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TMI Blog2003 (9) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 (exhibit P2). They also sought for quashing exhibits P4, P5, P7 and P9 to the extent it demands sales tax on the turnover of forest development tax. 3.. The petitioner in W.P. (C) No. 22610 of 2003 seeks for refund of the excess sales tax collected by the respondents from him during the period from 1995-96 to 1998-99 as mentioned in exhibit P4 with interest at the rate of 12 per cent and/or to adjust the said excess amount towards the amount due from the petitioner as per the final assessment of sales tax for the year 1998-99 and subsequent years. There is also a prayer for quashing exhibits P6 and P7 communications issued by the respondents. 4.. It is stated in the writ petitions that as per the provisions contained in section 75A of the Forest Act, the respondents used to collect along with the sale price an additional amount of five per cent as forest development tax, that on a wrong assumption the said amount of five per cent charged as forest development tax was also added on the sale price and sales tax was charged on the aggregate amount. This according to the petitioners was being done by the forest officials who are conducting auction of timber in forest depots of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said judgment was rendered relying upon the decision of this Court in Madras Rubber Factory Limited v. State of Kerala [1989] 74 STC 56 [FB]; (1989) 1 KLT 827 (FB) wherein it was held that rubber cess will not form part of taxable turnover but the said decision was overruled by the Supreme Court in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583; (1998) 6 KTR 118 wherein the Supreme Court held that rubber cess even though it is paid by the manufacturer will form part of the taxable turnover. It is stated that in the light of this decision of the Supreme Court the forest development tax will form part of the taxable turnover. It is further stated that the contention of the petitioners that the State has no right to revive the collection of sales tax on the turnover of forest development tax is against the decision of the Supreme Court. 6.. I have heard Mr. N.D. Premachandran and Mr. M.C. Sen, learned counsel appearing for the petitioners in all these cases. I have also heard Mr. Raju Joseph, learned Special Government Pleader appearing for the respondents. 7.. As already noted, the short question that is to be considered is as to whether the forest developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is based on the decision of the Supreme Court in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583; (1998) 6 KTR 118. 10.. The contention of the learned counsel for the petitioners is that the forest development tax payable under section 75A of the Forest Act is a separate and independent charge and that by no stretch of imagination it can be treated as part of the turnover of timber purchased by the petitioners from the forest department. According to the counsel this cannot be treated as forming part of the consideration for the sale of timber. 11.. The State Legislature had inserted a new Chapter XA, by Notification No. 17554/Leg.B1/86 Law dated November 29, 1986 by Amendment Act 20 of 1986 levying forest development tax under section 75A and also establishing the Kerala Forest Development Fund under section 75B of the Forest Act. The relevant portions of Sections 75A and 75B inserted under chapter XA read thus: "75A. Levy of forest development tax.-Notwithstanding anything contained in this Act, in respect of forest produce disposed of by the Government by sale, there shall be levied and collected a tax at the rate of five per cent, of the amount of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Explanation to sub-section (1) also gives the meaning of the term "sale" which shall have the same meaning assigned to it in the Act. Sub-section (1), as already noted, clearly provides for levy and collection of tax. Sub-section (2), however, says that the tax payable under sub-section (1) in respect of any forest produce shall be collected along with the consideration paid therefor. Sub-section (3) further provides that the tax levied under sub-section (1) in respect of any produce shall be in addition to and not in lieu of any tax payable in respect of such forest produce under the Kerala General Sales Tax Act, 1963 or under any other law for the time being in force. 13.. Section 75B provides for creation of the forest development fund, crediting all the sum to the consolidated fund of the State, appropriation of the balance amounts after deducting the expenses incurred for collection to the development fund and its user for planting and maintenance of soft-wood trees and other species of trees which form raw material for industries; and also for forest research. 