- (1.) This appeal by certificate is directed against the judgment of Allahabad High Court whereby that court held that provisions of Section 29-A of the U. P sales Tax Act (Act 15 of 1948) (hereinafter referred to as the principal Act) inserted by Section 15 of the U. P. Sales-tax (Amendment and Validation) Act, 1971 (Amendment Act of 1971) (hereinafter referred to as the Amending Act) as well as Section 17 of the Amending Act to be unconstitutional. This Court in the case of Commissioner of Sales-tax v Ganga Sugar Corporation Ltd., (1970) 25 STC 155 (SC) held that Section 8-A (4) of the principal Act was ultra vires the State Legislature. Section 8-A (4) read as under. "8-A (4) Without prejudice to the provisions of clause (g) of sub-sec. (2) of Section 14, the amount realised by any person as tax on sale of any goods shall, notwithstanding anything contained in any other provision of this Act, be deposited by him in a Government treasury within such period as may be prescribed, if the amount so realised exceeds the amount payable as tax in respect of that sale or if no tax is payable in respect thereof " The Court in that context relied upon the decision in Abdul Quader and Co v. Sales-tax Officer, Hyderabad, (1964) 15 STC 403 = (AIR 1964 SC 922). It was held in Abdul Quader's case that the State Legislature in making a similar provision, viz, Section 11 (2) in the Hyderabad General Sales Tax Act, could not be regarded as having directly legislated for the imposition of sales and purchase tax under entry 54 list II in the seventh Schedule to the Constitution because the amount though collected by way of tax was not exigible as tax under the law. It was observed: "We do not think that the ambit of ancillary or incidental power goes to the extent of permitting Legislature to provide that though the amount collected may be wrongly - by way of tax is not exigible under the law as made under the relevant taxing entry, it shall still be paid over to Government, as if it were a tax." In 1969 the Uttar Pradesh Taxation Amendment Act, 1969 (U. P. Act 11 of 1969) was passed. Section 17 of that Act inserted Section 29-A which read as under: "29-A -Refund in special cases. Notwithstanding anything contained in this Act or in any other law for the time being in force or in any judgment, decree or order of any court, where any amount is either deposited or paid by any dealer or other person under sub-section (4) or sub-section (5) of Section 8-A such amount or any part thereof shall on a claim being made in that behalf in such form and within such period as may be prescribed, be refunded to the person from whom such dealer or the person had actually realised such amount or part, and to no other person " On August 22, 1971 the Amending Act was published. A number of amendments were made by the amending Act in the principal Act. By S. 10 of the Amending Act, sub-sections (4) and (5) of Section 8-A were omitted. Section 15 of the Amending Act was as under: "15. For Section 29-A of the principal Act, the following section shall be substituted, namely: "29-A (1) Where any amount is realised from any person by any dealer purporting to do so by way of realisation of tax on the sale of any goods to such person, such dealer shall deposit the entire amount so realised into the Government treasury, within such period as may be prescribed, 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) Any amount deposited by any dealer under sub-section (1) shall, to the extent it is not due as tax, be held by the State Government in trust for the person from whom it was realised by the dealer, or for his legal representatives, and the deposit shall discharge such dealer of the liability in respect thereof to the extent of the deposit. (3) Where any amount is deposited by any dealer under sub-section (1), such amount or any part thereof shall, on a claim being made in that behalf in such form as may be prescribed, be refunded, in the manner prescribed, to the person from whom such dealer had actually realised such amount or part, or to his legal representatives, and to no other person. Provided that no such claim shall be entertained after the expiry of three years from the date of the order of assessment or one year from the date of the final order on appeal, revision or reference, if any, in respect thereof, whichever is later. Explanation - The expression "final order on appeal, revision or reference' includes an order passed by the Supreme Court under Article 32, Article 132, Article 133, Article 136 or Article 137, or by the High Court under Article 226 or Article 227 of the Constitution " Section 17 contains transitional provisions for deeming and validation consequent upon the deletion of sub- sections (4) and (5) of Section 8-A and the substitution of Section 29-A in the principal Act.
(2.) The dispute relates to the amount which a dealer wrongly realises as sales-tax from the customer and the question which arises for consideration is whether a State legislature has the legislative competence to pass a law for the deposit of that amount in the Government Treasury. In other words, is there any entry in List II or List III of the Seventh Schedule to the Constitution under which the State Legislature could make such a law So far as Section 17 of the amending Act is concerned, the High Court observed that this section was dependent upon and interrelated with Section 15 of the Amending Act. Section 17 provides that the amount already deposited under Section 8-A (4) of the principal Act shall be deemed to be under Section 29-A as substituted by Section 15 of the Amending Act. Section 15 is the principal provision, while Section 17 is an ancillary provision. If Section 15 was unconstitutional, Section 17 would also share the same fate and would have to be struck down as unconstitutional because it is linked with S. 15 and cannot exist independently of that section. Learned Advocate General appearing for the appellant State has not, and in our opinion, rightly challenged the correctness of the view taken by the High Court in this respect.
(3.) We may now deal with the provisions of Section 15 of the Amending Act as a result of which S. 29-A was substituted in lieu of the old Section 29-A in the principal Act. Section 29-A deals with the amount wrongly realised by a dealer on sale of goods to any person. Sub-section (1) of Section 29-A of the principal Act makes it obligatory on the part of the dealer to deposit such amount into the Government Treasury "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." Sub-section (2) provides that the amount so deposited by a dealer shall to the extent it is not due as tax from him be held by the State Government in trust for the person from whom it was realised by the dealer or for his legal representatives. It further provides that when a dealer has deposited the amount into the Treasury, he shall no longer be liable to the person from whom he has realised the amount. According to sub-section (3) of the section, the amount deposited into the Government Treasury by the dealer or any part thereof shall, on a claim being made in that behalf in such manner and form as may be prescribed, be refunded to the person from whom the dealer had actually realised the amount or part, or to his legal representatives. Section 29-A thus seeks to ensure the deposit into the Government Treasury of the amount by a dealer as has been wrongly realised by him as sales tax. As the said amount does not constitute sales-tax, it is not covered by entry 54 in List II of the Seventh Schedule to the Constitution which relates to taxes on sale or purchase of goods other than newspapers subject to the provisions of entry 92A of List I.;