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TMI Blog1964 (11) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... by reason of Article 286(1) of the Constitution but in the mistaken belief that they were taxable the petitioners initially paid a sum of Rs. 17,786-2-9 as tax in respect of such sales. The petitioners thereafter realising that these sales were not taxable, made an application for refund of the sum of Rs. 7,788-2-9 on 15th May, 1953. The Sales Tax Officer assessing the petitioners to sales tax accepted the claim of the petitioners to the extent of Rs. 10,361-5-6 and by an order dated 19th June, 1956, granted refund of the sum of Rs. 10,361-5-6 to the petitioners. Pursuant to this order of the Sales Tax Officer a refund order dated 26th July, 1956, for Rs. 10,361-5-6 was issued in favour of the petitioners and the petitioners obtained payment of the said amount. Since the relief granted by the Sales Tax Officer was only a partial relief, the petitioners preferred an appeal to the Assistant Collector of Sales Tax seeking relief in respect of the balance of the amount claimed by way of refund. The Assistant Collector of Sales Tax by his order dated 4th September, 1958, granted further relief to the petitioners but that relief was also partial and was confined to a sum of Rs. 4,000-1- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act to pay the balance of Rs. 6,361-4-3 in pursuance of the order of forfeiture with the result that the entire amount of Rs. 10,361-5-6 was recovered by the State from the petitioners. The Sales Tax Officer also initiated proceedings for forfeiture of the sum of Rs. 4,000-1-3 by issuing a notice dated 22nd June, 1962. The petitioners replied to the notice contending that the Sales Tax Officer had no right to forfeit the sum of Rs. 4,000-1-3 but it appears that the Sales Tax Officer was not prepared to stay his hands and the petitioners thereupon filed the present petition against the Sales Tax Officer and the State of Gujarat as respondents. The two main reliefs claimed in the petition were, first, that the notice dated 22nd June, 1962, issued by the Sales Tax Officer was not warranted by the terms of section 12A(4) and that in any event it was illegal and void since section 12A(4) was ultra vires as being beyond the legislative competence of the State Legislature and that a writ of mandamus should, therefore, issue to quash and set aside the said notice and a writ of prohibition should issue prohibiting the respondents from acting upon the said notice or taking any proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the forfeiture and the notice were not within the scope and ambit of section 12A(4) and if this claim of his was negatived, he submitted in the alternative that section 12A(4) was beyond the legislative competence of the State Legislature and was, therefore, void. The first contention raised a question of construction of section 12A(4) while the second raised a question of its vires. Section 12A was introduced in the Act by Bombay Act I of 1949. Sub-section (2) of section 12A was subsequently amended by Bombay Act XVIII of 1951, but during the period with which we are concerned in this petition, it was the unamended section which was in force. That section was in the following terms: "12A. Prohibition against collection of tax in certain cases- (1) No person shall collect any amount by way of tax under this Act in respect of sales or supplies of any goods which are declared, from time to time, under section 7 as sales or supplies on which the tax is not payable. (2) No person who is not a registered dealer shall in respect of sales or supplies of any goods collect from the purchaser any amount by way of tax under this Act except in cases where it is required to do in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present contention and in view of this decision Mr. Kaji rightly did not address any arguments to us in support of this contention. Mr. Kaji then contended that, in any event, by a reason of section 30 introduced in the Act with retrospective effect from 26th January, 1950, by the Bombay Sales Tax (No. 1) Ordinance, 1952, section 12A could not operate in respect of collections made by a dealer by way of tax on sales which were outside State sales. He relied very strongly on the words: "Nothing contained in this Act or the rules made thereunder shall be deemed to apply to any sale or purchase of any goods, where such sale or purchase takes place outside the State of Bombay." He contended that the expression "nothing contained in this Act shall be deemed to apply to any outside State sales" included section 12A, and section 12A was, therefore, by virtue of section 30, deemed not to apply to outside State sales and collections by way of tax on outside State sales were therefore outside the scope and ambit of section 12A. But this contention also stands answered by our decision in Kantilal Babulal Bros. v. H.C. Patel and Others, and for reasons given in our judgment in that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idental power do indirectly what it cannot do directly. The provision was of such a nature and inasmuch as it provided that though an amount collected by a dealer by way of tax was not exigible under the law as tax, still it should be made over to the Government, it was beyond the legislative competence of the Provincial Legislature and was therefore ultra vires and void. The learned AdvocateGeneral appearing on behalf of the Revenue agreed that the power of the Provincial Legislature to legislate with respect to tax on sale of goods was to be found in Entry 48 and that the validity of section 12A(4) must, therefore, be tested by reference to the true import of that entry, but he contended that the section was within the legislative power of the Provincial Legislature as contained in that entry. He of course did not dispute that the subjectmatter of the section did not fall directly within the subject of legislation expressly mentioned in Entry 48 since the section did not impose any tax on sale of goods. But he sought to justify the section on the ground that it constituted an exercise of legislative power on a matter ancillary or subsidiary to the primary and main power connoted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative powers on ancillary or subsidiary matters which can fairly and reasonably be regarded as comprehended within the subject of legislation and contains a provision necessarily incidental to effective legislation on the subject. Now admittedly in the present case, the subject-matter of section 12A(4) did not fall directly within the subject of legislation set out in Entry 48 since section 12A(4) did not impose any tax on sales of goods. The question which therefore requires to be considered is whether section 12A(4) could be said to