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1987 (12) TMI 314

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..... tax. This collection was contrary to law and was therefore liable to be forfeited. A show cause notice calling upon the petitioners to reply as to why the aforementioned sum should not be forfeited and a penalty levied, elicited a reply which may be summarised thus: Petitioners were resellers of various manufacturers including M/s. Morarji Dorman Smith Pvt. Ltd. When purchasing goods, i.e., electrical goods, from the said company, the petitioners were billed as per the price list, less a trade discount whereupon was calculated the excise duty and sales tax payable by the seller. When reselling the goods some part of the trade discount was passed on by the petitioners to their purchasers. In order not to let these purchasers know the exact profit margin, the petitioners were recovering from them a surcharge to reimburse themselves for the amounts paid towards excise duty and sales tax. In other words, the petitioners were not recovering sales tax qua a tax payable by them to the State but reimbursing themselves for the price paid by them to their seller. This could not be said to constitute a violation of the statute. In support of this stand, the petitioners placed before the 1st .....

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..... o the Revenue. Section 46(2) of the Act had been breached and for that reason the forfeiture and penalty imposed on the petitioners was justified. The impugned order was well within the purview of powers conferred upon the Commissioner under section 57 of the Act. The petition was premature inasmuch as the petitioners had preferred appeals to the Deputy Commissioner of Sales Tax (Appeals) which appeals were pending. The appellate authority had directed the petitioners to make part payment as a condition precedent for the admission of appeals. Petitioners had not complied with that condition precedent nor got the same vacated by further proceedings under the Act. Therefore, they could not approach this Court in exercise of its extraordinary jurisdiction. 5.. The petition's outcome rests on answers to the three issues formulated below: (A) Whether article 226 is the proper remedy qua the facts and circumstances of the case? (B) Is the order of respondent No. 1 ultra vires section 57 of the Act? (C) Whether the order of forfeiture and penalty is illegal? 6.. At the threshold the petitioners have to meet the objection that recourse to the writ jurisdiction of this Court is .....

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..... admissibility was found to be onerous. Conceivably, they could have questioned by a writ petition the imposition of the onerous condition. The last justification offered is little better than presenting the court with a fait accompli and compelling it to decide the petition whatever be the difficulties that arise on account of disputed questions of fact. This brings me to the plea about a writ petition being inappropriate where disputed questions of fact arise. In this petition parties are not at all agreed on the factual position. Petitioners assert that recovery of surcharge in lieu of sales tax recited in the bills issued to purchasers from them is a recoupment for price paid by them to their vendors. That the levy is on price charged the purchasers, is explained away as a device to conceal the trade rebate received by them and parted with in different proportions to their different purchasers. Respondent No. 1 refutes this assertion and wants me to read the bills as inclusive of a representation that the purchasers were required to pay sales tax which the petitioners were recovering from them prior to the transmission of the same to the Government. The explanation offered by .....

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..... powers." Now, it will be necessary to notice section 57 of the Act. The portion of that section material for our purposes reads thus: "57. (1)......... (a) the Commissioner may, of his own motion, call for and examine the record of any order passed (including an order passed in appeal) under this Act or the rules made thereunder by any officer or person subordinate to him, and pass such order thereon as he thinks just and proper." The impugned order was preceded by a notice which followed a scrutiny of the assessment orders passed by respondent No. 2. The notice recited that the dealer had collected surcharge in lieu of sales tax at 10 per cent in respect of sales claimed to be second sales in the return and allowed as resales in the assessment order and that it was proposed to forfeit the surcharge as also levy a penalty. The portion from section 57 reproduced above does not contain any limitation. The Commissioner is given the jurisdiction to send for and examine the record of any order passed under the Act or the Rules. The order has that to be of an officer or person subordinate to him. After the prescribed hearing, the Commissioner is empowered to pass such order as h .....

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..... ving rise to an examination of the correctness, legality and propriety of an order, the revisional jurisdiction was attracted. Quoted in support of the view taken was an observation from the Swastik Oil Mills Ltd.'s case [1968] 21 STC 383(SC): "Whenever a power is conferred on an authority to revise an order, the authority is entitled to examine the correctness, legality and propriety of the order and to pass such suitable orders as the authority may think fit in the circumstances of the particular case before it." The amplitude of the power being wide, the impugned order cannot be quashed on the ground that it is beyond the scope of revisional power lodged in section 57 of the Act. 9.. So far as the last question is concerned, the true facts will have to be ascertained by the statutory authorities. Petitioners had placed before respondent No. 1 affidavits and certificates reciting the case set forth by the petitioners. Their assertion was that the bills issued by them in relation to the sales when they pertained to the item of "surcharge in lieu of sales tax" related to nothing more than their seeking to recoup themselves for a portion of the price paid by them to their vend .....

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..... u of excise duty surcharge in lieu of sales taxis calculated at the rate of flat 5 per cent and 10 per cent therefore...... it is clear that the dealer does not reimburse himself the exact amount of sales tax paid by him on his purchases while effecting sales to his customers. Because the actual purchase price is always less than whatever advantages are passed on to the customers by way of variable discounts. Thus he collects amounts in excess of taxes paid on purchases." Simply put, respondent No. 1 negatived the plea of the petitioners that they were recouping themselves for the price paid to their vendor who had billed them under different heads, and had in their turn, billed their customers under different heads, and at the same time, preserved a trade secret. The law on the subject was laid down long ago [see Mather Platt Ltd. v. State of Maharashtra [1983] 53 STC 104 (Bom)]. That judgment was delivered by the Division Bench upon two references made by the Sales Tax Tribunal at the instance of dealers. The sales in those cases were covered by two types of bills, one reciting "3 per cent sales tax" and the other "surcharge on account of sales tax paid by us". The judgment o .....

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..... resell the goods, he is not prohibited by the Act from doing so, so long as he does not represent to his own purchaser that this is the amount of tax which he was liable to pay by way of tax. In thus recouping himself he is really increasing his sale price with a view to reimburse himself for an extra item of cost. There is no prohibition under the Act against a reseller thus reimbursing himself by increasing his selling price and in our opinion whether he does so by increasing the selling price or by showing the amount by way of tax collected from him by his own vendor as a separate item in the bill makes no difference. So long as the purchaser is not led to believe that the amount charged to him is the amount which the seller would be liable to pay as tax to the Government when he is not liable to pay it, there would be no contravention of section 46(2). In the type of bills we are considering the representation made by the applicants was that their vendors had collected from them certain amount by way of sales tax which their vendors were liable to pay to the Government and they, that is, the applicants were reimbursing themselves in respect of such amount. However, here the ap .....

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..... duty and sales tax, they would be incurring heavy losses. From this, it follows that to the extent the surcharge in lieu of sales tax corresponds to a reimbursing of the amount paid by them to their vendor on that account, the petitioners are not contravening section 37(1)(a)(ii) of the Act. It was argued that the bills as framed gave the impression of the petitioners recovering sales tax from their customers and this because of their being liable to pay the same to the State Government, when in fact, the petitioners were not so liable. Now, no party is to be penalised for mistakes in preparation of bills. In Mather Platt Ltd.'s case [1983] 53 STC 104 (Bom) the first type of bill was the only evidence before the court, thus compelling it to hold that a false representation had been made to the purchasers from the dealer. That is not the position here. Petitioners have documentary evidence in the sense of the bills issued in their favour by their vendors and also the bills issued by them in favour of their purchasers. Next, it is not as if the word "surcharge" is susceptible of only one meaning, viz., petitioners were recovering a sum by way of tax. As said earlier, the word .....

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