ORDER
R. Gururajan, J.
1. This case involves an interesting question of law requiring a decision at the hands of this Court. Facts in brief are as under :
Petitioner registered dealer entered into works contract with Hindustan Petroleum Corporation Ltd., in terms of annexure A. In respect of the said works contract undertaken, petitioner opted for composition of tax in terms of Section 17(6) of the Karnataka Sales Tax Act, 1957 in lieu of the amount payable under the said Act. Petitioner states that the works contract undertaken under the contract dated November 24, 1995 was executed over a period of three years. In as much as the petitioners have opted for composition scheme, the assessment in respect of the said assessment years were duly completed under Section 17(6) accepting the composition of tax for the assessment years 1996-97. While concluding the assessment tax has been levied at Rs. 15,49,049 which has already been remitted by the petitioner. After assessment proceedings, petitioners were served with a notice dated November 10, 2000 under Section 18-AA of the KST Act. It was observed that the petitioners have charged and collected tax of Rs. 15,49,050 from M/s. HPCL. As per Section 18(2) of the K.S.T. Act as substituted by the Karnataka Taxation Laws Amendment Act, 1996 (Act 1 of 1996) and Karnataka Taxation Laws Amendment Act, 1997 (Act 7 of 1997), the works contractor who opts for composition under Section 17(6) is not entitled to charge and collect tax separately on the bills during the relevant assessment year, 1996-97. According to the notice dated November 10, 2000 petitioner was alleged to have contravened the provisions of Section 18 of the Act. He was asked to show cause as to why the amount so collected as tax should not be forfeited in terms of Section 18-AA of the Act. Petitioner submitted a detailed reply in this regard. Respondents however by order dated January 4, 2001 annexure G rejected the contentions raised by the petitioner. In the said order the notice issued under Section 18-AA was confirmed and the demand notice for forfeiture was asked to be issued in terms of annexure H. Petitioner in these circumstances is before me seeking for a declaration declaring the provisions of Section 8(14) of the Karnataka Taxation Laws Amendment Act, 1997 (Act 7 of 1997) to be declaratory in nature and thus having retrospective operation. Petitioner is also seeking for a writ of certiorari for quashing of annexures G and H on the facts of this case.
2. Respondents have entered appearance and they have filed their detailed statement of objections. In the statement of objections, respondents contend that the Taxation Laws Amendment Act is prospective in nature and the same has come into force from April 1, 1997. According to respondents there was clear prohibition on the petitioner from collecting the tax in the light of an option for composition of tax under Section 17(6) of the Act. Having negatived the same, according to the respondents, petitioner is answerable for forfeiture in terms of the Act. They have also filed a bill which clearly goes to show the collection by the petitioner. Respondents justify their stand in the matter.
3. Parties are heard at great length.
4. Learned Senior Counsel, Sri Chander Kumar invites my attention to the various provisions of the Act to contend that the petitioner has made over the tax already to the respondent. According to him a combined reading of the various provisions would show that there exists no power for forfeiture in terms of Section 18-AA on the facts of this case. He relies on certain judgments in support of his prayer.
5. Let me see as to whether the petitioner is entitled for any relief on the facts of this case. At this stage, it is necessary to notice the various provisions of law governing these matters.
Section 18-AA provides for payment and disbursement of amounts wrongly collected by dealer as tax. It reads as under :
18-AA, Payment and disbursement of amount wrongly collected by dealer as tax.--(1) Where any amount is collected by way of tax or purporting to be by way of tax from any person by any dealer in contravention of Section 18, whether knowingly or not, such dealer shall pay the entire amount so collected to the assessing authority within twenty days after the close of the month in which such amount was collected, notwithstanding that the dealer is not liable to pay such amount as tax or that only a part of it is due from him as tax under this Act.
(2) If default is made in payment of the amount in accordance with Sub-section (1),--
(i) the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the dealer ;
(ii) the dealer liable to pay the amount shall pay interest at the rate of two and one half per cent of such amount for each month of default ; and
(iii) the whole of the amount remaining unpaid along with the interest calculated under Clause (ii) of this Sub-section shall be recoverable in the manner specified in Section 13.
(3) Notwithstanding anything contained in this Act, or in any other law, for the time being in force, any amount paid or payable by any dealer under Sub-section (1), shall, to the extent it is not due as tax be forfeited to the State Government and be recovered from him and such payment or recovery shall discharge him of the liability to refund the amount to the person from whom it was collected.
Section 18-AA refers to contravention of Section 18. Section 18 reads as under :
18. Collection of tax by dealers.--(1)(a) A person who is not a registered dealer liable to pay tax shall not collect any amount by way of tax or purporting to be by way of tax under this Act ; nor shall a registered dealer collect any amount by way of tax or purporting to be by way of tax at a rate or rates exceeding the rate or rates (at which he is liable to pay tax under the provisions of this Act).
(b) No person shall collect any amount by way of tax or purporting to be by way of tax in respect of sales of any goods (or any transaction) on which no tax is payable by him under the provisions of this Act.
