TATA OIL MILLS LTD. Vs. SALES TAX OFFICER

JUDGEMENT

(1.) THE petitioner is an incorporated company which is engaged in the manufacture and sale of soaps,toilets,pakav and other goods.It was assessed to salestax for the year 1964 -65 under the Kerala General Salestax Act,1963(hereinafter referred to as the Act)by the first respondent,the Salestax Officer,Special Circle,Ernakulam,by his order,Ext.P -1,dated 7th January 1966.This order was revised by him by rectifying certain errors by a subsequent order,Ext.P -2,dated 23rd February 1966.The petitioner claimed exemption in respect of a few transactions,and also deduction of certain amounts from its total turnover the petitioner's accounts were accepted;and all the above claims were allowed by the first respondent in making the assessment.The salestax and surcharge payable by the petitioner as per Ext.P -2 are Rs.5,37,631.69 p.and Rs.21,939.80 p.respectively;and there is no dispute about this assessment.The petitioner's accounts disclosed that it had collected from the persons to whom it sold goods a sum of Rs.30,591.71 p. as salestax in excess of the tax which the petitioner was liable to pay under the Act.This was because in determining the taxable turnover under the Act,a dealer is entitled under rule 9(1)of the Kerala General sales Tax Rules,1963(hereinafter referred to as the Rules)to deduct from the total turnover the excise duty,if any paid,by him to the Central Government in respect of the goods sold by him.Accordingly,sum of Rs.6.62,958.paid by the petitioner as excise duty was deducted from its total turnover in determmins the taxable turnover and assessing the tax payable by the petitioner.But the petitioner,when it sold the goods,collected salestax from the purchasers on the invoice price without deducting there from the excise duty paid in respect of the said goods.This resulted in the collection of a larger amount of sales tax than what the petitioner was liable to pay under the Act.The first respondent held as per Exts.P -1 and P -2 that the petitioner was liable to pay the aforesaid amount of Rs.30,591.71 also to the Government under section 22(3)of the Act.The petitioner had paid almost the whole tax payable under the Act,even before the assessment was made.The first respondent,therefore,issued a notice of demand Ext.P -3,dated 23 -2 -1966 to the petitioner,requiring the petitioner to pay a sum of Rs,30,592.39 which consisted of the above sum of Rs.30,591.71 and a small balance of the tax assessed under the Act.

(2.) THE petitioner contended before the first respondent that section 22(3)of file Act is unconstitutional and that the Government have no right to collect from the petitioner anything more than what it was liable to pay as tax under the Act.It relied on the decision of this court in O.P.Nos.485,486 and 487 of 1965,wherein a similar claim of the petitioner was upheld.Reliance was also placed on the decision of the Supreme Court in Abdul Quader &Co.v.Sales Tax Officer,Second Circle,Hyderabad (1964)15 S.T.C.403 in support of his contention,that the Government have no right to collect such an amount from a dealer.But the first respondent rejected the petitioner's contention.He observed regarding the decision of this Court in O.P.Nos.485,486 and 487 of 1965 that it happened to be in favour of the petitioner as the real and full facts of the case were not placed before the Court.He also observed that the above decision of the Supreme Court did not apply to this case,as that decision was concerned with the collection of tax made otherwise than in accordance with the provisions of the Act.The petitioner has,therefore,filed this Original Petition for a declaration that section 22 of the Act,in so far as it imposes a liability on a dealer to pay over to the Government any amount collected by him as salestax,even when such amount is not payable by him as tax under the Act,is unconstitutional,and to quash by a writ of certiorari the orders Exts.P -1 and P -2 as well as the notice of demand,Ext.P -3.

(3.) THE petitioner's learned counsel has advanced the same contention as was raised before the first respondent.The decision of this Court in O.P.Nos.485,486 and 487 of 1965 was passed on a concession made on behalf of the first respondent that the decision of the Supreme Court in Abdul Quader &Co.v.Sales Tax Officer,Second Circle,Hyderabad (1964)15 S.T.C.403 applied to those cases,and that the demands made therein could not be sustained.The position now taken up by the first respondent is that it was a wrong concession,and that the decision of the Supreme Court does not apply to the case.The above decision of this Court is therefore,no authority to support the petitioner's contention,nor does it preclude the first respondent from requiring the petitioner to pay the disputed amount under section 22(3)of the Act,which relates to a different assessment year.It is necessary to refer to the relevant provisions of the Act and the Rules,for the purpose of examining the respective contentions of the parties."Section 5 of the Act is the charging section;and it provides that every dealer coming within its ambit shall be taxed on his total turnover for the year.Section 2 (xxv) of the Act defines the taxable turnover;and according to this definition,taxable turnover means turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed.Rule 9 of the Rules deals with the determination of the taxable turnover;and according to clause (i) of this rule,excise duty,if any,paid by a dealer to the Central Government in respect of the goods sold by him,is a deduction to be made from the total turnover in determining the taxable turnover.Section 22 of the Act reads as follows:" "22. Collection of tax by dealers. "( 1)No person who is not a registered dealer shall collect any amount by way of tax under this Act;nor shall a registered dealer make any such collection except in accordance with such conditions and restrictions,if any,as may be prescribed. Provided that nothing contained in this sub -section shall apply to the Central Government,a State Government or a local authority. (2)If any dealer or person who is not liable to tax under this Act collects any amount purporting to be by way of tax,such dealer or person shall,unless it is established to the satisfaction of the assessing authority that the amount so collected has been refunded to the person who had originally paid the amount,pay over to the Government within such time and in such manner as may be prescribed all amounts so collected. (3)If any dealer or person collects tax on transactions not liable to tax under this Act or in excess of the tax leviable under this Act,such dealer or person shall,unless it is established to the satisfaction of the assessing authority that the tax so collected has been refunded to the person who had originally paid the tax,pay over to the Government,in addition to the tax payable,the tax amount so collected,within such time and in such manner as may be prescribed. (4)A local authority which collects any amount by way of tax under this Act shall pay over to the Government the amount so collected,and,if any such amount is not so paid the Collector of the district concerned shall,on requisition by the assessing authority make an order directing the person haying the custody of the funds of the local authority to pay it in priority to any other charge against such fund except charges for the service of authorised loans ; and such person shall be bound to comply with such order " ;. The legislative power of the State to levy salestax is contained in entry 54 of List II in the Seventh Schedule of the Constitution and it reads as follows:" "54.Taxes on the sale or purchase of goods other than newspapers subject to the provisions of entry 92 (a) of List I " ;.