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TMI Blog2018 (11) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... s also an enabling provision, the direct consequence of which is the consumer's right to seek refund by making an application in the prescribed form with the prescribed documents. The distinction in the two limbs of Section 46A of the KGST Act is further accentuated by the fact that the provision speaks of an order issued by the Assessing Authority after giving the person from whom such forfeiture is made, an opportunity to show cause why penalty or forfeiture shall not be ordered. If forfeiture necessarily resulted in penalty, then the words employed would have been penalty and forfeiture, in conjunction. The legislature contemplated situations in which forfeiture would be a necessity, but the act of collection being not contumacious or in direct defiance of the provisions of law, in which event the registered dealer being absolved of such consequence of penalty. The collection made by the dealer becomes one purporting to be by way of tax on the sale of SIM Cards in respect of which he is not liable to pay tax. This again brings the act of collection within the framework of forfeiture as contemplated in Section 46A of the KGST Act, a necessary consequence by reason of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the KVAT regime. After the judgment of the Hon'ble Supreme Court, the State conceded to the position that there is no sale of goods involved in the sale of SIM cards and, hence, there could be no levy made under the KGST Act and KVAT Act. A batch of writ petitions pending before this Court which challenged the levy under the KVAT Act was placed before a Division Bench. The writ petitions were allowed, directing the Assessing Officer [for brevity AO ] to exclude the value of SIM Cards and Recharge Coupons from taxable turnover. The Division Bench, however, made it clear that tax if any collected, on SIM Cards and Recharge Coupons, should be forfeited under Section 72 of the KVAT Act. Refund was directed to be considered strictly in terms of Form 21D as furnished by the customers in terms of Rules 55 and 56. 3. The present revisions arise from assessments completed under the KGST Act, which desisted from imposing the levy under that Act for the years 2002-03, 2003-04 and 2004-05. However, the tax collected and paid already by the respondent-assessee were directed to be forfeited under Section 46A of the KGST Act. The assessment was carried out under Section 17D of the KGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - para 36). The conclusion in paragraph 47 was as follows: 47. Conclusions: ( a) the transaction of sale of SIM card is without doubt exigible to sales tax under the KGST Act. The activation charges paid are in the nature of deferred payment of consideration for the original sale, or in the nature of value addition, and, therefore, also amount to parts of the sale and become exigible to sales tax under the KGST Act. ( b) Both the selling of the SIM card and the process of activation are services provided by the mobile cellular telephone companies to the subscriber, and squarely fall within the definition of taxable service as defined in suction 65(72)(b) of the Finance Act. They are also exigible to service tax on the value of taxable service as defined in section 67 of the Finance Act . Hence, the decision dated February 15, 2002 prior to the assessment years in these revisions declared that the telecommunication companies are liable to both service tax and sales tax on their turnover of sale of SIM Cards and Recharge Coupons. We say this because the assesee herein, then was made liable to pay both the taxes. 5. However, a three-Judge Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to their mobile subscribers. Though the State was not a party, since the Hon'ble Supreme Court in BSNL(supra) had directed the A.O's to consider the existence of any transfer of property in goods by sale of SIM Cards, the State of Kerala, represented by Commercial Taxes Department was also heard. Therein, the State produced orders of the Assistant Commissioner of Commercial Taxes, Special Circle, Thiruvananthapuram dropping the proceedings to levy sales tax on SIM Cards, conceding to the position canvassed in and upheld by the Supreme Court in BSN L ( supr a ), finding no intrinsic sale value (read-of goods) in the sale of SIM Cards. The Division Bench of this Court upheld the levy of service tax and vacated the order of the CESTAT. The aforesaid decision was challenged before the Hon ble Supreme Court, the result of which is reported in Idea Mobile Communication Ltd . v. Commissioner of Central Excise and Customs, Cochin [ ( 2011) 12 SCC 608 ]. The appeal was dismissed, upholding the decision of the High Court finding the levy of service tax under the Finance Act, 1994 to be proper and also holding that the wrong remittance made by certain operators under the Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies to those who are unregistered and is not applicable to the assessee-respondent, since they are registered under the KGST Act. Subsection (2) of Section 22 speaks of collection of any sum purporting to be by way