Haji P. Mohammed Timber Merchant and Others Vs State of Kerala and Others

G. Sivarajan, J.@mdashA common question as to whether forest development tax collected by the forest department on the auction sale of timber to the petitioners forms part of the turnover for the purpose of levy of tax under the Kerala General Sales Tax Act, 1963 (for short "the Act"), arises for consideration in all these cases.

2. The petitioners in all these cases are engaged in the business of buying and selling of timber. They are all registered dealers both under the Kerala General Sales Tax Act, 1963 and the Central Sales Tax Act, 1956. All of them used to purchase timber from forest depots belonging to the State, In all these writ petitions except Writ Petition No. 22610 of 2003, the petitioners seek a declaration that the respondents have no right or authority to collect sales tax on the element of forest development tax in the light of the Government communication dated August 21, 1996 (exhibit P1) and in the light of the judgment dated January 8, 1997, in O.P. No. 378 of 1997 (exhibit P2). They also sought for quashing exhibits P4, P5, P7 and P9 to the extent it demands sales tax on the turnover of forest development tax.

3. The petitioner in W.P. (C) No. 22610 of 2003 seeks for refund of the excess sales tax collected by the respondents from him during the period from 1995-96 to 1998-99 as mentioned in exhibit P4 with interest at the rate of 12 per cent and/or to adjust the said excess amount towards the amount due from the petitioner as per the final assessment of sales tax for the year 1998-99 and subsequent years. There is also a prayer for quashing exhibits P6 and P7 communications issued by the respondents.

4. It is stated in the writ petitions that as per the provisions contained in Section 75A of the Forest Act, the respondents used to collect along with the sale price an additional amount of five per cent as forest development tax, that on a wrong assumption the said amount of five per cent charged as forest development tax was also added on the sale price and sales tax was charged on the aggregate amount. This according to the petitioners was being done by the forest officials who are conducting auction of timber in forest depots of the State in spite of the objections taken by them and therefore the matter was taken up before the Government and the Government have issued a clarification dated August 21, 1996 wherein it is stated that it is not proper to collect sales tax on a tax already collected for the consideration paid. It is also their case that this Court in the judgment dated January 8, 1997 in O.P. No. 378 of 1997 held that forest development tax will not form part of the taxable turnover and therefore the respondents were not collecting any sales tax thereafter on the turnover including forest development tax. It is also stated that pursuant to the said judgment the petitioners and others have taken steps for getting refund of the tax already paid. The petitioners have produced a copy of the order dated July 19, 2002 issued by the first respondent rejecting one such claim. The present grievance of the petitioners is that the first respondent have forwarded the copy of the G.O. (Rt.) No. 405/2002/TD dated July 19, 2002 to all the Divisional Forest Officers and that on the basis of the said G.O., forest officials are taking steps to collect sales tax on the turnover of forest development tax. The petitioners have also received demand notices in respect of the bill which did not include forest development tax in the turnover for the purpose of levy of sales tax. It is in these circumstances, the petitioners have filed the above writ petitions. The material facts and circumstances in the other writ petitions are by and large similar.

5. Two of the Forest Divisional Officers of the timber sales division at Perumbavoor and Palakkad had filed counter-affidavits in O.P. No. 2243 of 2003 wherein it is stated that in the Government order dated July 19, 2002 it is stated they have collected sales tax on forest development tax also. It is also stated that no sales tax was collected on the forest development tax till the receipt of the said communication and that as per the existing rule the amounts once collected and remitted over to the sales tax department cannot be refunded by the forest department. It is also stated that the contention that the forest development tax will not form part of the turnover had been examined in detail by the Government in consultation with the Commissioner of Commercial Taxes. With reference to the judgment in O.P. No. 378 of 1997, it is stated that the said judgment was rendered relying upon the decision of this Court in Madras Rubber Factory Limited Vs. State of Kerala, wherein it was held that rubber cess will not form part of taxable turnover but the said decision was overruled by the Supreme Court in State of Kerala v. Madras Rubber Factory Ltd. [1998] 108 STC 583 ker : (1998) 6 KTR 118 wherein the Supreme Court held that rubber cess even though it is paid by the manufacturer will form part of the taxable turnover. It is stated that in the light of this decision of the Supreme Court the forest development tax will form part of the taxable turnover. It is further stated that the contention of the petitioners that the State has no right to revive the collection of sales tax on the turnover of forest development tax is against the decision of the Supreme Court.

6. I have heard Mr. N.D. Premachandran and Mr. M.C. Sen, learned counsel appearing for the petitioners in all these cases, I have also heard Mr. Raju Joseph, learned Special Government Pleader appearing for the respondents.

