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TMI Blog1998 (8) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... t. In the said proceedings, this Court initially stayed the enforcement of the section by its interim order dated December 4, 1993. The petitioner continued its business and in doing so, it collected an amount described as contingent deposit. This deposit, it was claimed, was intended to offset the tax liability if arising in the event the court upholds the validity of section 5-C of the Act and alternatively to be returned to the customers if otherwise. This Court by the judgment in Shetty Leasing Company case, reported in [1996] 100 STC 533 dated November 21, 1995, struck down the section. Subsequently an amended section 5-C was introduced with effect from April 1, 1996. The petitioner has filed W.P. No. 34727 of 1996 challenging the amended section as well and the same is pending. The present proceedings were initiated by the first respondent under section 18-AA of the Act to recover the said collection made by the petitioner as if section 5-C is in force on the ground that the said collection contravenes the provisions of section 18(1) of the Act and that the collected amount purports to be tax payable by the purchaser. 2. Annexures B, B1, B2 and annexure C are the notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rates or the rates provided in the statute. Section 18-A provides for the penalty for the contravention of section 18. These provisions are followed by section 18-AA which provide for payment and disbursement of amount collected in contravention of section 18 of the Act. A closer look at the sections would disclose that these sections form a group in themselves; first the prohibition; next the penal consequence for the violation, and the third the remedial measures. Sections 18-A and 18-AA are dependent on section 18 for their existence. De hors section 18, these sections have no field to operate. Therefore, these sections have to be taken together and construed to understand its scope. Section 18(1)(a) and (b) reads thus: 18. Collection of tax by dealers.-(1)(a) A person who is not a registered dealer liable to pay tax shall not collect any amount by way of tax or purporting to be by way of tax under this Act; nor shall a registered dealer collect any amount by way of tax or purporting to be by way of tax at a rate or rates exceeding the rate or rates at which he is liable to pay tax under the provisions of this Act. (b) No person shall collect any amount by way of tax or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated under the Act. 9.. Now, would there be a violation of section 18(1)(a) of the Act if the dealer collects only the amount by way of tax or purporting to be by way of tax at the prescribed rate at which he is liable to pay tax under the Act. I do not think that then there would be any violation of section 18(1). The violation, according to me, steps in only when the dealer collects tax or amount purported to be tax in excess of the rates at which he is liable to pay tax. There cannot be any contravention of section 18, if the dealer collects tax or amount purported to be by way of tax, if it equals the rate at which he is liable to pay tax under the Act. This would be clear if we advert to sections 18-A and 18-AA. Section 18-A provides that the assessing authority may impose penalty at one and half a times of such amount . Such amount can only represent the amount collected in excess of the rates at which he is liable to pay tax under the provisions of the Act. This inference can be drawn by referring to sub-clause (b) as well. Sub-clause (b) to section 18(1) covers all cases where tax is collected by the dealer in respect of sales with respect to which tax is not leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any amount with the dealer, there is only the entrustment of the amount and the position of the dealer is in the nature of a trustee for the amount. The taking of deposit by a dealer cannot be construed as collection of any amount by way of tax or purporting to be by way of tax. 13.. In other words, the relationship of the dealer with the purchaser in such cases is not that of an agent of the State collecting the stipulated tax and the payee of tax; and the payment of a sum by the purchaser thus collected is not collection of an amount purporting it to be tax. 14.. The next decision relevant in this behalf is that of the Supreme Court in State of Mysore v. Mysore Spinning and Manufacturing Co. Ltd. [1960] 11 STC 734. Examining a similar contention, their Lordships stated thus: ............Where an amount is received merely by way of deposit, on the express understanding or undertaking as in these cases, the company held the money as a mere custodian, and on the fulfilment of the condition became a trustee for the depositor. It is sufficient to state that when once the tax authorities determined that the proceeds of the sales in question were not within the taxable turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said sub-section operates in a different field altogether. It prohibits the collection of tax with respect to a sale, which transaction is not taxable under the statute. In the present case, no tax or amount purported to be tax has been collected with respect to a sale of any goods on which no tax is leviable under the Act. The transaction in dispute is characterised as a sale and the statute levies fixed rate of tax as well. As such, sub-section (b) has no field to operate. 19.. We will now examine the fall-out of these discussions on the case in hand. Firstly, there was no excess collection of any amount purporting to be tax in excess of the rate stipulated under the Act. The situation was that at the relevant time operation of section 5-C of the Act, which cast the liability, stood stayed as far as the petitioner was concerned. If so, the collection made by the petitioner is not collection of tax or an amount purported to be tax within the meaning of section 18(1) of the Act. It can at best be a contingency deposit whose ownership always dwelt with the purchaser (depositor) and the dealer holding the sum only as a trustee. In such an event, there is no contravention of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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