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TMI Blog1988 (3) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... with various parties on hire-purchase systems in respect of truck chassis. Under this hire-purchase system, the party usually agreed to pay the amount by certain instalments every month, the period ranging between 7 months to 24 months, depending on each individual case. As per this agreement, the hirers, i.e., the parties, would become the owners of the truck on the exercise of the option to purchase after the payment of the last instalment. It is usual for the petitioner to prepare a bill for the total amount, mentioning the price as exwarehouse delivery including the sales tax. The petitioner, for the purpose of accounting, used to credit the amount mentioned in the bill in its books of accounts. In crediting so, the petitioner used to credit certain amount in the sales tax account, being its estimated liability which would arise on such transactions when the sale is completed. Excepting this account and mentioning in the bill "including the sales tax", the petitioner states that he has not recovered any sales tax as such from the parties concerned. During the period from 1st January, 1960 to 31st December, 1960, the petitioner gave trucks on hire-purchase basis amounting to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to why the said amounts should not be forfeited and why penalty should not be levied under section 37(2) of the Sales Tax Act: 1.. Rs. 1,18,800.30 for the period from 1-1-1960 to 31-12-1960; 2. Rs. 92,292.59 for the period from 1-1-1961 to 31-12-1961; 3. Rs. 56,081.36 for the period from 1-1-1962 to 31-12-1962. All the notices were marked as exhibit C collectively in the special civil application. These notices, issued by the 1st respondent, are questioned by the petitioner on various grounds and the petitioner prayed for quashing and setting aside these impugned notices at annexure C collectively. No doubt, there is a prayer in the petition for declaring section 37 read with section 46 of the Bombay Sales Tax Act, 1959 as unconstitutional and ultra vires and also on the ground that these sections are beyond the legislative competence of the State Legislature and void. A Bench of this High Court, by judgment dated 16th August, 1973, following the decision reported in Special Civil Application No. 480 of 1970, dated 16th August, 1973, declared sections 46 and 37 of the Sales Tax Act as ultra vires the Constitution, since these were beyond the legislative power of the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner by a notice served on him fails in contravention of sub-section (1) of section 48 to keep a true account of the value of the goods purchased or sold by him, or fails when directed so to do under that section to keep any accounts or record in accordance with the direction, he shall be liable to pay, in addition to any tax for which he may be liable, a penalty of an amount not exceeding two thousand rupees, or double the amount of tax which would have been payable had there been no such failure, whichever is less; and in addition, in the case of a contravention referred to in clause (a), any sum collected by the person by way of tax in contravention of section 46 shall be forfeited to the State Government. (2) If the Commissioner in the course of any proceeding under this Act or otherwise, has reason to believe that any person has become liable to a penalty with or without forfeiture of any sum under sub-section (1), he shall serve on such person a notice in the prescribed form requiring him on a date and at a place specified in the notice to attend and show cause why a penalty with or without forfeiture of any sum as provided in subsection (1) should not be imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him under the provisions of any law for the time being in force. (3) Notwithstanding anything contained in sub-section (2), a dealer who has been permitted by the Commissioner to pay a lump sum payment under section 40 shall not collect any sum by way of tax on the sales of goods if made during the period to which such lump sum payment applies." Section 46, as it stood before Gujarat Amendment Act 25 of 1962 read as follows: "46. (1) No person shall collect any sum by way of tax in respect of sales of any goods on which by virtue of section 5 no tax is payable. (2) No person, who is not a registered dealer and liable to pay tax in respect of any sale or purchase, shall collect on the sale of any goods any sum by way of tax from any other person: Provided that, this sub-section shall not apply where a person is required to collect such amount of the tax separately in order to comply with the conditions and restrictions imposed on him under the provisions of any law for the time being in force. (3) Notwithstanding anything contained in sub-section (2), a dealer who has been permitted by the Commissioner to pay a lump sum payment under section 40 shall not collect any sum by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, held that it would not be correct to imply only one meaning to the phrase or term "inclusive of tax" in the assessee's bills, but it admitted of a meaning that by introducing the phrase or term "inclusive of tax" it conveyed to its customers a sense that under no circumstances would the customers be required to pay the tax on the goods purchased by them. In that case also, the assessee has referred in its quarterly returns for the relevant period that it had deducted under rule 46A of the Bombay Act, the amount of tax which it had included in the total amount of sale price shown in the bills. So the question that arose in that case was as to whether there is anything to clearly show that the recovery of Rs. 27,104 by the assessee was a recovery of tax and not the recovery of price for the goods sold. Under the facts and circumstances of that case, the learned Judge held that it was not correct in levying upon the assessee the order of forfeiture of Rs. 27,104 under section 37(1) read with section 46(2) of the Bombay Sales Tax Act, 1959 and that it also held that merely because the goods are sold under the bills containing the phrase or term "inclusive of tax" it does not me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n argument. According to the Bombay High Court, the very sentence begins by referring to the amounts collected from buyers and that there cannot be a buyer unless there is a seller and a contract of sale. It has been further held in the decision: "Consequently, on a true and correct interpretation of section 46(2) of the Act, it is not correct in law to say that the latter part of section 46(2) is wide enough to take within its fold even transactions which do not amount to sales and in concluding that amounts collected by way of tax on such transactions are liable to be forfeited under section 37(1)(a) of the Act. To construe section 46 as authorising a prohibition against collection of tax in respect of a transaction which is not a transaction of sale or purchase and thus as a complementary thereto as authorising the State Government under section 37(1) to forfeit such amount would be unconstitutional as being beyond the legislative competence of the State Legislature." Mr. G.D. Bhatt, learned counsel appearing for the State, contended that the matter is at the stage of show cause notice and it is premature for the petitioner to approach this Court. It is the say of Mr. G.D. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the notices impugned which are at annexure C to the special civil application are without jurisdiction and the same have to be quashed. In view of this conclusion we have arrived at, it is unnecessary for us to answer the other contentions raised by Mr. Kaji. The aforesaid discussion clearly shows that the said show cause notices are clearly misconceived. It does seem that in this particular case, the department has adopted a course which is basically unsupportable and an honest assessee has been unnecessarily penalised. If the department has correctly appreciated the situation, then undoubtedly the time and money of all concerned would have been saved. Apart from the aforesaid, there is one more angle from which such departments should view the situation. The purpose of the notices is twofold, namely, to treat the said sums which are shown as sales tax as amounts collected by way of tax in contravention of section 46 and to forfeit them and the other purpose is to impose a penalty under subsection (2) of section 37 of the said Act. Thus, on the one hand, the said amounts are sought to be forfeited and penalty levied and on the other hand, undoubtedly, on completion of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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