7. As already noted, the short question that is to be considered is as to whether the forest development tax paid by the petitioners at the time of purchase of timber in auction from the forest depots of the State Government is liable to be included in the turnover for the purpose of sales tax under the KGST and CST Act.

8. According to the petitioners, forest development/tax paid cannot be included in the turnover for the purpose of levy of sales tax. But according to the forest department, it is liable to be included. The petitioners, as already noted, have relied upon the communication issued by the State Government to the Accountant-General in reply to a communication dated December 27, 1995 of the Accountant-General. In paragraph 3 of the said communication it is stated thus :

"Regarding the third joint Section 75A and 75B of the Kerala Forest Act, deals with the levy and utilisation of forest development taxes. It is very clear from the above section that the observation made is not correct. The five per cent forest development tax is collected for the consideration already paid. It is not proper to collect sales tax on a tax already collected for the consideration paid."

9. Another learned single Judge in the judgment in O.P. No. 378 of 1997 considered the very question. Relying upon the decision of the Full Bench of this Court in Madras Rubber Factory Limited Vs. State of Kerala, the learned Judge held that forest development tax will not form part of the taxable turnover exigible to sales tax. Based on this judgment, the forest department did not include the forest development tax in the taxable turnover and therefore no tax was collected on the element of forest development tax. Thus it is clear that it is only on the basis of the judgment passed by this Court in Madras Rubber Factory Limited Vs. State of Kerala, that the learned single Judge took the view that forest development tax will not form part of the taxable turnover exigible to sales tax. There is no dispute that the decision of the Full Bench of this Court in Madras Rubber Factory Limited Vs. State of Kerala, was reversed by the Supreme Court in State of Kerala Vs. Madras Rubber Factory Ltd., In view of the above decision of the Supreme Court the first respondent cannot be faulted for taking the view that the judgment in O.P. No. 378 of 1997 no longer represent the correct law. The Government order dated July 19, 2002 also, it must be noted, is based on the decision of the Supreme Court in State of Kerala Vs. Madras Rubber Factory Ltd., .

10. The contention of the learned counsel for the petitioners is that the forest development tax payable u/s 75A of the Forest Act is a separate and independent charge and that by no stretch of imagination it can be treated as part of the turnover of timber purchased by the petitioners from the forest department. According to the counsel this cannot be treated as forming part of the consideration for the sale of timber.

11. The State Legislature had inserted a new Chapter XA, by Notification No. 17554/Leg.B1/86 Law dated November 29, 1986 by Amendment Act 20 of 1986 levying forest development tax u/s 75A and also establishing the Kerala Forest Development Fund u/s 75B of the Forest Act. The relevant portions of Sections 75A and 75B inserted under chapter XA read thus :

"75A. Levy of forest development tax.--Notwithstanding anything contained in this Act, in respect of forest produce disposed of by the Government by sale, there shall be levied and collected a tax at the rate of five per cent, of the amount of consideration paid therefore :

Explanation.--In this sub-section, the term ''sale'' shall have the meaning assigned to it in the Kerala General Sales Tax Act, 1963 (15 of 1963).

(2) The tax payable under Sub-section (1) in respect of any forest produce shall be collected along with the consideration paid therefor.

(3) The tax levied under Sub-section (1) in respect of any forest produce shall be in addition to and not in lieu of any tax payable in respect of such forest produce under the Kerala General Sales Tax Act, 1963 (15 of 1963) or under any other law for the time being in force.

75B. Establishment of Kerala Forest Development Fund.--(1) There shall be established for the State a fund to be called the Kerala Forest Development Fund (hereinafter in this section referred to as the development fund).

(2) The proceeds of the tax levied and collected u/s 75A shall first be credited to the consolidated fund of the State and after deducting the expenses for collection as determined by the Government, the remaining amount shall, under appropriation duly made by law in this behalf, be entered into and transferred to the development fund.

(3) Any amount transferred to the development fund shall be charged on the consolidated fund of the State.

(4) No sum shall be paid or applied from and out of the development fund except as provided in Sub-section (5).

(5) The amount standing to the credit of the development fund shall be expended in such manner and subject to such conditions as may be prescribed by rules made under this Act for the purposes and to the extent specified below :

(a) sixty per cent, for the planting and maintenance of soft-wood trees and other species of trees, which form raw material for industries; and

(b) forty per cent, for forest research.

(6) The development fund shall be held administered on behalf of the Government by an officer not below the rank of Chief Conservator of Forests, subject to such general or special directions as may be given by the Government from time to time."