of tax on the sale of goods, in respect of which he is not liable to pay tax or at a rate exceeding the rate at which he is liable to pay tax as per subclause (a). Again, subclause (b) would not be applicable, since it deals with purchase of goods by a registered dealer. Only when there is any sum collected by way of tax by a registered dealer where he is not liable to pay tax or at a rate exceeding the rate at which the liability is cast on him could there be a penalty imposed and the amounts collected forfeited. In the present case, it is pointed out that as early as in February, 2002 a Division Bench of this Court in Escotal Mobile Communications Ltd. ( supra ) specifically found sales tax to be leviable on sale of SIM Cards. The tax collection made by the respondent-assessee was in pursuance of such declaration made by this Court. Whatever tax was collected was also at the rates at which it was levied under the sales tax enactment. There cannot be found any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) or sub-section (3) of Section 22 shall be liable to be forfeited to the Government by an order issued by the assessing authority after giving such person an opportunity to show cause why penalty or forfeiture shall not be ordered: Provided that no penalty or forfeiture shall be ordered under this sub-section if the assessing authority is satisfied that the sum so collected has been returned to the person from whom it was collected. ( 2) Where any sum is forfeited to the Government under sub-section (1), any person from whom the amount was collected in contravention of the provisions of sub-section (2) or sub-section (3) of Section 22 may apply to the assessing authority for reimbursement of such sum and the amount shall be reimbursed to such person in the prescribed manner. ( 3) No prosecution for an offence under this Act shall be instituted in respect of the same facts on which a penalty has been imposed or forfeiture has been ordered under this Section . There was a submission made by the learned Senior Government Pleader that if there was no forfeiture effected, there would be an impasse insofar as even the customer from whom the tax col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which cannot be reached at except by the device of forfeiture. In frank fact, it is not a measure of penalty but an oblique methodology to do an illegitimate thing which is beyond the legislature s legitimate reach. (sic-para 17); which question was pointedly dealt with in the concurring judgments. 13. Krishna Iyer, J. who authored the majority judgment; found that speaking generally and having in mind the object of the provision, forfeiture had a punitive impact. Quoting from Blacks Law Dictionary it was found that the terms 'fine', 'forfeiture' and 'penalty' are often used loosely and 'forfeiture' is a penalty by which one looses his right and interest in a property. However it did not require mens rea, was the categoric finding, in the following paragraph: 19. The same connotation has been imparted by our Court too. A Bench has held Bankura Municipality Vs. Lalji Raja AIR 1953 SC 248 : According to the dictionary meaning of the word forfeiture the loss or the deprivation of goods has got to be in consequence of a crime, offence or breach of engagement or has to be by way of penalty of the transgression or a punishment for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the express penalty in Section 37(1)(a) had a ceiling while the additive forfeit was unlimited. A penny worth of penalty and a pound worth of forfeiture proved that the statute itself meant the latter to be not a penalty. From a verbal, syntactic and structural angle there is something to be said for this submission. But the heart of the matter is that the forfeit in the inartistically worded section is plainly punitive, not nakedly confiscatory. 29. The marginal note which, in ambiguous situations, may shed some light, treats the forfeit also as a penalty. Secondly, the words of a statute are purposeful symbols to be decoded straight-forwardly, not by unveiling the words behind the words. And so, when Section 37(1) expressly says that the wrongful collections shall be forfeited it means what it says. Forfeiture being penal, terminologically, it must bear the same sense here too. Moreover, so far as the Act of 1959 is concerned, there is no case of outwitting any anterior judicial verdict. The fact that mens rea is excluded and the penal forfeiture can be enormous are germane to legislative policy, not for judicial compassion. A limited penalty, without forfeiture, may p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot bring with it the essential requirement of mens rea though penal in nature. Any collection by way of tax or purporting to be by way of tax in contravention of the provisions noticed therein, shall be liable to penalty not exceeding rupees five thousand which requires mens rea . The second limb speaks of such collection, either by way of tax or purporting to be by way of tax in contravention of the specified provisions, being liable for forfeiture to the Government . It is also pertinent that the collected amounts does not belong to the registered dealer. The basic foundation on which the clause of forfeiture is anchored upon would be the principle of unjust enrichment which would be the result, if the dealer who collected such tax from its consumers is permitted to retain the same. The dealer also cannot be given the responsibility of refund, since then there would be no mechanism to ensure such refund. 