LEO ENGINEERING INDIA Vs. STATE OF KERALA

JUDGEMENT

(1.) THE short question arising in this case is whether excess tax collected by a dealer under the Central Sales Tax Act, 1956, hereinafter called "the CST Act", can be forfeited in exercise of powers conferred under section 46a of the Kerala General Sales Tax Act, 1963. In this case, the excess tax collected by the dealer and forfeited to Government is only Rs. 1,400 for the year 1991-92. However, the issue is important because in the first place, the issue arises in many cases, and secondly, there is no binding decision of this Court directly on the subject. THE Sales Tax Appellate Tribunal upheld the forfeiture of excess sales tax collected under the CST Act by the petitioner and dismissed the appeal.

(2.) THE sole question arising from the Tribunal's decision raised by the petitioner is given below : Whether, on the facts and in the circumstances of the case, has not the Appellate Tribunal gone wrong in holding that forfeiture of the excess tax collected by the revision petitioner is legal, in view of the provision in section 46a of the KGST Act, when there is no specific provision in the CST Act.

(3.) FROM the above it is clear that once a person from whom excess tax collected by the dealer and forfeited to the Government makes an application in form No. 40 prescribed under rule 31d along with convincing documents as proof for such collection, and forfeiture by Government, the officer who has forfeited the tax has to refund such excess collection to such person from whom it is collected. Therefore under the scheme, Government is not the beneficiary of the forfeiture and it is the duty of the Government to reimburse the amount to the person from whom it is collected after the forfeiture of the same from the dealer who collected it. Therefore this is not a case where Government derives any undue financial advantage by ordering forfeiture of excess tax that is not really due to the Government. On the other hand, it is only a machinery provision to ensure that the dealers authorised to collect tax under the statutory powers do not go beyond and collect what is not authorised. Simultaneously, the grievance of the aggrieved person is redressed by providing for reimbursement to him after forfeiture. The benefit for the Government in this matter will be the collection of penalty up to a maximum of rupees five thousand, which is not seen levied in this case. Therefore we need to consider as to whether the excess collection of CST under the local Act is permissible or not. As we find, the Government is only getting transitional advantage of money for a short time, until it is reimbursed to the person from whom it is collected by the dealer and the statute does not contemplate any substantive advantage to the Government in this regard. Probably there may be cases where the purchaser from whom excess tax is collected may not exercise statutory right to claim reimbursement. In that event, it would be a case of waiver of right to claim reimbursement by the buyer in favour of the Government, which will not affect the validity of the statute. Therefore we do not think the contention of the petitioner that the Government has derived advantage by demanding the tax that is not really due to it for the reason that it is collected by the dealer from the buyer, is not correct.