12. Section 75A of the Forest Act provides for levy and collection of tax at the rate of five per cent of the amount of consideration paid in respect of the forest produce disposed of by the Government by sale. The five per cent tax is geared to the amount of consideration paid in respect of the sale of the forest produce by the Government. Explanation to Sub-section (1) also gives the meaning of the term "sale" which shall have the same meaning assigned to it in the Act. Sub-section (1), as already noted, clearly provides for levy and collection of tax. Sub-section (2), however, says that the tax payable under Sub-section (1) in respect of any forest produce shall be collected along with the consideration paid therefor. Sub-section (3) further provides that the tax levied under Sub-section (1) in respect of any produce shall be in addition to and not in lieu of any tax payable in respect of such forest produce under the Kerala General Sales Tax Act, 1963 or under any other law for the time being in force.

13. Section 75B provides for creation of the forest development fund, crediting all the sum to the consolidated fund of the State, appropriation of the balance amounts after deducting the expenses incurred for collection to the development fund and its user for planting and maintenance of soft-wood trees and other species of trees which form raw material for industries; and also for forest research.

14. Thus it is clear that levy and collection of forest development tax u/s 75A of the Forest Act is for the specific purpose of creating a fund for the development of the forest industries and forest research.

15. The forest development tax levied u/s 75A(1) of the Forest Act, as already noted, is in respect of the forest produce disposed of by the State by sale and the tax at the rate of five per cent is on the amount of consideration for such sale. So in order to quantify the liability to pay forest development tax, the consideration for the sale of forest produce has to be determined. The explanation to Sub-section (1) defined the term "sale" which gives the same meaning as assigned to the term "sale" under the Act. Sub-section (2) casts an obligation to collect forest development tax along with the consideration for the sale of the forest produce. Sub-section (3) further says that the forest development tax levied under Sub-section (1) is in addition to and not in lieu of any tax payable in respect of any forest produce under the Act or under any other law for the time being in force.

16. Thus the first step in the matter of computation of the forest development tax levied u/s 75A of the Forest Act is to find out the consideration for the sale of the forest produce. The term "sale" defined in Section 2(xxi) of the Act means every transfer of property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration. The forest department in auction sale transfers the property in the forest produce, here timber for consideration. But for Section 75A(1) of the Forest Act, the consideration for the sale is the bid amount as well as the sales tax due thereon. It is on this consideration, the five per cent tax u/s 75A(1) has to be levied and collected by way of forest development tax.

17. Thus, on a conspectus of the provisions of Sub-sections (1), (2) and (3) of Section 75A of the Forest Act, particularly since the levy is on the consideration paid for the sale of forest produce, it is difficult to treat the forest development tax paid by the purchasers as part of the consideration for sale and thus forms part of the turnover subject to levy of tax under the Act.

18. Now let me consider as to whether the forest development tax collected u/s 75A of the Forest Act can be treated as forming part of the turnover of sale of timber by the forest department of the State under the Act.

19. u/s 5 of the Act every dealer other than a causal trader or agent of a non-resident dealer whose total turnover for a year is not less than two lakh rupees and every casual trader or agent of a non-resident, whatever be his total turnover for that year, shall pay tax on his taxable turnover for the year in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedule. As already noted, the forest produce purchased by the petitioners in these cases is timber. u/s 5(1)(v) of the Act the dealer has to pay tax on his taxable turnover in the case of goods specified in the Fifth Schedule at the two points specified against such goods in the said Schedule. The proviso to Section 5(1) of the Act is not very much relevant for the purpose of these cases and hence not dealt with. Item No. 8 in the Fifth Schedule is timber. The goods falling under the Fifth Schedule are taxable at two points u/s 5(1) of the Act. The first point of levy of tax on timber is at the point of first sale in the State by a dealer who is liable to tax u/s 5 of the Act to a registered dealer for sale. The rate of tax at that point is 10 per cent. The second point of levy is at the point of last sale in the State by a dealer who is liable to tax u/s 5 of the Act and the rate of tax is two per cent. Where there are no two points of sale in the State, then at the point of first sale in the State by a dealer who is liable to tax u/s 5 to a person other than a registered dealer or to a dealer other than for sale, the rate of tax is 12 per cent.

