@JUDGMENTTAG-ORDER
N. Kumar, J.@mdashThe Revenue has preferred this revision against the order passed by the Karnataka Appellate Tribunal holding that the order passed u/s 18AA both under the Karnataka Sales Tax Act and the Central Sales Tax Act are illegal and consequently setting aside the same.
2. For the purpose of convenience the parties are referred to as they are referred to before the Karnataka Appellate Tribunal.
3. M/s. S.L.N. Coffee Curing Works, is a coffee curer and effecting sale of cured coffee. The assessment for the year 2003-04 was concluded on November 28, 2003. Thereafter the assessing authority noticed that the orders passed were erroneous. A portion of the turnover had escaped from assessment to tax. Though the assessee was a coffee curer and though he was liable to pay tax at the point of purchases, as per entry No. 3 of the Third Schedule to the Karnataka Sales Tax Act, 1957 for short, hereinafter referred to as "the KST Act", tax was levied on the local and inter-State sales turnovers. Levy was found to be wrong. Therefore, proceedings were initiated u/s 12A of the Act and reassessment orders were passed. While doing so, the assessing authority invoked the provisions of section 18AA of the KST Act and passed orders u/s 9(2) of the Central Sales Tax Act, 1956 read with section 18AA of the KST Act and forfeited the illegal collections. Aggrieved by the said order, the assessee preferred an appeal to the Joint Commissioner, who affirmed the said order and dismissed the appeal. It is against the said order, a second appeal was preferred before the Tribunal. The Tribunal, on consideration of the material on record formulated two points for consideration, which reads as under :
(1) Whether the first appellate authority is justified in subjecting the purchase of coffee seeds by the appellant under entry No. 3 of the Third Schedule to the KST Act, 1957 ?
(2) Whether the penalty levied u/s 18AA of the KST Act, 1957 regarding CST collected is just and proper ?
4. In answering the first point, it was held that the assessee has admitted the purchase of coffee seeds from unregistered dealers and failed to pay tax at the purchase point. Subsequently he paid corresponding tax along with compounding fee. In those circumstances, the assessing authority was justified in invoking section 12A and in making the reassessment. Entry No. 3 of the Third Schedule to the KST Act, exclusively applies to coffee curer and action of the first appellate authority in upholding the reassessment order passed by the assessing authority u/s 12A is justified. Therefore, the said finding was affirmed. However, dealing with the second question, it held that there is no bar on the assessee to collect or recoup the taxes, which he has incurred at the time of purchase. The levy of tax is on the taxable turnover, which depends on the point of levy. It is nowhere mentioned that a dealer shall not collect any amount as tax on which he was made liable, to pay tax on the purchases. At the point of purchase, if the tax is levied, then only occasion for a dealer to collect tax arises when the latter is sold. The assessee, as a result of agreement collected tax at the same rate at which he was liable to pay. Though he is liable to pay tax on sales, it was made known to him that he was liable to pay tax on the point of purchase itself. The law does not therefore prohibit any person from collecting tax from the customers even if the same is to be paid at the point of purchase itself. What the law prohibits is any excess collection. Liability to pay tax is quantified by the assessment. If the dealer is found to have collected more tax than what is quantified to be paid, then the question of excess collection or illegal collection arises, in which case, only the provision of section 18AA could be invoked. In this case, though the assessee is liable to pay tax at the point of purchase there is no bar on him to collect tax from his customers. Therefore it held that there is no contravention of section 18 of the Act. It is this finding of the Tribunal, which is challenged by the Revenue before this court.
5. The learned Government-Advocate assailing the impugned order contends that when admittedly the assessee was making purchase from unregistered dealers, there is statutory liability imposed on him u/s 6 of the Act to pay purchase tax. Once he pays the purchase tax at the time of purchase, there is a prohibition for him to collect tax on the same goods at the time of selling. In this case, admittedly, he has collected four per cent tax on sales, which is totally prohibited and therefore authorities rightly invoked section 18AA and forfeited the said amount. Interpretation placed by the Tribunal on the aforesaid provision is illegal and contrary to the statutory provisions.
6. Per contra, the learned counsel appearing for the assessee contends that what the law prohibits is only collection of tax, when there is no liability to pay tax. When admittedly, there was liability cast on the assessee to pay purchase tax, if he has collected sales tax from the purchaser and paid tax to the Revenue, he cannot be found fault with on the ground that he has not paid the purchase tax. When the purchase tax and the sales tax are one and the same and when the assessee had not paid the purchase tax, he collected the sales tax and therefore he contravened no law. Therefore a case for invoking section 18AA is not made out. Therefore she submits that the impugned order does not call for interference.