constitute legislation on an ancillary or subsidiary matter necessarily incidental to effective legislation on the subject of legislation contained in Entry 48. Now what is incidental or ancillary in a given case must depend upon the main legislation and the circumstances of the particular case. It is in the last analysis a question of degree and it is not possible to lay down any hard and fast rule on the basis of which it can be said that a particular provision is the result of an exercise of incidental or ancillary power of legislation or is necessarily incidental to effective legislation on the subject. The object of the particular provision and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales effected by him and yet he may recover amounts from the purchaser in the name of tax and thus abuse the provisions of the Act by making illegal gain for himself. A registered dealer may also not be liable to pay tax on any particular sales effected by him either because they are exempt under the Act or because they are not taxable under the Constitution and yet he may unjustly enrich himself by collecting from the purchaser amounts by way of tax when in fact no tax is payable by him on those sales. In such cases the result would be that the Act would be utilised by the dealer as an instrument of exploitation of the consumer for extracting from the consumer under the guise of tax moneys which are in fact not payable by the dealer to the State and which will only go to fill the pockets of the dealer. This situation would indeed be intolerable and the State cannot possibly sit with folded hands and allow its statute to be abused by dealers exploiting the consuming public in this manner under the cloak of the Act. To suffer illegal payments to be recovered in the name of tax would be nothing short of permitting extortion. The Legislature, therefore, intervened and amended the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him under the Act and this penalty was imposed in order to secure that no person under the cloak of the provisions of the Act or taking shelter under the provisions of the Act collected any amount by way of tax when no tax was payable by him or collected any amount by way of tax in excess of the amount payable by him as tax under the Act. This provision imposing penalty of forfeiture was clearly an ancillary or incidental provision necessary for the purpose of preventing misuse of the provisions of the Act, and carrying out the object of the Act was necessarily incidental to effective legislation on the subject of tax on sales of goods. In fact, it stood on no different ground than the provision enacted in section 24(1)(dd). Section 24(1)(dd) imposed one penalty namely, penalty, of imprisonment for contravention of the provisions of sub-sections (1) and (2) of section 12A while section 12A(4) imposed another penalty, namely, penalty of forfeiture for contravention of the same provisions and also where a registered dealer collected any amount by way of tax in excess of the amount payable by him as tax under the Act. The nature and character of both provisions was the same, namely, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment the said amount shall be recovered from him as if it were arrears of land revenue". The true meaning and legal effect of this provision was explained by the Supreme Court in the following words: "Section 11(2) thus provides that amounts collected by way of tax though not exigible as tax under the Act...shall be recovered from such person as if they were arrears of land revenue. Clearly therefore section 11(2) as it stands provides for recovery of an amount collected by way of tax as arrears of land revenue though the amount was not due as tax under the Act." It will be clear from these observations that the way the Supreme Court read section 11(2) it did not enact a provision forfeiting an amount by way of tax when such amount was not exigible as tax under the Act but merely provided that such amount shall be paid over to Government and it was for this reason that the Supreme Court held that it was not competent to the State Legislature even in exercise of its ancillary or incidental power of legislation to enact such a provision. The Supreme Court observed: "All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20, but section 11(2) was not a provision which had anything to do with penalties and could not be justified as a penalty on the dealer. The Supreme Court then referred to section 20(c) which provided that any person, who failed to pay the amounts specified in section 11(2) within the prescribed time, shall, on a conviction by a Magistrate, be liable to a fine and observed that it was remarkable that this provision made a person punishable for his failure to pay to the Government an amount which was not authorised as tax at all under the law but did not provide any penalty for collecting the amount wrongly by way of tax from the purchaser. The Supreme Court observed that if such a provision had been made it might have been justified as a penalty for the purpose of carrying out the objects of the taxing legislation. It is apparent from this that the Supreme Court did not regard section 11(2) as imposing a penalty but took the view, prima facie of course, that if there had been a provision imposing penalty on a person for collecting any amount wrongly by way of tax, such a provision might have been justifiable as an ancillary or incidental provision for the purpose of carrying out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax in excess of the amount payable by him under the Act. Moreover, we have already held that the provision in section 12A(4) to be a provision imposing a penalty in Kantilal Babulal Bros. v. H.C. Patel[1965] 16 S.T.C. 973., a decision which is binding upon us. But the matter does not rest there. This view of the character of the provision in section 12A(4) which we are taking is supported by the decision of the Supreme Court in State of Bihar v. Rai Bahadur Hurdut Roy Moti Lall Jute Mills and Others[1960] 11 S.T.C. 17. The provision which came up for consideration before the Supreme Court in that case was section 14A of the Bihar Sales Tax Act, 1947, the proviso to which was in the following terms: "Provided that if any dealer collects any amount by way of tax, in contravention of the provision of this section or the conditions and restrictions prescribed thereunder the amount so collected shall, without prejudice to any punishment to which the dealer may be liable for an offence under this Act, be forfeited to the State Government and such dealer shall pay such amount into the Government treasury in accordance with a direction issued to him by the Commissioner or any off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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