20. Section 2(viii) of the Act defines a "dealer" to mean any person who carries on the business of buying, selling, supplying or distributing goods directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and includes many other persons specified thereunder. Explanation (2) to the definition of "dealer" clearly provides that the Central Government or a State Government, which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash or for deferred payment, ................. shall be deemed to be a dealer for the purposes of this Act. The term "sale" is defined in Section 2(xxi) of the Act to mean every transfer whether in pursuance of a contract or not of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge. Explanation (IA) states that a transfer of property in goods by the Central Government or a State Government for cash or for deferred payment or other valuable consideration whether or not in the course of business, shall be deemed to be a sale for the purpose of this Act. The term "turnover" is defined in Section 2(xxvii) to mean the aggregate amount for which goods are either bought or sold, supplied or distributed by a dealer ...........whether for cash or for deferred payment or other valuable consideration. Explanation (2) provides that subject to such conditions and restrictions, if any, as may be prescribed in this behalf the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or before, the delivery thereof and any cash or other discount on the price...............the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that for the former.

21. "Total turnover" is defined in Section 2(xxvi) and "taxable turnover" is defined in Section 2(xxv) of the Act. Rule 8(4) of the Kerala General Sales Tax Rules provides for computation of the total turnover and Rule 9 provides for determination of the taxable turnover.

22. The liability to pay tax in respect of the turnover of timber u/s 5(1)(v) is on the dealer who sells the goods as provided under the Fifth Schedule since the first point of levy under entry 8 of the Fifth Schedule is at the point of first sale in the State by a dealer who is liable to pay tax u/s 5 to the registered dealer for sale. The petitioners are all registered dealers both under the KGST and CST Act. They have purchased timber from the various depots of the State. By virtue of the definition of "dealer", particularly explanation (2) thereof, the State Government is a dealer. The turnover involved is also above the non-taxable limit. Thus it is the turnover of the dealer, here the Forest Department of the State, which is exigible to sales tax u/s 5 of the Act. The turnover, as already noted, is defined in Section 2(xxvii) of the Act which means the aggregate amount for which goods are either bought or sold.

23. There is no dispute that the petitioners have paid consideration for sale of timber as well as the forest development tax at the time of purchase of timber. The forest development tax paid u/s 75A of the Forest Act cannot be said to fall within Clause (i) of explanation (2) to Section 2(xxvii), for, it cannot be treated that the forest development tax is charged for anything done by the forest department in respect of the goods sold at the time or before the delivery thereof. Thus unless the forest development tax falls within the main part of the definition of turnover, it cannot form part of the turnover. Can it be said that forest development tax paid u/s 75A of the Forest Act on the consideration for sale of the forest produce is taken in within the ambit of the expression "the aggregate amount for which the goods are bought or sold"?

24. The Supreme Court in Joint Commercial Tax Officer, Division III, Madras Vs. Spencer and Co. and Others, , had occasion to consider the question whether the sales tax which a seller of foreign liquor was liable to pay u/s 21A of the Madras Prohibition Act, 1937 did form part of the turnover on which sales tax could be levied under the Madras General Sales Tax Act, 1959. The relevant portion of Section 21A of the Madras Prohibition Act, 1937 reads thus :

"Every person or institution which sells foreign liquor--

(a)................

(b)................

shall collect from the purchaser and pay over to the Government at such intervals and in such manner as may be prescribed, a sales tax calculated at the rate of eight annas in the rupee, or at such other rate as may be notified by the Government from time to time, on the price of the liquor so sold."

25. The Supreme Court with reference to the said provision observed thus :

"It is clear from Section 21-A of the Madras Prohibition Act, 1937, that the sales tax which the section requires the seller of foreign liquor to collect from the purchaser is a tax on the purchaser and not on the seller. This is what makes the authorities on which counsel for the appellants relied inapplicable to the cases before us. u/s 21-A the tax payable is on the price of the liquor and that tax is to be paid by the purchaser; the seller is required to collect the tax from the purchaser which he has to pay over to the Government. Section 21-A makes the seller a collector of tax for the Government, and the amount collected by him as tax under this section cannot therefore be a part of his turnover. Under the Madras General Sales Tax Act, 1959, the dealer has no statutory duty to collect the sales tax payable by him from his customer, and when the dealer passes on to the customer the amount of tax which the former is liable to pay, the said amount does not cease to be the price for the goods although ''the price is expressed as X plus purchase tax''. [Paprika Ltd. v. Board of Trade [1944] 1 All 372 : [1944] 1 KB 327."

