L. Palamalai, Administrative Member -
(1.) THE tax case miscellaneous petition to set aside the ex parte order in T.C. No. 3677 of 1997 dated August 24, 1999 and restore it on file was taken up, and after hearing the Government Advocate, it was restored on the file.
(2.) THEREAFTER , Mr. D.T. Chopda, the learned counsel for the petitioner, contended as follows :
The assessee by mistake collected sales tax and surcharge on tax -suffered goods and after the mistake being pointed out by the assessing authority, the assessee refunded the money by issuing credit notes in the month of April, 1980. This fact was referred to in the order of the Appellate Tribunal and when the entire amount collected as tax and surcharge has been refunded, there is no case to levy any penalty. In this connection, he referred to the decisions reported in R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited [19771 40 STC 497 (SC), Amrutanjan Limited v. State of Tamil Nadu  97 STC 575 (Mad) ; (1994) 6 MTCR 562 and State of Tamil Nadu v. K. Mohammed Ibrahim Sahib  83 STC 402 (Mad). Mr. D.T. Chopda, the learned counsel for the petitioner, argued that in all these decisions, it was held that there is no violation warranting levy of penalty, inasmuch as the amount collected as tax has not been retained by the assessee, but, either refunded to the purchasers or deposited with the Government. Therefore, in the present case also, as credit notes have been issued to the buyers, there is no case for levy of penalty and in any event, the quantum of penalty levied is excessive.
Mr. R. Mahadevan, the learned Government Advocate stated that there is clear violation and therefore the penalty levied under Section 22(2) of the Act which was reduced by the Appellate Tribunal after considering all facts is in order.
We have considered the contentions carefully. In R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited  40 STC 497, the Supreme Court considered the imposition of penalty in the context of Section 37(1) of the Bombay Sales Tax Act, 1959, which reads as follows :
"37. (l)(a) If any person, not being a dealer liable to pay tax under this Act, collects any sum by way of tax, or being a registered dealer collects any amount by way of tax in excess of the tax payable by him, or otherwise collects tax in contravention of the provisions of Section 46, he shall be liable to pay, in addition to any tax for which he may be liable, a penalty as follows :
(i) where there has been a contravention referred to in clause (a), a penalty of an amount not exceeding two thousand rupees ; ........... and, in addition, ............. any sum collected by the person by way of tax in contravention of Section 46 shall be forfeited to the State Government".
In that context, the following observations were made :
"If a dealer merely gathered a sum by way of tax and kept it in suspense account because of dispute about its taxability or was ready to return it if eventually it was found to be not taxable, it was not collected within the meaning of Section 37(1). The spirit of the provision lends force to the construction that 'collected' means 'collected and kept as his' by the trader".
(3.) SIMILARLY , in the case of State of Tamil Nadu v. K. Mohammed Ibrahim Sahib  83 STC 402, the Madras High Court considered the case of "decorticating mills" who collected purchase tax from the oil mill owners on the value of groundnut belonging to agriculturists sold to the mills and remitted the tax amount to the Government on behalf of the said oil mills. In that case, though the taxable event is at the hands of the oil mills, having regard to the fact that the amounts collected by the decorticating mills have been deposited with the Government on behalf of the oil mills it was held that the collection of the amount as tax by the decorticating mills cannot be construed as contravention of Section 22(1) of the Tamil Nadu General Sales Tax Act, 1959 so as to attract penalty under Section 22(2) of the Act. In the case of the Amrutanjan Limited v. State of Tamil Nadu  97 STC 575 (Mad.) ; (1994) 6 MTCR 562, the assessee at the end of the assessment year gave certain rebate and cash discount to its stockists. While giving such rebate, the element of sales tax and surcharge collected on the original sales were not refunded. Therefore, it was construed that there is violation of Section 22(1) of the Act and on that basis, penalty was levied under Section 22(2) of the Act. However, the Tribunal found that the assessee was justified in collecting the sales tax and surcharge on the amounts given by way of rebate and cash discount to its stockists and dealers, since rebate and cash discount were given at the end of the assessment year only. In short, the Tribunal held that the sales tax and surcharge collected on the original sale amount was in order, inasmuch as the rebate in question was given only at the end of the year. On that basis, it was held that penalty under Section 22(2) of the Act was not exigible. Having held so, the Tribunal gave a direction to the assessing officer to ascertain whether the assessee has refunded the sales tax and surcharge collected by the assessee on the amounts given by way of rebate and cash discount to its stockists and if the assessee has not refunded the amount collected by way of surcharge and sales tax, then the assessing authority was directed to levy penalty under Section 22(2) of the Act. Thus, the point for consideration before the High Court was whether the Tribunal was justified in giving such direction to levy penalty under Section 22(2) of the Act, if the assessee failed to return the sales tax and surcharge collected on the amounts given by way of rebate and cash discount to its stockists and dealers. Only in that context, the High Court held, that when the collection was held to be legal by the Tribunal, the Tribunal was not justified in giving direction to the assessing authority to levy penalty under Section 22(2) of the Act, if on verification, the assessing officer comes to the conclusion that the assessee has not refunded the amount collected by way of sales tax and surcharge on the amount given by way of rebate and cash credit. Further, the High Court observed that the assessee has already deposited with the Government, the sales tax and surcharge collected on the amounts given by way of rebate and cash discount to its stockists and dealers. Further, the assessee has also given an undertaking that it will return the sales tax and surcharge collected from its customers and dealers on the amount given by way of rebate and cash discount.;