1. Shri Bhagwat Patil, Income Tax and Sales Tax Practitioner, on behalf of the appellant, and Sales Tax Officer, III Circle, on behalf of the Department, appeared. Heard their arguments.
2. Shri Hiranand Ramsukh has filed this appeal against the decision of the learned Deputy Commissioner, Appellate, who upholding the assessment of the Sales Tax Officer ordered to remit the amount of Rs. 3,762-14-3 under Section 11(2) of the Hyderabad General Sales Tax Act, 1950.
3. Hiranand Ramsukh is the selling commission agent on behalf of resident and non-resident principals, in taxable and non-taxable goods.
He withheld under Section 18(3) of the Act certain sums amounting to Rs. 3,513-7-0 and Rs. 249-7-3 out of the moneys payable to his non-resident and resident principals respectively, as tax under doubtful liability of the turnover to levy of sales tax under the Act.
These amounts have been entered in the separate accounts of his individual constituents opened for that purpose.
4. It is an admitted fact that he sold commodities such as jowar, wheat etc. of the non-resident principals which are taxable at the purchase point under Rule 5(2) of the Hyderabad General Sales Tax Rules, 1950.
He retained sums amounting to Rs, 3,513-7-0 from such principals towards tax on the purchases, which are admittedly not liable to levy of sales tax under the Act, the transaction of purchase of the same having been completed outside the State.
5. The amounts so withheld cannot be treated as tax inasmuch as "tax" has been defined in Section 2(1) of the Act to be a tax leviable under the provisions of this Act, and under Section 11(2), the tax which is (lawfully) leviable and collected in excess by the dealer as such, only is payable to the Sales Tax Department. The collection of any other sum which is not lawfully leviable under the Act is not payable to the Government but is, however, refundable to his constituents. The same is held in Minerva Mills and Anr. v. State of Mysore [1956] 7 S.T.C. 148, Tata Iron & Steel Co. v. State of Madras [1954] 5 S.T.C. 382 and Cement Marketing Co. of India Ltd. v. State of Hyderabad File No. 27/5 of 1955 dated 23rd December, 1955. It is argued by the learned State Representative that in the above cited rulings there was a specific condition in the contract that any amount collected as tax would be refunded to the purchaser if the High Court would decide that the commodity sold is exempt from the levy of sales tax and there being no such condition in the present case, the said rulings are not applicable.
6. He also relied on K.J. Mathew v. Sales Tax Officer [1954] 5 S.T.C.58 and Kunju Moideen Kunju v. State of Travancore-Cochin [1954] 5 S.T.C. 462 and contended that any amount whatsover collected by the dealer from his constituents in the name or in the guise of tax shall be paid over to the Government. With great respect to their Lordships of the Travancore-Cochin High Court, we do not find ourselves concurrent with the interpretation taken by them of the relevant section particularly when we are fortified in our interpretation by the above mentioned decisions of the Hyderabad, Madras and Mysore High Courts. Further, Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law, and we do not find any provision in the Act granting such authority to the State to recover from the dealers the amounts under consideration.
Under the circumstances if the State, while admitting the relevant turnover to be exempt from levy of sales tax, demands payment to it of the amounts retained by the dealers in that regard, such a demand would tantamount to collection of tax, on the same turnover (or a part thereof) on which the State has admittedly no authority to levy tax under the Act. In our opinion, the appellant, as already stated above, is not bound by law to remit the sums so withheld to the State but, however, is bound to refund the same to his non-resident principals whether or not there is a specific condition in the contract of sale for such refund.
7. As regards the sum of Rs. 249-7-3 it is collected from resident-principals who are liable to pay at the sale point as these sales have been made within the State and Shri Bhagwat Patil has, therefore, not pressed for this amount.
8. Hence the appeal is partly allowed. The appellant is not bound to remit Rs. 3,513-7-0 to the Department as ordered by the learned Deputy Commissioner. The institution fee of Rs. 35 may be refunded to the appellant.