26. The Supreme Court again in George Oakes (P.) Ltd. Vs. State of Madras, while interpreting the provisions of the Madras General Sales Tax Act, 1939 observed that the expression "turnover" meant the aggregate amount for which goods were bought or sold whether for cash or deferred payment or other valuable consideration and when a sale attracted purchase tax and the tax was passed on to the consumer what the buyer had to pay for the goods included the tax as well and the aggregate amount so paid would fall within the definition of "turnover". The Supreme Court in the above case was considering the meaning of the expression "turnover" appearing in a statute in which there was no provision authorising the seller to recover the sales tax payable by him from the purchaser although the price of the goods realised by him included the sales tax payable by him and thus he had passed on his liability to the purchaser. The Supreme Court in Delhi Cloth and General Mills Co. Ltd., etc. Vs. The Commissioner of Sales Tax, Indore, held that the expression "sale price" as defined in Section 2(o) of the Madhya Pradesh General Sales Tax Act, 1958, included the sales tax collected by a dealer from his purchaser as there was no provision in that statute imposing any liability on the purchaser to pay the tax imposed by it on the dealer and there was no law empowering the dealer to collect the tax from his buyer.

27. Almost a similar situation was considered by the Supreme Court in Anand Swarup Mahesh Kumar Vs. Commissioner of Sales Tax, The appellant in that case was a firm carrying on business at Mandi Anandganj, Barut, District Meerut in the State of Uttar Pradesh and was a dealer as defined in the U.P. Sales Tax Act, 1948. The appellant filed the appeal by special leave under Article 136 of the Constitution against an order passed by the Assistant Commissioner (Judicial), Sales Tax, Meerut Range, Meerut, upholding the inclusion of the market fee and the commission payable to the commission agent operating within a market area established under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, referred to as "the Adhiniyam", in the turnover of purchases of the appellant for purposes of levy of sales tax u/s 3-D of the U.P. Sales Tax Act. The Supreme Court had granted leave to appeal to the appellant since the question involved had already been decided by the High Court of Allahabad in Durga Das Narain Das v. State of Uttar Pradesh (Civil Misc. Writ Petition No. 301 of 1978, dated December 18, 1978, Allahabad High Court). One of the contentions urged by the appellant before the Supreme Court was that the market fee payable under the Adhiniyam, being a sum which can be collected from the purchaser by virtue of the provisions contained in Section 17(iii)(b) of the Adhiniyam by the commission agent which requires the same to be paid to the market committee, cannot be considered as forming part of the consideration paid or payable by the purchaser to the commission agent in respect of the purchase of goods in auction held within a market area established under the Adhiniyam and, therefore, it cannot be included in the turnover of purchases for purposes of levy u/s 3-D of the U.P. Sales Tax Act. The Supreme Court considered the question whether market fee paid on the transaction of sale or purchase of specified agricultural produce in the market area established under the Adhiniyam can be included in the turnover for purposes of levy. Sub-clause (b) of Clause (iii) of Section 17 of the Adhiniyam empowers the market committee to levy market fee and utilise such market fee and other fees collected by it under that section for the purposes of the Adhiniyam. Section 17(iii)(b) had undergone amendment since 1973 and a new clause was substituted by U.P. Act No. 7 of 1978 with retrospective effect from June 12, 1973. The relevant portion reads thus :

"17 ...............

(iii) ...............

(b) ................

(1) if the produce is sold through a commission agent, the commission agent may realise the market fee from the purchaser and shall be liable to pay the same to the ''committee''."

28. The contention of the appellant was that when a dealer who in that goods happens to be a commission agent is permitted by law to collect the market fee which he is liable to pay to the market committee from the purchaser such market fee cannot form part of the consideration for sale and therefore cannot be included in the turnover of purchases for the purpose of levy of tax under the U.P. Sales Tax Act. The contention of the State Government was that all sums paid by a purchaser to a seller or to a commission agent for the purpose of purchase of the goods including any tax or fee payable by him form the consideration for the purchase and therefore are liable to be included in the turnover of purchases. The Supreme Court, after referring to the earlier decisions of the Supreme Court in George Oakes (P.) Ltd. Vs. State of Madras, , it was observed that from the observations made in the decisions referred to above, it follows that where a dealer is authorised by law to pass on any tax payable by him on the transaction of sale to the purchaser, such tax does not form part of the consideration for purposes of levy of tax on sales or purchases but where there is no statutory provision authorising the dealer to pass on the tax to the purchaser, such tax does form part of the consideration when he includes it in the price and realises the same from the purchaser. It was further observed that the essential factor which distinguishes the former class of cases from the latter class is the existence of a statutory provision authorising a dealer to recover the tax payable on the transaction of sale from the purchaser and that it is on account of the above distinction that the Supreme Court had held in Joint Commercial Tax Officer, Division III, Madras Vs. Spencer and Co. and Others, , that the sales tax which a seller of foreign liquor was liable to pay u/s 21-A of the Madras Prohibition Act, 1937, did not form part of the turnover on which sales tax could be levied under the Madras General Sales Tax Act, 1959, because the seller was entitled to recover the sales tax payable by him from the purchaser. The Supreme Court relied on the observations in Joint Commercial Tax Officer, Division III, Madras Vs. Spencer and Co. and Others, extracted earlier in this judgment and observed that there is no substantial difference between Section 21-A of the Madras Prohibition Act, 1937 and Section 17(iii)(b) of the Adhiniyam. The Supreme Court thereafter observed as follows :

