, the State Government can collect. What- ever is lawfully leviable as tax, the registered dealer can collect under Section 8-B(1) subject to the other limitations imposed by sub-sections (1) and (2) of Section 8-B. Whatever is lawfully leviable as tax, the State Government can collect under Section 8-C but only in its right as a statutory registered dealer. What is collected as tax under Section 3 goes to the State. There is no difficulty about that. What is collected by the registered dealer under Section 8-B(1) also goes to the State; Section 8-B(2) provides for that. Obviously there is no need to provide for anything analogous to Section 8-B(2) in Section 8-C, because it is the State Government itself that makes the collection authorised under Section 8-C. Whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay over to the State Government "all amounts collected by him if they are in excess of the tax, if any, paid by him for the period during which the collections were made". The expression "tax, if any, paid by him" should obviously refer only to the tax lawfully levied or lawfully leviable under the Act. Had it been the intention of the legislature to impose an absolute obligation on the registered dealer to pay over to the State Government all amounts collected by him, whether they were lawfully collectable or not, one should except the statutory provision to be differently worded, requiring him to pay over all the amounts collected by him, without the limiting clause, which requires him to pay over his collections, if they are in excess of the tax, if any, paid by him during the assessment period in question. The expression is not even "in excess of the tax, if any, payable by him". But it is "in excess of the tax, if any, paid by him". The further provi- sion in Section 8-B(2), that in default of such payment the amounts may be recovered as if they were arrears of land revenue, is also significant. We have already pointed out that the amount collected by way of tax under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s collected by the registered dealer are all taxes lawfully leviable on the sales of goods, the entire collections will come within the scope of "all amounts so collected by him" and the entire collections will be payable by the registered dealer to the Government under Section 8-B(2). The next question is whether Section 8-B(2) also requires a regis- tered dealer to pay over to the Government collections made by him which were not lawful. What we have already stated about the extent of the power conferred on a registered dealer by Section 8-B(1) and the extent of the obligation imposed upon him by Section 8-B(2) should suffice to answer this question in the negative. We are not here concerned with the question, whether by making a collection which was not lawful, the assessee laid himself open to the penalty that Section 15(f) might impose upon him. All we are called upon to say now is that, in our opinion, Section 8-B(2) does not impose an obligation on a registered dealer to pay over to the Government any amount not lawfully collected by him. Apart from the language of the section itself, the need for such a restriction on the obligation of the registered dealer should be obvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses- sion of several thousand pounds found in his hands, and he was tried by court-martial and convicted of conduct prejudicial to good order and military discipline. After his release from prison he claimed, by petition of right, the return of the amount seized. The House of Lords, confirming the decision of the Court of Appeal, held that he was not entitled to recover the money. Lord Porter rested the right of the Crown to retain the money on two grounds. One was that the official position held by the soldier, which enabled him to earn money by its use gave his master, (1) [1951] A.C. 507. the Crown, the right to the money so earned as money had and received, even though it was earned by a criminal act, and even though the Crown suffered no loss. The other ground was that the Crown was also entitled to the noney on the separate and independent ground, that a fiduciary relationship existed between the soldier and the Crown. That the soldier owed a fiduciary duty was also the view of Lord Normand. Lord Porter observed at page 516: "I agree with Asquith, L.J., in thinking that the words 'fiduciary relationship' in this setting are used in a wide and loose sense and include, inter al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us is, what is the extent of the statutory obligation created by Section 8-B(2) of the Act. As we have already pointed out, Section 8-B(2) applies both to the collections made by a registered dealer who is authorised to collect, and by an un- registered dealer who is forbidden to collect by Section 8-B(1). It applies to "every person who collects any amounts by way of tax under this Act". That aspect should not be lost sight of in construing the scope of the obligation cast alike by Section 8-B(2) on the registered dealer and on the unregistered dealer. Neither of them is in the position of a servant vis a vis the State. Nor can the unregistered dealer be said to have ever occupied a fiduciary position in relation to the State. The collections he made could never be under colour of any authority conferred upon him by the State, when Section 8-B(1) in specific terms prohibited him from making any collections. Therefore in the case of an unregistered dealer, neither of the grounds mentioned by Lord Porter in Reading v. Attorney-General(1) could apply. In the case of an unregistered dealer, at any rate, Section 8-B(2) cannot be held to accord any statutory recognition of the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - sion "by way of tax" in Section 8-B(1) and we have pointed out that under Section 8-B(1) each transaction of sale, which will ultimately enter the turnover of the dealer, is treated as a taxable event. There is thus all the difference between the turnover of a dealer that is taxable and the transaction of sale that is treated as taxable for the purpose of Section 8-B(1). In the case of the petitioner-assessee we have held that the transactions of sales themselves were not taxable even under Section 8-B (1). In our opinion, the liability of a registered dealer with a turnover of less than Rs. 10,000 to pay over to the State Government under Section 8-B(2) all collections so made within the meaning of Section 8-B(2), that is, all collections made by way of tax, does not affect the interpretation we have placed upon the expression "by way of tax " as it occurs both in Section 8-B(1) and in Section 8-B(2). We have attempted an interpretation of Section 8-B(2) that would cover all the three classes of dealers referred to above: (1) an unregistered dealer, (2) a registered dealer whose turnover itself is not taxable, and (3) a registered dealer whose turnover is taxable. It has alway ..... X X X X Extracts X X X X X X X X Extracts X X X X
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