16. The measure of forfeiture though penal is also an enabling provision, the direct consequence of which is the consumer's right to seek refund by making an application in the prescribed form with the prescribed documents. The distinction in the two limbs of Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creating a fresh levy on the second sales made by the assessee. In the present case, no such issue arises. Here we are only concerned with how the collected money by the registered dealer, on a levy understood to have been validly created, under the sales tax enactment at that point of time and also paid into the coffers of the State, should be dealt with. 18. We also notice the Punjab Haryana High Court judgment in M/s.Idea Cellular Ltd. ( supra ) in identical circumstances and look at the declaration made on the effect of BSNL ( supra ). We also have to notice that therein the dealer was before the High Court with a petition under Article 226, seeking a writ of mandamus on identical circumstances as is available in this case. The essential distinction we wish to draw is that we are sitting in a statutorily conferred jurisdiction, which does not clothe us with any power to deal with the issue arising in an equitable manner especially when we are concerned only with the substantial questions of law arising from the order of the last fact finding authority, being the Sales Tax Appellate Tribunal. Even then, we extract the following paragraph from the judgment of the Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the subject assessment years it was perfectly valid by virtue of the declaration made by a Division Bench of this Court. However, on the subsequent decision of the Hon'ble Supreme Court in BSNL ( supra ), the levy has been rendered illegal and in such cases the collection falls foul of the sales tax enactment and falls within the mischief of sub-section (2) of Section 22; by virtue, or more appropriately, the rigour, of the declaration made in BSNL ( supra ). The collection made by the dealer becomes one purporting to be by way of tax on the sale of SIM Cards in respect of which he is not liable to pay tax. This again brings the act of collection within the framework of forfeiture as contemplated in Section 46A of the KGST Act, a necessary consequence by reason of the declaration of the Hon'ble Supreme Court. The claim for refund, if any, would subsist only in the consumer and it is the State who is competent to make such refund as per the procedure prescribed. There can be no refund to the assessee who admittedly has collected the amounts paid to the State as tax from its consumer on sale of SIM Cards. In the facts and circumstances, however, the first limb dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it. xx xxx xxx ( ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception: Where a person approaches the High Court or the Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on the basis of a decision on another person s case; this is the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the court/tribunal in another person s case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment or levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in another person s case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well-established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17(1)(c) of the Limitation Act, 1963, has no application to such a claim for refund. (para 108) xxx xxx xxx K.S.Paripoornan,J ( A) If the excise duty paid by the assessee was ultimately passed on to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumers, who paid such tax on purchase of SIM Cards within the State, even if not individually claimed by such consumers, would essentially and eventually flow to the welfare of the persons residing within the State, who constitute the majority of the consumers also. 22. In this context, we also have to notice the two-Judge Bench decision of the Hon'ble Supreme Court immediately rendered after Mafatlal Industries Ltd. ( supra ), again on the question of refund, reported in Union of India v. Barmalt (India) Ltd. [ ( 1997) 5 SCC 748 ]. The questions raised therein were with respect to duty exemption for malt and malt extract as a food product and the refund of the excise duty paid by the manufacturer. The Revenue treated the products as not entitled to exemption, which decision was overturned by the Delhi High Court allowing the exemption claim. The Delhi High Court also overruled the Revenue's plea based on the theory of unjust enrichment, and directed refund. There were appeals filed before the Supreme Court, during the pendency of which the State granted refund to a large extent. When the appeals came up for hearing, there was a suggestion made by the assessee-r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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