"Whereas the levy u/s 21-A of the Madras Prohibition Act, 1937, was sales tax payable to the State Government, u/s 17(iii)(b)(1) of the Adhiniyam, the levy in question is market fees payable to the market committee and secondly whereas the former provision stated that ''every person or institution which sells foreign liquor..............shall collect from the purchaser and pay over to the Government........'', the latter provision states that ''if the produce is sold through a commission agent, the commission agent may realise the market fees from the purchaser and shall be liable to pay the same to the committee''. The levies in both the cases are statutory although under the Madras Prohibition Act, 1937, it is a tax payable to the Government and under the Adhiniyam, it is a fee payable to a market committee which is a statutory body. The only distinguishing feature between the two laws is that whereas the Madras Act provides that every person who sells foreign liquor shall collect sales tax from the purchaser, the Adhiniyam provides that the commission agent may realise the market fees from the purchaser. The use of ''shall'' in the former case and of ''may'' in the latter case is not of much consequence insofar as the question involved in the present case is concerned because in both the cases the seller or the commission agent who is liable to pay the tax or the fee, as the case may be, is entitled statutorily to realise it from the purchaser and wherever a dealer is authorised by law to do so, the tax or fee realised by him from the purchaser cannot be treated as part of the turnover for purposes of levy of sales tax. The contention of the appellant that market fees payable under the Adhiniyam cannot be included in the turnover of purchases has, therefore, to be upheld."

29. According to me, the decision of the Supreme Court in Anand Swarup Mahesh Kumar Vs. Commissioner of Sales Tax, , following the decision in Joint Commercial Tax Officer, Division III, Madras Vs. Spencer and Co. and Others, , fits in with the facts of the present case where the amount of forest development tax collected u/s 75A of the Forest Act is sought to be included in the turnover for the purpose of levy of sales tax. I have already extracted the provisions of Section 75A of the Forest Act. On the wordings of the said section, I find it difficult to hold that forest development tax at the rate of five per cent in respect of the consideration for the sale of forest produce paid as forming part of the turnover of the dealer.

30. Here it must be noted that the liability to pay forest development tax was on the purchaser and not on the selling dealer, in the instant case, the forest department. The forest development tax is levied in respect of the consideration for the sale of forest produce and it was the obligation on the part of the forest department to collect the same along with the consideration for the sale of the forest produce. The forest department had acted only as an agent of the State for the purpose of collection of the forest development tax and for remitting the same to the forest development fund created u/s 75B of the Act. The forest department was acting on behalf of the State in the matter of collection. As such, by no stretch of imagination, the forest development tax paid by the petitioners can be treated as forming part of the turnover of the dealer-forest department, which sold the goods to the petitioners. The decisions of the Supreme Court in Spencer & Co.''s case [19751 36 STC 188 SC and Anand Swarup Mahesh Kumar Vs. Commissioner of Sales Tax, squarely apply.

31. Now I will deal with the decision of the Supreme Court in State of Kerala Vs. Madras Rubber Factory Ltd., This Court in a writ petition, O.P. No. 378 of 1997, filed by a dealer engaged in the manufacture of furniture, held that the forest development tax paid u/s 75A of the Forest Act will not form part of the taxable turnover exigible to sales tax, relying on the decision of the Full Bench of this Court in Madras Rubber Factory Limited Vs. State of Kerala, It is this decision of the Full Bench which is reversed by the Supreme Court in State of Kerala Vs. Madras Rubber Factory Ltd., . The question involved in the case before the Supreme Court was as to whether rubber cess payable under statutory obligation will form part of the producers'' turnover. The Supreme Court, after adverting to the provisions of the Act, particularly Sections 2(xxvii) and 5(xxv) and the relevant Rules and Sections 12(1) and (2) of the Rubber Act and Rule 33D of the Rubber Rules, reversed the decision of the Full Bench and held that the cess which is collected is the duty of excise on all rubber produced in India is evident from the provisions of Section 12(1) of the Rubber Act, that the rate of cess is prescribed u/s 12(1) itself, that the excise duty referred to in Section 12(1) is not determined with reference to any price, but the duty is determined by applying a fixed rate to the weight of the rubber produced. The change brought about by the amendment of Sub-section (2) of Section 12 is that the duty is to be collected by the Board in accordance with the rules made in this behalf either from the owner of the estate on which the rubber is produced or from the manufacturer by whom such rubber is used. The court observed that the opening words of Sub-section (2) of Section 12 refers to "the duty of excise levied under Sub-section (1)" is important and these words clearly provides that the levy of excise duty is not under Sub-section (2) but under Sub-section (1) of Section 12 of the Rubber Act. It is observed that by reason of Section 12(1) of the Rubber Act, a cess at the rate prescribed is statutorily levied on the rubber so produced and the liability to pay the said amount of cess gets attached to the rubber so produced and that the duty element would be inherent in the price which is paid for the purchase of the said goods. It was further observed that the duty of excise is one which directly relates to the production or manufacture of goods, but can be collected at a latter stage is now no longer open to doubt.