14.. Thus it is clear that levy and collection of forest development tax under section 75A of the Forest Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forest department of the State under the Act. 19.. Under section 5 of the Act every dealer other than a causal trader or agent of a non-resident dealer whose total turnover for a year is not less than two lakh rupees and every casual trader or agent of a non-resident, whatever be his total turnover for that year, shall pay tax on his taxable turnover for the year in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedule. As already noted, the forest produce purchased by the petitioners in these cases is timber. Under section 5(1)(v) of the Act the dealer has to pay tax on his taxable turnover in the case of goods specified in the Fifth Schedule at the two points specified against such goods in the said Schedule. The proviso to section 5(1) of the Act is not very much relevant for the purpose of these cases and hence not dealt with. Item No. 8 in the Fifth Schedule is timber. The goods falling under the Fifth Schedule are taxable at two points under section 5(1) of the Act. The first point of levy of tax on timber is at the point of first sale in the State by a dealer who is liable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ............the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that for the former. 21.. "Total turnover" is defined in section 2(xxvi) and "taxable turnover" is defined in section 2(xxv) of the Act. Rule 8(4) of the Kerala General Sales Tax Rules provides for computation of the total turnover and rule 9 provides for determination of the taxable turnover. 22.. The liability to pay tax in respect of the turnover of timber under section 5(1)(v) is on the dealer who sells the goods as provided under the Fifth Schedule since the first point of levy under entry 8 of the Fifth Schedule is at the point of first sale in the State by a dealer who is liable to pay tax under section 5 to the registered dealer for sale. The petitioners are all registered dealers both under the KGST and CST Act. They have purchased timber from the various depots of the State. By virtue of the definition of "dealer", particularly explanation (2) thereof, the State Government is a dealer. The turnover involved is also above the non-taxable limit. Thus it is the turnover of the dealer, here the Forest Department of the State, which is exigible to sales tax und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of the liquor and that tax is to be paid by the purchaser; the seller is required to collect the tax from the purchaser which he has to pay over to the Government. Section 21-A makes the seller a collector of tax for the Government, and the amount collected by him as tax under this section cannot therefore be a part of his turnover. Under the Madras General Sales Tax Act, 1959, the dealer has no statutory duty to collect the sales tax payable by him from his customer, and when the dealer passes on to the customer the amount of tax which the former is liable to pay, the said amount does not cease to be the price for the goods although 'the price is expressed as X plus purchase tax'. [Paprika Ltd. v. Board of Trade [1944] 1 All ER 372; [1944] 1 KB 327 (CA)]." 26.. The Supreme Court again in George Oakes (Private) Ltd. v. State of Madras [1961] 12 STC 476 while interpreting the provisions of the Madras General Sales Tax Act, 1939 observed that the expression "turnover" meant the aggregate amount for which goods were bought or sold whether for cash or deferred payment or other valuable consideration and when a sale attracted purchase tax and the tax was passed on to the consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 17(iii)(b) of the Adhiniyam by the commission agent which requires the same to be paid to the market committee, cannot be considered as forming part of the consideration paid or payable by the purchaser to the commission agent in respect of the purchase of goods in auction held within a market area established under the Adhiniyam and, therefore, it cannot be included in the turnover of purchases for purposes of levy under section 3-D of the U.P. Sales Tax Act. The Supreme Court considered the question whether market fee paid on the transaction of sale or purchase of specified agricultural produce in the market area established under the Adhiniyam can be included in the turnover for purposes of levy. Sub-clause (b) of clause (iii) of section 17 of the Adhiniyam empowers the market committee to levy market fee and utilise such market fee and other fees collected by it under that section for the purposes of the Adhiniyam. Section 17(iii)(b) had undergone amendment since 1973 and a new clause was substituted by U.P. Act No. 7 of 1978 with retrospective effect from June 12, 1973. The relevant portion reads thus: "17 ............... (iii) ............... (b) ................ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se [1975] 36 STC 188 (SC) extracted earlier in this judgment and observed that there is no substantial difference between section 21-A of the Madras Prohibition Act, 1937 and section 17(iii)(b) of the Adhiniyam. The Supreme Court thereafter observed as follows: "Whereas the levy under section 21-A of the Madras Prohibition Act, 1937, was sales tax payable to the State Government, under section 17(iii)(b)(1) of the Adhiniyam, the levy in question is market fees payable to the market committee and secondly whereas the former provision stated that 'every person or institution which sells foreign liquor..............shall collect from the purchaser and pay over to the Government........', the latter provision states that 'if the produce is sold through a commission agent, the commission agent may realise the market fees from the purchaser and shall be liable to pay the same to the committee'. The levies in both the cases are statutory although under the Madras Prohibition Act, 1937, it is a tax payable to the Government and under the Adhiniyam, it is a fee payable to a market committee which is a statutory body. The only distinguishing feature between the two laws is that whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners can be treated as forming part of the turnover of the dealer-forest department, which sold the goods to the petitioners. The decisions of the Supreme Court in Spencer Co.'s case [1975] 36 STC 188 and Anand Swarup Mahesh Kumar's case [1980] 46 STC 477 squarely apply. 