TANGUDU GOPALAN AND SONS Vs. STATE OF ORISSA

JUDGEMENT

(1.) LEGALITY of order passed by the Commissioner of Sales Tax, Orissa (respondent No. 2) setting aside the order of the Sales Tax Officer, Ganjam-I Circle, Berhampur, holding that no penalty under section 9-B (3) of the Orissa Sales Tax Act, 1947 (in short, "the Act") was leviable, is the subject-matter of this appeal.

(2.) BACKGROUND facts shorn of unnecessary details are as follows : The appellant is a dealer registered under the Act. During the assessment years 1974-75 and 1975-76, the appellant had collected sales tax on the sale of dry cell batteries at 12 per cent. A writ application bearing O. J. C. No. 928 of 1973 was filed in this Court for a direction that dry cell batteries were taxable at 5 per cent, and not at 12 per cent as luxury goods. By judgment dated July 8, 1975, this Court held that the dry cell batteries are taxable at the rate of 5 per cent and not at 12 per cent as luxury goods. The validity of Finance Department Notification No. 23710 dated June 16, 1971, notifying the rate of tax on the sale of dry cell batteries at 12 per cent with effect from July 1, 1971, was the subject-matter of challenge. Undisputedly, the appellant had collected sales tax on dry cell batteries at 12 per cent and had deposited it. Keeping in view the decision of this Court, the assessing officer by his order dated December 31, 1977, for the assessment year 1974-75 assessed sale of dry cell batteries to tax at 5 per cent and allowed refund of Rs. 16,388. The amount was refunded to the dealer. During the year 1975-76, the dealer collected tax at 12 per cent from July 8, 1975, i. e. , date of judgment of this Court and thereafter by way of contingent deposit differential amount at 7 per cent was charged from the purchasers with a declaration that the same shall be refunded in case of non-success. The assessing officer assessed the sale of dry cell batteries at 5 per cent, and allowed refund of Rs. 12,285. After refund of the aforesaid amounts to the appellant, the Sales Tax Officer by his letter No. 13383 dated August 13, 1982, required the appellant to show cause as to why penalty under section 9-B (3) of the Act for excess collection of tax for the two periods shall not be imposed. The said letter/notice was issued on the basis of objection raised by the Auditor-General. In response to notice, the appellant appeared and furnished show cause reply and contended that there was no mens rea in collecting the excess amount and therefore, question of levy of penalty did not arise. So far as collection of tax for the assessment year 1975-76 is concerned, it was urged that out of the amount of refund a sum of Rs. 12,285, a sum of Rs. 12,002 related to collection before the date of judgment of this Court and Rs. 283 related to collection as contingent deposit. After judgment of this Court, the State Government had moved the apex Court by filing a special leave petition and therefore, contingent deposits were made. The appellant's stand was that provisions of section 9-B (3) of the Act have no application, because when collections were made, Notification No. 23714-CTA-57/71/f dated June 16, 1971, operating from July 1, 1971, was in force. Subsequently, this Court gave its verdict on July 8, 1975 and consequentially question of refund arose. The Sales Tax Officer was of the view that payment was made under a mistake and the Government was duty bound to return the amount of tax, irrespective of the consideration whether money had been paid voluntarily or not. In R. S. Joshi, Sales Tax Officer v. Ajit Mills Limited [1977] 40 STC 497 (SC) on which the Auditor-General had placed reliance to find fault was held to be distinguishable. It was held that the said case related to forfeiture and essence of judgment was principles of mens rea, have no application to the case of excess amount collected within the purview of the Bombay Sales Tax Act. On facts, it was concluded that there was no criminal intention, the conduct did not reflect contumacy and therefore, penal provisions of section 9-B (3) were not applicable. The Commissioner exercised powers under section 23 of the Act read with rule 80 of the Orissa Sales Tax Rules, 1947 (in short, "the Rules") and held that the order of the Sales Tax Officer dropping the proceeding was not legal. It was held that collection made by the petitioner in excess of what had been ultimately found payable amounted to clear case of excessive collection and therefore, action of the Sales Tax Officer in dropping the proceeding was not legal. The legality and propriety of the Commissioner's order is impugned.

(3.) FOR resolution of dispute, reference to section 9-B (3) of the Act is necessary. The same reads as follows :