32. Reading Section 12(1) and (2) together, it was observed that excise duty being a levy on the manufacture or production of goods could ordinarily have been collected at that stage itself and that this was in fact the position prior to the amendment in 1960. The Supreme Court further observed that the incidence of duty is directly relatable to the production of rubber. The character of levy is not altered merely because the payment of duty is deferred till the purchase of the rubber by the manufacturer, the character of levy is on the production of the rubber and the duty paid should therefore be deemed to be part of the price that the producer had paid for the goods purchased and that neither a provision for deferred payment nor the liability cast on the manufacturer of rubber goods for payment of the duty to facilitate easy collection can alter the duty as being one on the production of rubber, as provided by Section 12(1) of the Rubber Act and such duty even though paid later will be a part of the price of goods purchased and would therefore form part of the producers'' turnover.

33. The position obtained in the case on hand stands on a different footing. Forest development tax paid u/s 75A of the Forest Act does not get attached to the production of timber or the sale price of timber. It is an independent levy on the purchaser. Such independent levy cannot be treated as part of the turnover of the selling dealer. The position of rubber cess u/s 12(1) of the Rubber Act is in the nature of an excise duty and it is in those circumstances the Supreme Court has held that excise duty is a duty on manufacturer or production of goods and therefore it is the obligation of the person who produces or manufactures the goods and the fact that the said liability has been shifted to the latter point of time will not alter the nature of the excise duty.

34. State of Kerala Vs. Madras Rubber Factory Ltd., has no application to the present case. Here it is relevant to note that the Supreme Court had adverted to its earlier decision in Anand Swarup Mahesh Kumar Vs. Commissioner of Sales Tax, and the decision of the Constitution Bench of the Supreme Court in McDowell and Co. Ltd. Vs. Commercial Tax Officer, had distinguished the said position. Here it must be noted that McDowell and Co. Ltd. Vs. Commercial Tax Officer, was also concerned with the inclusion of excise duty on the sale of liquor in the taxable turnover of the manufacturer. The decision in Anand Swarup Mahesh Kumar Vs. Commissioner of Sales Tax, was distinguished by the Constitution Bench in McDowell and Co. Ltd. Vs. Commercial Tax Officer, by observing that the decision on the position of turnover of purchase in the U.P. Sales Tax Act and the provisions of the Adhiniyam and the rules made thereunder that market fee and commission payable to an agent are very different from excise duty and a very different position emerged in law in regard to them. It was further observed that no support is available from that decision for the appellant''s case. It was also observed that the relevant consideration is not whether the law permits the incidence of the duty to be passed on to the purchaser but whether there is a prohibition against the passing of it. If there is no bar, the incidence would be passed to the purchaser in accordance with the normal commercial practice.