(2) Notwithstanding anything contained in Sub-section (1), a dealer who has been permitted to pay any amount by way of composition (under Sub-section (1) or Sub-section (4) or Sub-section (8) of Section 17) or a dealer who is exempted from sales tax by virtue of recognition granted under the provisions of this Act, shall not collect any amount by way of tax or purporting to be by way of tax on the sales or purchases of goods made during the period to which such composition or recognition applies.
Section 18A provides for penalty. The said section reads as under :
If any person contravenes any of the provisions of Section 18, the assessing authority may, after giving such person reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum (not less than one half but nor exceeding an amount equivalent to) such amount.
In the case on hand, the case of the department is that the petitioner has collected tax and that therefore the collection qualifies for forfeiture. It is seen from the material on record that notice was issued under Section 18-AA on the ground that on verification of assessment records it is seen that the petitioner has collected tax at Rs. 15,49,050 and hence petitioner is liable for forfeiture under Section 18-AA. Petitioner admittedly opted for composition of tax in terms of Section 17(6) of the Act. That was omitted by Act No. 7 of 1997. However that was available for the relevant year. Therefore the sum and substance of the notice is that the petitioner having opted under Section 17(6) has collected some amount by way of tax warranting forfeiture. Section 18-AA(1) says that a dealer who has collected any amount by way of tax or purporting to be by way of tax in contravention of Section 18 shall pay the entire amount so collected to the assessing authority within 21 days after the close of the month in which such amount was collected. In the case on hand, it is an admitted fact the petitioner did collect and the same was made over within 21 days. Sub-section (2) provides that in the event of default made in payment of the amount in accordance with Sub-section (1), then the same is recoverable by the department. Sub-section (3) says that notwithstanding anything contained in this Act, any amount paid or payable under Sub-section (1) to the extent it is not due as tax be forfeited to the State Government and be recovered from him and such payment or recovery shall discharge him of the liability to refund the amount to the person from whom it was collected. Subsection (4) provides for forfeiture within two years.
A combined reading of Sections 18, 18A and 18-AA would show that if a dealer has collected in the event of composition any amount by way of tax and if such dealer has not deposited the same, he would incur the wrath of forfeiture in terms of Section 18-AA.
To attract Section 18-AA, Section 18 has to be noticed. Section 18(1)(a) provides for no collection by way of tax at a rate or rates exceeding the rate or rates at which a dealer is liable to pay tax under the provisions of this Act. In the case on hand, the case of the department is not one of excess collection. Section 18(1)(a) gets out of picture.
Section 18(1)(B) provides for no collection by way of tax in respect of sale of any goods on which no tax is payable by him under the provisions of this Act. Here again it is not the case of the department that collection has been made notwithstanding no tax. Section 18(1)(B) also gets out of picture.
Section 18(2) provides for no collection by a dealer who has been permitted to pay by way of composition under Sub-section (1) or Sub-section (8) of Section 17, or a dealer who is exempted from sales tax by virtue of recognition granted under the provisions of this Act, shall not collect any amount by way of tax or purporting to be by way of tax on the sales or purchase of goods made during the period to which such composition or recognition applies. Section 18(2) alone applies to the facts of this case. Section 18(2) refers to collection. Collection has been considered by courts of law. In the case of R.S. Joshi, Sales Tax Officer v. Ajit Mills Ltd. [1977] 40 STC 497, the Supreme Court has considered with regard to the word 'collected' as under :
The spirit of the provision lends force to the construction that 'collected' means 'collected and kept as his' by the trader.
Only in such contingencies, the court ruled that the forfeiture is permissible in law. In the case on hand, as I mentioned earlier, though the petitioner has collected tax notwithstanding composition in terms of Section 17(6) of the Act, he has not retained the same in terms of Section 18. Therefore, forfeiture is not justified in the given set of circumstances. Learned counsel for the petitioner also submitted that the composition opted and granted was with reference to the turnover of the contract and not with reference to any relevant year. Since in the case on hand, I have ruled that Section 18-AA is not applicable to the case on hand, it is unnecessary for me to consider the other questions raised by the parties. It is also to be noticed at this stage that the petitioner has categorically raised this question and the authority unfortunately has ruled that 'no doubt the assessee paid the amount which is collected by him, the same is not sufficient ground not to forfeit the same'. This finding in my view is not sustainable in law in the light of Section 18 and Section 18-AA. In these circumstances, accepting the argument of the petitioner, I deem it proper to set aside annexure G on the ground of want of jurisdiction. The other issues raised by the petitioner need not be considered in the light of this finding. It is made clear that the petitioner is not to seek refund of the amount already made over in the light of his objections in support of his submissions.
In the result, this petition is allowed. Annexure G is set aside. Consequently the demand at annexure H is also set aside. No opinion is expressed with regard to the declaratory prayer as sought for in para 15 of the writ petition. I also deem it proper to observe that if any other avenues is available to the respondents they may opt for the same in accordance with law. No costs.