7. Therefore the only point that arises for our consideration in this appeal is :
When the statute imposes the liability to pay purchase tax by the assessee, whether the assessee is entitled to levy and collect sales tax on the ground that he has not paid the purchase tax and whether it contravenes section 18 of the Act ?
8. From the aforesaid facts it is clear that the assessee is a registered dealer under the Act. The assessee has purchased coffee seeds from unregistered dealers. u/s 6 of the Act, the assessee being a dealer under the Act is liable to pay purchase tax at the rime of purchase. Therefore the case of the assessee squarely falls within section 5(3)(b) of the Act, which reads as under :
In the case of purchase of any of the goods mentioned in column (2) of the Third Schedule, at the rate and only at the point specified in the corresponding entries of columns (4) and (3) of the said Schedule, on the dealer liable to tax under this Act, on his taxable turnover of purchases in each year relating to such goods.
9. Relevant entry in the Third Schedule reads as under :
|
Sl. No. |
Description of the goods |
Point of levy |
Period for which applicable |
Rate of tax |
|
3 |
Coffee beans and coffee seeds (whether raw or roasted),-- (i) When purchased by coffee curers from persons not liable to tax under the Act. |
At the point of purchase in the State |
1-4-95 to 31-3-97 1-4-97 to 31-12-99 From 1-1-2000 |
6% 4% 8% |
10. Therefore, from the aforesaid provisions it is clear that the assessee being a coffee curer, when he purchased coffee seeds/beans from unregistered dealers, he is liable to pay tax on such purchases at the point of purchase at the rates mentioned in column No. 4. Therefore the finding of the Tribunal that the order passed u/s 12A foisting the said liability on the assessee is proper. It is not challenged by the assessee and it has attained finality. Now the only question is, instead of paying purchase tax, was the assessee justified in collecting tax at the point of sale and remitting the tax to the Revenue and could avoid consequences of section 18. In this regard it is necessary to look at section 18, which reads as under:
18. Collection of tax by dealers.--(1)(a) A person who is not a registered dealer liable to pay tax shall not collect any amount by way of tax or purporting to be by way of tax under this Act nor shall a registered dealer collect any amount by way of tax or purporting to be by way of tax at a rate or rates exceeding the rate or rates at which he is liable to pay tax under the provisions of this Act.
(b) No person shall collect any amount by way of tax or purporting to be by way of tax in respect of sales of any goods or any transaction on which no tax is payable by him under the provisions of this Act.
11. Therefore the aforesaid provision makes it clear that firstly a person who is not registered as a dealer under the Act has no authority to collect any amount by way of tax from the persons from whom he makes purchases. Secondly, a registered dealer cannot levy and collect tax at a rate or rates in excess of what is prescribed under law. Thirdly, if a dealer is not liable to pay tax under the provisions of this Act, he shall not collect the tax from the person to whom he has sold the goods. In the instant case, the assessee is a registered dealer. Under the provisions of the Act, he is liable to pay purchase tax when he makes purchases from an unregistered dealer. Therefore the liability to pay tax is at the point of purchase. Once he pays tax on such purchases, in law, he is not liable to pay tax at the point of sale. If he is not liable to pay tax at the point of sale, he is debarred from collecting tax on such sale. If he collects tax, it is in contravention of the statutory provisions and therefore, the said mischief falls within section 18 of the Act.
12. Section 18AA deals with payment and disbursement of amounts wrongly collected by dealer as tax. It provides that where any amount is collected by way of tax or purporting to be by way of tax from any person by any dealer in contravention of section 18, whether knowingly or not, such dealer shall pay the entire amount so collected, to the assessing authority within twenty days after the close of the month in which such amount was collected, 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 the Act. Sub-section (2) provides for forfeiture of the amount.
13. In this context the observation of the Tribunal that the law does not prohibit any person from collecting the tax from the customers even if the same is to be paid at the point of purchase is contrary to the aforesaid statutory provisions. Similarly, the observation that though he was liable to pay tax at the stage of purchase and he has paid tax at the stage of sale and therefore there is no contravention, also runs counter to the aforesaid statutory provisions. Therefore the error committed by the Tribunal is patently illegal and cannot be sustained. In that view of the matter, the order passed by the Tribunal is hereby set aside. Hence, we pass the following order :
Revision is allowed.
The impugned order is set aide.
The order of the first appellate authority is restored.