35. The decision of the Supreme Court in Harsh Dhingra Vs. State of Haryana and Others, is also relevant in this context. Under the provisions of the Fertilizer (Control) Order, 1985, the maximum selling price for different types of fertilisers was determined under Clause (3) and no manufacturer could sell or offer for sale any fertiliser at a price exceeding the maximum price or the rate fixed under Clause (3). Non-compliance or violation of the order attracted penal consequences. In order to ensure that no hardship was caused to the manufacturer and sufficient supplies were available, an administrative scheme was introduced in 1977 by the Government of India for determination of a retention price to be paid by way of subsidy to the manufacturer. The scheme was revised in 1980 and under the revised scheme, bills for the retention price were to be submitted by the manufacturer when the fertiliser was moved out of the factory along with proof of movement. Claims for the retention price were to be made in the form prescribed, and one of the conditions therein was that the fertiliser which was moved had been sold or would be sold for agricultural purposes. The question was whether the retention price received by the appellant, a manufacturer of fertilisers, was part of the sale price and had to be included in the turnover for the purpose of the Tamil Nadu General Sales Tax Act, 1959. The Supreme Court held that it is that sale consideration, whether in cash or otherwise, which is receivable in respect of sales made by the dealer which can possibly form part of the turnover of a dealer. It is that sum which can legitimately be regarded as forming part of the aggregate amount for which the goods have been bought or sold and the sum has to be paid either by the purchaser or on his behalf by some other person and that any sum received de hors the contract of sale from another entity, whether it be the Government or anyone else, cannot be regarded as being an amount which would form part of the sale price on which tax is payable. The Supreme Court following the observations in George Oakes (P.) Ltd. Vs. State of Madras, , has observed that "so far as the purchaser is concerned, he pays for the goods what the seller demands, viz., price even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by purchaser should not be treated as the consideration for the sale and included in the turnover". With reference to the said observation, the Supreme Court held that it is that amount which flows from the purchaser to the seller which alone would form part of the turnover of the seller and any sum received de hors the contract of sale from another entity whether it be the Government or anyone else, cannot be regarded as being an amount which would form part of the sale price on which tax is payable. The case on hand cannot be equated with the case of subsidy as in the case of excise duty.

36. In the present case, the question is as to whether the forest development tax paid u/s 75A of the Forest Act will form part of the turnover for the purpose of levy of tax u/s 5 of the Act. As already noted, the forest department is the dealer which is liable to pay tax on the turnover of sales of forest produce at the point of first sale in the State as per entry 8 of the Fifth Schedule to the Act. The forest development tax paid by the petitioners on the consideration for the sale of forest produce cannot form part of the turnover of the dealer, which is the forest department. The forest department, as already noted, has been collecting the forest development tax from the petitioners only as the agent of the State and on behalf of the Government and the forest development tax so collected has to be made over to the Forest Development Fund after deducting the expenses incurred in regard to such collection. By no stretch of imagination it can form part of the turnover of the dealer, who sold the forest produce to the petitioners. Hence it is declared that forest development tax paid by the petitioners and collected by the forest department u/s 75A of the Forest Act does not form part of the turnover of the dealer--the forest department for the purpose of levy of tax u/s 5 of the Act. The forest department is not entitled to collect sales tax on the element of forest development tax u/s 5 of the Act.

37. Now the question is as to whether the petitioners are entitled to get refund of the tax paid on the element of forest development tax on the purchase of forest produce from the forest department. As already noted, as per the provisions of Section 75A of the Forest Act, forest development tax has to be paid at the rate of five per cent of the consideration for the sale of forest produce and the consideration will take in both the bid amount and the sales tax paid on the said amount. It would appear that the forest department has levied forest development tax only on the bid amount exclusive of the sales tax due on the bid amount. This would require a recomputation of the liability to pay forest development tax u/s 75A of the Forest Act. The question of payment of balance amount left after recomputation and adjustment towards forest development tax by way of refund to the petitioners will arise in cases where sales tax was paid on the element of forest development tax also. Whether the petitioners can get refund of the excess tax paid is again a matter which would necessarily attract the doctrine of unjust enrichment. In the instant case, the petitioners are dealers in timber or persons engaged in the manufacture of furniture, etc., by using timber purchased from the forest department. They had paid sales tax on the element of forest development tax also without demur. In such circumstances, in all probability the petitioners might have fixed the price of timber when sold or by selling the finished products made out of timber in such a way as to include the tax paid on the element of forest development tax and passed on the liability to consumers. In such circumstances, if refund is ordered, that will amount to unjust enrichment. This certainly is a prima impression. In such circumstances, it is open to the petitioners to agitate this matter before the concerned authorities. So far as the payment of sales tax demanded on the element of forest development tax is concerned, certainly, the petitioners are entitled to relief, however, subject to recomputation of the liability to forest development tax as observed earlier. Petitioners in all these writ petitions succeed to the above extent.

Original petitions are disposed of as above.

Order on C.M.P. No. 48756 of 2003 in O.P. No. 28576 of 2003 dismissed.

Order on C.M.P. No. 4043 of 2003 in O.P. No. 2243 of 2003 dismissed.

Order on C.M.P. No. 15569 of 2003 in O.P. No. 8969 of 2003 dismissed.

Order on C.M.P. No. 16431 of 2003 in O.P. No. 9431 of 2003 dismissed.

Order on C.M.P. No. 17086 of 2003 in O.P. No. 9886 of 2003 dismissed.