The State of Tamilnadu, rep. by the Deputy Commissioner (CT) Madras (Central) Division, Madras-6.... v. Tvl.Uptron India Limited, No.282 TTK Road, Alwarpet, Madras-18

IN THE HIGH COURT OF JUDICATURE AT MADRASDated: 10.12.2009CoramThe Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice M.M.SUNDRESHTAX CASE (REVISION) NO.1711 of 2008The State of Tamilnadu, rep.by the Deputy Commissioner (CT)Madras (Central) Division,Madras-6....PetitionerVsTvl.Uptron India Limited, No.282TTK Road, Alwarpet, Madras-18. ...RespondentREVISION under Section 38 of the Tamilnadu General Sales Tax Actagainst the order of the Sales Tax Appellate Tribunal (Main Bench),Madras dated 30.3.1993 made in TA.No.1181 of 1992 and TMP.No.35 of1993. Against the order of the appellate Assistant Commissioner (CT)IV Station, VI Floor, Kuralagam Annexe, Madras-108, dated 16.7.92 andmade in Appeal No and year AP.748/88, against the order of theCommercial Tax Officer, Mylapore, Assmt Circle No.46, Greenways Road,Madras-600 028, dated 1.7.88 in TNGST 648940/86-87.For Petitioner : Mr.Haja Nazirudeen, SGPO R D E R(ORDER OF THE COURT WAS MADE BY K.RAVIRAJA PANDIAN,J)By formulating the following substantial questions of law :"i.Whether the order of the Tribunal canceling thelevy of penalty under Section 22(2) and thereby allowing theappeal of the assessee and dismissing the enhancementpetition of the Department is erroneous in law ?ii.Whether the Tribunal ought to have seen that incase of Section 22, the levy of penalty follows as a matterof course wherever the assessee is found to have collectedtax in contravention of the provisions of the Act and asheld in 57 STC 69 and 72, the Tribunal ought to haveconfirmed the levy of penalty and dismissed the appeal ? Andiii.Whether the Tribunal ought to have seen the fact https://hcservices.ecourts.gov.in/hcservices/ that the tax, which had been remitted to the Government willnot sanctify due to the illegal collection and hence theTribunal ought to have allowed the enhancement petition andrestored the Assessing Officer's order ?"the Department has filed this revision under Section 38 of theTamilnadu General Sales Tax Act (hereinafter referred to as the Act)questioning the correctness of the order of the Tribunal dated30.3.1993 made in TA.No.1181 of 1992 and TMP.No.35 of 1993 whereinand whereby the Tribunal deleted the levy of penalty in a sum ofRs.10,421/-. 2. The minimum facts required for the disposal of the revisionare as follows :During the checking of accounts of the assessee, which is adealer in electronic goods, the Assessing Officer found that theassessee had collected tax on electronic goods at 15% instead of 10%over a turnover of Rs.3,78,951.65 Ps. The excess collection of tax somade was quantified to Rs.20,842/- and the Assessing Officer, byinvoking his power under Section 22(2) of the Act, levied penalty atone and half times of the excess collection, which is quantified atRs.31,263/-. On appeal at the instance of the assessee, the FirstAppellate Authority reduced the penalty to 50% of the excesscollection, which is quantified to Rs.10,421/-. Before the Tribunal,the assessee filed an appeal. In turn, the Department filed anenhancement petition to restore the penalty imposed by the AssessingOfficer. The Tribunal, after hearing the appeal and enhancementpetition, found that there was no illegal retention of the amount bythe assessee and that the collection of the tax at the rate of 15%was paid over to the Government. On the above said reasoning, theTribunal has come to the conclusion that the penalty is unwarrantedunder Section 22(2) of the Act. By holding so, the Tribunal dismissedthe enhancement petition filed by the Department. As the relief hasbeen granted in favour of the assessee, the Department is on furtherrevision before this Court against the order of the Tribunal. 3. Learned Special Government Pleader submits that there is noneed for any mens rea for imposition of penalty under Section 22(2)of the Act. If the collection of tax by the dealer is unauthorized,it is automatic on the part of the Assessing Officer to levy penaltyas per the provisions of the Act. 4. We have heard the learned Special Government Pleader andperused the materials on record. 