31.. Now I will deal with the decision of the Supreme Court in Madras Rubber Factory Ltd's case [1998] 108 STC 583. This Court in a writ petition, O.P. No. 378 of 1997, filed by a dealer engaged in the manufacture of furniture, held that the forest development tax paid under section 75A of the Forest Act will not form part of the taxable turnover exigible to sales tax, relying on the decision of the Full Bench of this Court in MRF's case [1989] 74 STC 56. It is this decision of the Full Bench which is reversed by the Supreme Court in [1998] 108 STC 583; (1998) 6 KTR 118 (SC) (State of Kerala v. Madras Rubber Factory Ltd.). The question involved in the case before the Supreme Court was as to whether rubber cess payable under statutory obligation will form part of the producers' turnover. The Supreme Court, after adverting to the provisions of the Act, particularly sections 2(xxvii) and 5(xxv) and the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment nor the liability cast on the manufacturer of rubber goods for payment of the duty to facilitate easy collection can alter the duty as being one on the production of rubber, as provided by section 12(1) of the Rubber Act and such duty even though paid later will be a part of the price of goods purchased and would therefore form part of the producers' turnover. 33.. The position obtained in the case on hand stands on a different footing. Forest development tax paid under section 75A of the Forest Act does not get attached to the production of timber or the sale price of timber. It is an independent levy on the purchaser. Such independent levy cannot be treated as part of the turnover of the selling dealer. The position of rubber cess under section 12(1) of the Rubber Act is in the nature of an excise duty and it is in those circumstances the Supreme Court has held that excise duty is a duty on manufacturer or production of goods and therefore it is the obligation of the person who produces or manufactures the goods and the fact that the said liability has been shifted to the latter point of time will not alter the nature of the excise duty. 34.. Madras Rubber Factory L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the fertiliser was moved out of the factory along with proof of movement. Claims for the retention price were to be made in the form prescribed, and one of the conditions therein was that the fertiliser which was moved had been sold or would be sold for agricultural purposes. The question was whether the retention price received by the appellant, a manufacturer of fertilisers, was part of the sale price and had to be included in the turnover for the purpose of the Tamil Nadu General Sales Tax Act, 1959. The Supreme Court held that it is that sale consideration, whether in cash or otherwise, which is receivable in respect of sales made by the dealer which can possibly form part of the turnover of a dealer. It is that sum which can legitimately be regarded as forming part of the aggregate amount for which the goods have been bought or sold and the sum has to be paid either by the purchaser or on his behalf by some other person and that any sum received de hors the contract of sale from another entity, whether it be the Government or anyone else, cannot be regarded as being an amount which would form part of the sale price on which tax is payable. The Supreme Court following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now the question is as to whether the petitioners are entitled to get refund of the tax paid on the element of forest development tax on the purchase of forest produce from the forest department. As already noted, as per the provisions of section 75A of the Forest Act, forest development tax has to be paid at the rate of five per cent of the consideration for the sale of forest produce and the consideration will take in both the bid amount and the sales tax paid on the said amount. It would appear that the forest department has levied forest development tax only on the bid amount exclusive of the sales tax due on the bid amount. This would require a recomputation of the liability to pay forest development tax under section 75A of the Forest Act. The question of payment of balance amount left after recomputation and adjustment towards forest development tax by way of refund to the petitioners will arise in cases where sales tax was paid on the element of forest development tax also. Whether the petitioners can get refund of the excess tax paid is again a matter which would necessarily attract the doctrine of unjust enrichment. In the instant case, the petitioners are dealers in ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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