M DADUBHAI AND CO Vs. C C TRIVEDI

JUDGEMENT

(1.) This petition under Article 226 of the Constitution challenges two orders of assessment made against the petitioners on 25th January, 1963. One in respect of the period 1st April, 1964, to 31st March, 1955, an the other in respect of the period 1st April, 1955, to 31st March, 1956. Most of the questions arising in this petition are concluded by two decisions given by us during this and the last sessions and only one question really survives for consideration. But in order to understand and appreciate that question, it is necessary to state briefly a few facts giving rise to the petition.

(2.) The petitioners at all material times carried on business as coal merchants and burning contractors in Ahmedabad. The petitioners were dealers registered under the Bombay Sales Tax Act, 1953, and held a certificate of registration under the provisions of that Act. During the period with which we are concerned in this petition, there were restrictions on purchase of coal and no textile mill or other industrial concern could purchase coal without obtaining priority from the Coal Controller. The modus operandi which was therefore followed was that after the textile mills and industrial concerns, to which for the sake of convenience we shall briefly refer as the purchasers, obtained priority from the Coal Controller, they used to employ the petitioners to contact the collieries on their behalf for ascertaining whether the requisite supply of coal desired by them was available with the collieries and to procure the same. The petitioners accordingly used to contact the collieries on behalf of the purchasers and to make the necessary arrangements for obtaining the requisite quantity of coal required by the purchasers from the collieries. The collieries used to send coal directly to purchasers but the bills used to be made out in the name of the petitioners who, in their turn, used to make out their own bills in the name of the purchasers after adding their commission as well as sales tax. The petitioners used to add sales tax to the amounts of the bills as the legal position was rather uncertain and it was not possible to say with any definiteness or certainty that sales tax would not be payable by the petitioners on transactions of this kind. The petitioners thus recovered in respect of these transactions amounts by way of sales tax from the purchasers. The question whether sales tax was payable by dealers who transacted business in this manner was ultimately taken to the Supreme Court and the Supreme Court in State Court in State of Bombay v. Ratilal Vadilal & Bros. ([1961] 12 S.T.C. 18), held that such dealers did not carry on business of selling coal but the position was merely that of agents arranging sale to disclosed purchasers, though guaranteeing payment to the colliery on behalf of their principals and they were therefore not liable to pay sales tax in respect of the transactions entered into by them on behalf of the purchasers. In view of this decision of the Supreme Court the petitioners contended in the course of their assessment to sales tax for the assessment periods 1st April, 1954, to 31st March, 1955, and 1st April, 1955, to 31st March, 1956, that no sales tax was payable by them on the transactions effected by them on behalf of the purchasers. The Sales Tax Officer bound as he was by the decision of the Supreme Court, accepted this position but he intimated to the petitioners that he proposed to forfeit the amounts collected by the petitioners from the purchasers by way of sales tax, since no sales tax was payable by the petitioners on those transactions. The petitioners contended that the Sales Tax Officer was not entitled to forfeit these amounts, but the Sales Tax Officer negatived the contention of the petitioners and by two orders dated 25th January, 1963, one in respect of the period 1st April, 1954, to 31st March, 1955, and the other in respect of the period 1st April, 1955, to 31st March, 1956, he forfeited the respective sums of Rs. 6,422.25 and Rs. 5,105.19 collected by the petitioners from the purchasers in respect of those assessment periods. This forfeiture was made by the Sales Tax Officer under section 21(4) of the Bombay Sales Tax Act, 1953. The Sales Tax Officer also imposed a penalty on the petitioners under section 39A of the Act in respect of certain purchases of coal effected by them but we are not concerned in this petition with the imposition of that penalty inasmuch as, though the imposition of that penalty has been challenged in the petition, we are told that subsequent to the filing of the petition the revenue authorities have remitted that penalty. The only dispute which therefore survives in the petition is with regard to the forfeiture of the two sums of Rs. 6,422.25 and Rs. 5,105.19 and it is this forfeiture which has been challenged by the petitioners in the present petition.

(3.) Mr. Kaji, learned Advocate appearing on behalf of the petitioners, urged three contentions against the validity of the forfeiture and they were as follows : (i) On a true construction of the various provisions of section 21 and particularly the words "by way of tax" occurring in sub-sections (1), (2) and (4), it was clear that the section was intended to deal only with collection of tax by a dealer which was lawfully leviable under the Act and since in the present case there were no sales effected by the petitioners and no sales tax was therefore lawfully leviable under the Act, sub-section (4) could not operate so as to entitle the State to forfeit any amount collected by the petitioners from the purchasers by way of tax in respect of transactions which were not sales and on which tax was accordingly not payable by the petitioners. (ii) Section 21(4) did not fall directly within the subject of legislation set out in entry 54 of List II of the Seventh Schedule to the Constitution under which the Act was made nor could it be justified even as an incidental or ancillary provision permitted under that entry and it was therefore beyond the legislative competence of the State Legislature and consequently ultra vires and void; (iii) Section 21(4) on its true construction was applicable only to a case where a registered dealer collected any amount by way of tax in respect of a sale and the amount so collected by him was in excess of the amount actually payable by him as tax on such sale under the Act. Since in the present case, though the amounts in question were collected by the petitioners by way of tax, they were not collected in respect of sales effected by the petitioners but were collected in respect of transactions which were not sales. Section 21(4) was not attracted and could not be availed of by the State for the purpose of forfeiting those amounts.