5.Section 22(2) of the Act provides that if any person orregistered dealer collects any amount by way of tax or purporting tobe by way of tax in contravention of the provisions of Sub.Section(1), whether or not any tax is due from such person or dealer underthis Act in respect of the transaction in which he collects suchamount, the Assessing Authority may, after giving such person or https://hcservices.ecourts.gov.in/hcservices/ dealer a reasonable opportunity of being heard, by order in writingimpose upon him by way of penalty a sum which shall be (i) where theexcess amount collected in the bonafide belief that it had to becollected 100% of the amount collected and (ii) where the excessamount has been collected willfully and knowing that it was not dueto be collected 150% of the amount collected. 6.A reading of the above provision makes it clear that it notin each and every case the collection is made over and above the ratefixed penalty is warranted. The discretion is vested with theAssessing Officer to impose penalty taking into consideration of thefacts of each case. In the facts of the present case, the electronicgoods were taxable at the rate of 15% till 17.3.1986. On and from17.3.1986, the rate of tax has been reduced to 10%. It is the case ofthe assessee that without being aware of the fact that the rate oftax has been reduced to 10% from 17.3.1986, they had collected thetax at old rate. However, they did not retain even a single pie withthem and the entire amount so collected at the rate of 15% has beenpaid over to the coffer of the Government. There is absolutely nointention on the part of the assessee to collect tax in contraventionof Section 22(1) of the Act and retain the same for the benefit ofthe assessee. 7.A Division Bench of this Court in the case of State ofTamilnadu Vs. Mohd.Ibrahim Sahib (reported in 83 STC 402), aftertaking note of the ratio of the decision in the case of State ofTamilnadu Vs. Selvakumar Timber Traders (reported in 57 STC 69),which has been referred to in one of the questions of law forautomatic imposition of penalty, held that it became apparent thatthe penalty might be levied by the Authorities under Section 22(2) ofthe Act after giving the affected person a reasonable opportunity ofbeing heard by an order in writing where there had been acontravention of the provisions of Sub.Section (1) implying therebythat any amount had been collected by way of tax or purporting to beby way of tax under the Act by a person including a registered dealerexcept in accordance with the provisions of the Act and the Rulesframed thereunder and after taking note of the facts of that case,the Tribunal found that it was at the instance of the Commercial TaxAuthorities, the decorticating millers had collected sales tax fromthe purchasing oil millers to be remitted to the Government on behalfof the purchasing merchants for facilitating recovery of sales tax bythe Revenue. Posing a question in the facts noticed that could it besaid that the assessee had collected any amount by way of tax orpurporting to be by way of tax under the Act and while answering thesaid question, the Division Bench observed as follows :"The Supreme Court in Joshi, Sales Tax Officer Vs.Ajith Mills Ltd. (reported in (1977) 40 STC 497) had anoccasion to consider the import of the expression'collected' by reference to Sections 37(1)(a) and 46(2) of https://hcservices.ecourts.gov.in/hcservices/ the Bombay Sales Tax Act. Section 37(1)(a) of the BombaySales Tax Act reads as follows :'37(1)(a). If any person, not being a dealer liable topay tax under this Act, collects any sum by way of tax, orbeing a registered dealer collects any amount by way of taxin excess of the tax payable by him, or otherwise collectstax in contravention of the provisions of Section 46, heshall be liable to pay, in addition to any tax for which hemay be liable, a penalty as follows :(i)Where there has been a contravention referred toin clause (a), a penalty of an amount not exceeding twothousand rupees;......... and in addition,............anysum collected by the person by way of tax in contraventionof Section 46 shall be forfeited to the StateGovernment.............Interpreting this section, the Supreme Court dealtwith the expression 'collected', and opined :'What does 'collected' mean here ? Words cannot beconstrued effectively without reference to their context.The setting colours the sense of the word. The spirit ofthe provision lends force to the construction that'collected' means 'collected and kept as his' by thetrader. If the dealer merely gathered the sum by way of taxand kept it in suspense account because of dispute abouttaxability or was ready to return it if eventually it wasnot taxable, it was not collected. 