Wanchoo, J. - (1.) This is an appeal by special leave against the order of the Andhra Pradesh High Court. The appellant filed a writ petition in the High Court questioning the validity of S. II (2) of the Hyderabad General Sales Tax Act, No. XIV of 1940, (hereinafter referred to as the Act). The material facts on which the petition was based were these. The appellant acted as agent in the then State of Hyderabad to both resident and non-resident principals in regard to sale of betel leaves. Under the Act betel leaves were taxable at the purchase point from May 1, 1953, by virtue of a notification in that behalf. We are here concerned with the assessment period from May 1, 1953 to March 31. 1954, covered by the assessment year 1953-54. The appellant collected sales tax from the purchasers in connection with the sales made by it on the basis that the incidence of the tax lay on the sellers and assured the purchasers that after paying the tax to the appellant there would be no further liability on them. After realising the tax, however, the appellant did not pay the amount realised to the Government but kept it in the suspense account of its principles, namely, the purchasers. When the accounts were scrutinized by the Sales Tax Department, this was discovered and thereupon the appellant was called upon to pay the amounts realised to the Government. The appellant however objected to the payment on the ground that it was the seller and the relevant notification for the relevant period imposed tax at the purchase point, i.e., on the purchaser. This objection was over-ruled and the appellant was directed to pay the amount to Government.
(2.) The main contention raised on behalf of the appellant in the High Court was that S. 11(2) of the Act, which authorised the Government to recover from any person, who had collected or collects, after May 1, 1950, any amount by way of tax otherwise than in accordance with the provisions of the Act, as arrears of land revenue, was beyond the legislative competence of the State legislature. The argument was that the Act was passed under Entry 54 of List II of the Seventh Schedule to the Constitution, which enables the State legislature to enact a law taxing transactions of the sale or purchase of goods. The entry therefore vested power in the State legislature to make a law for taxing sales and purchases of goods and for making all necessary incidental provisions in that behalf for the levy and collection of sales or purchase tax. But it was urged that that entry did not empower the State legislature to enact a law by which a dealer who may have collected a tax without authority is required to hand over the amount to Government, as any collection without the authority of law would not be a tax levied under the law and it would therefore not be open to the State to collect under the authority of a law enacted under Entry 54 of List II any such amount as it was not a tax on sale or purchase of goods. The High Court held S. 11 (2) good as an ancillary provision with regard to the collection of sales or purchase of tax and therefore incidental to the taxing power under Entry 54 of List II. Further the High Court took the view that assuming that Entry 54 of List II could not sustain Ss. 11 (2), it could be sustained under Entry 26 of List II. Consequently the writ petition was dismissed. The High Court having refused a certificate to appeal to this Court, the appellant obtained special leave and that is how the matter has come up before us.
(3.) It is necessary to read S. 11of the Act in order to appreciate the point urged on behalf of the appellant. Section 11 is in these terms:- "11. (1) No person who is not registered as a dealer shall collect any amount by way of tax under this Act nor shall a registered dealer make any such collection before the 1st day of May, 1950, except in accordance with such conditions and restrictions, if any, as may be prescribed: Provided that Government may exempt persons who are not registered dealers from the provisions of this sub section until such date, not being later than the 1st day of June, 1950, as Government may direct. 2. Notwithstanding to the contrary contained in any order of an officer or tribunal or the judgment, decree or order of a Court, every person who has collected or collects on or before 1st May, 1950, any amount by way of tax otherwise than in accordance with the provisions of this Act shall pay over to the Government within such time and in such manner as may be prescribed the amount so collected by him, and in default of such payment the said amount shall be recovered from him as if it were arrears of land revenue." It will be seen that S. 11 (1) forbids an unregistered dealer from collecting any amount by way of tax under the Act. That provision however does not apply in the present case, for the appellant is admittedly a registered dealer. Further S. 11 (1) lays down that a registered dealer shall not make any such collection before May 1, 1950, except in accordance with such conditions and restrictions, if any, as may be prescribed. This provision again does not apply, for we are not concerned here with any collection made by the appellant before May 1, 1950. The prohibition therefore of S. 11 (1) did not apply to the appellant. Then comes S. 11 (2). It applies to collections made after May 1, 1950 by any person whether a registered dealer or otherwise and lays down that any amount collected by way of tax otherwise than in accordance with the provisions of the Act shall be paid over to the Government and in default of such payment, the said amount shall be recovered from such person as if it were arrears of land revenue. It is clear from the words "otherwise than in accordance with the provisions of this Act" that though the amount may have been collected by way of tax it was not exigible as tax under the Act. Section 11 (2) thus provides that amounts collected by way of tax though not exigible as tax under the Act shall be paid over to Government, and if not paid over they shall be recovered from such person as if they were arrears of land revenue. Clearly therefore S. 11 (2) as it stands provides for recovery of an amount collected by way of tax as arrears of land revenue though the amount was not due as tax under the Act.;