'Collected' in anAustralian Customs Tariff Act, was held by Griffith, C.J.,not 'to include money deposited under an agreement that ifit was not legally payable it will be returned'. (Words &Phrases page 274). We, therefore, semanticise 'collected'not to cover amounts gathered tentatively to be given backif found non-exigible from the dealer. It would be relevant to notice here that the aboveopinion was rendered by the Apex Court on terms of Section37(1) of the Bombay Act, wherein the expression used was'any sum collected by the person by way of tax.........shall be forfeited...'. Thus, even where the forfeiture waspreceded by the use of the word 'shall', the Court heldthat the expression 'collected' must have reference to'collected illegally and retained' or 'collected and keptas his', to attract the penalty of forfeiture. Thus, thecircumstances under which the tax was 'received' have to beconsidered by the Authorities before imposing the penalty." https://hcservices.ecourts.gov.in/hcservices/

8.If so construed from the facts noticed supra, it could beseen that all that the assessee has done in this case was that theycollected tax at the rate of 15% as per the original rate withoutbeing aware of the reduction of tax at the rate of 10%. The tax socollected was duly remitted to the Government. No amount was retainedby the assessee, which factum has not been disputed by the Revenue. 9. In view of the law laid down by the Apex Court in AjithMills case (cited supra) and on the admitted facts, it cannot,therefore, be said that the assessee has collected any amount by wayof tax or purporting to be by way of tax so as to be held liable orrender itself liable for contravention of Section 22(1) of the Act.The assessee collected the amount, brought the same on account andremitted it to the Government faithfully. Therefore, it is notpossible to hold that the assessee had collected tax as interpretedby the Supreme Court in Ajith Mills' case (cited supra) incontravention of the provisions of Section 22(1) of the Act. InSelvakumar Timber Traders's case (cited supra), the Assessing Officerlevied penalty for violation of Section 22(1) of the Act. TheAppellate Assistant Commissioner reduced the quantum of penalty. TheTribunal considered the second appeal of the assessee as well as theDepartment's enhancement petition asking for restoration of penaltyas originally levied by the Assessing Officer and held that there wasno case for restoration of the penalty levied by the AssessingOfficer and that the Appellate Assistant Commissioner was justifiedin reducing the quantum of penalty. The enhancement petition filed bythe Government was dismissed. The High Court upheld the order of theTribunal and dismissed the revision filed by the Department. So isthe judgment in the case of P.Ramasamy Vs. State of Tamilnadu(reported in (1984) 57 STC 72). Similar view has been taken by thisCourt in the case of State of Tamilnadu Vs. Samsan and Company(reported in (1984) 57 STC 160) and in the case of State of TamilnaduVs. Jaya Pharmacy (reported in (1984) 57 STC 164). The abovejudgments show that depending upon the facts and circumstances of thecase, it is a matter for discretion of the Assessing Officer todetermine as to whether the penalty provision under Section 22(2)of the Act is attracted in a case where collection has been made inviolation of Section 22(1) of the Act and that the imposition ofpenalty is not warranted. The discretion, indeed, has to be exercisedjudiciously, properly and bonafidely. 10.In the given set of facts, as stated above, we are of theview that the Tribunal exercised its jurisdiction under Section 22(2)of the Act judiciously, properly and bonafidely, which requires nointerference at our hands in the revisional jurisdiction of thisCourt under Section 38 of the Act. https://hcservices.ecourts.gov.in/hcservices/

11.Therefore, the revision petition is dismissed. No costs. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarRSTo1. The Sales Tax Appellate Tribunal (Main Bench), Madras.2. The Appellate Assistant Commissioner (CT) IV, Statation VI Floor, Kuralagam Annexe, Madras-108.3. The Commercial Tax Officer, Mylapore Assmt Circle, No.46, Greenways Road, Madras-600 028.+ 1 cc to Spl. Govt., Pleader (CC SR 67906)TC(R)NO.1711 OF 2008GV (CO)RH (31.12.09)