1 hvn IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SALES TAX APPLICATION NO. 67 OF 2009 IN REFERENCE APPLICATION NO. 247 OF 2008 M/s. Hyundai Motors (India) Ltd. Vasundhara Building, Ground Floor, Bhalubhai Desai Road, Mumbai 400 026 ... Applicant Versus The Maharashtra State, Mumbai ... Respondent Mr. V.P. Patankar with Mr. M.M. Vaidya for the Applicant. Mr. Milind More, A.G.P. for Respondent. CORAM : FERDINO I. REBELLO & D.G. KARNIK, JJ. DATED : JULY 17 2009 ORAL JUDGMENT (Per Ferdino I. Rebello,J.): By consent of the parties the application taken up for hearing and heard forthwith. The following two questions have been framed for consideration : “(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the applicant had separately collected tax and therefore, he was not entitled to the exemption claimed under Entry 1 of Gro0up H of the Notification issued under section 41 of the Bombay Sales Tax Act, 1959? 2 (2) Whether the Tribunal was justified in rejecting the alternative contention to forfeit the tax @1% and to allow the exemption under Entry 1 of Group H of the Notification issued under section 41 of the Bombay Sales Tax Act, 1959?” 2. For the purpose of deciding the reference, a few facts may be taken into consideration. The applicant herein supplies goods to the canteen stores department. The applicant carries on the business of buying and selling the motor vehicles spare parts and accessories and is duly registered under the provisions of the Bombay Sales Tax Act and Central Sales Tax Act. For the period from 1.4.2001 to 31.3.2002 the appellant was assessed by the Assistant Commissioner of Sales Tax (Assessment) on 25.1.2005 under the provisions of the B.S.T. Act. The assessment resulted in the demand notice of Rs.13,52,431/-. 3. The applicant aggrieved by the order of the Assessing Authority had filed an appeal before the Deputy Commissioner of Sales Tax. In the appeal the appellant had raised the following grounds : (1) The learned Assistant Commissioner of Sales Tax has erred in observing that the appellant has sold the goods directly to the army personnel and not to the canteen stores department? (2) The A.O. had erred in observing that the appellant had collected tax separately. Hence, the claim of sales being subjected to sales tax @ 12%. The first appellate authority after considering various contentions and the documents on record came to the conclusion that the appellant had effected sales to 3 canteen stores department and not to individuals. However, as regards the claim of the appellant of sales being exempted under Entry I of Group H of the Notification the first appellate authority observed that the appellant had collected tax separately and contravened the condition. The applicant therefore, was not entitled to the benefit of the notification issued under section 41 of the B.S.T. Act. Accordingly the appeal was dismissed against which the second appeal was preferred. 4. Before the learned tribunal it was contended that in the purchase order given to the canteen stores department by the applicant showed the amount of purchase order as Rs.4,99,972/- which amount nowhere reflects any tax amount. In the sales invoice, however, it was shown that the Appellants had collected tax separately. After considering the contention advanced on behalf of the applicant herein, the learned tribunal addressed itself to the issue as to whether there is separate tax collected as claimed or not, and went on to observe that answer to the issue can be answered only on the basis of sales invoice. Considering that in the invoice the tax had been collected, the tribunal observed that the condition laid down by the notification are required to be strictly followed. The view of the lower authority was affirmed. 5. The applicant aggrieved applied by way of reference to refer the question as now framed. By order dated 27.2.2009, that was rejected and consequently the application before this court. 6. We may first consider the first contention which is that no tax has been 4 collected separately. The documents on record would show that the Appellant had in fact collected 1% of the tax. The question therefore, is whether inspite of having collected the tax of 1% the applicants, can avail of the benefit of notification. The relevant entry in the notification reads as under : Sr.No 2 3 4 GROUP H Sales to the Canteen Stores Department or the Indian Naval Canteen Service of goods listed in the price list published periodically by the Chairman, Board of Administration, Canteen Stores Department or the General Manager, Indian Naval Canteen Service except those specified in the Appendix hereto, certified by an officer not below the rank of Commanding officer, that the goods purchased will be resold directly or through canteens anywhere within the territory of India to the members of the armed forces of India at the price fixed by the Government of India. Explanation : For the purpose of Sales of general stores specified sections A,D,E,F,G,H and J of the Retain Price List published by the General Manager, Indian Naval Canteen service the Expression “members of the Armed Forces of India”, wherever it occurs in entries 1,2,3,4,5 and 6 of Group G shall include ex-servicemen and also the families of the deceased personnel of armed forces on production of the identity cards issued by the respective service Head quarters. Whole of tax in case of sales of potable alcohol and in any other case in excess of one percent. (i) The selling Registered dealer shall not separately collect tax. (ii) The purchasing officer in -charge furnishes to the selling dealer a declaration in Form “H”. (iii) The goods purchased are for resale directly or through Canteens anywhere within the territory of India to the members of the Armed forces of India at the prices fixed, by the Government of India. 5 From the notification it is clear that one of the conditions is that the selling registered dealer shall not separately collect tax. In the instant case admittedly the Petitioner has collected tax of 1%. We are dealing with an exemption provided by the notification. It is true that the Petitioner after collecting tax may have paid the sales tax. That is no answer considering the express terms of the notification. Once the applicant has violated the condition in the notification, the conditions necessary for claiming the benefit does not arise. In that light of the matter, first question as raised is devoid of merits and consequently has to be rejected. 7. The learned counsel has placed reliance on the judgment in Hyderabad Asbestos Cement Products Ltd. Versus State of Andhra Pradesh, 1969 STC 487. In that case the appellants therein supplied goods to outstation customers by rail with freight to pay. The freight payable was deducted from the catalogue price. The question was whether the freight was charged on the sales price. The court held that under the terms of the contract there was no obligation on the part of the company to pay the freight and price received by the company for the sale of the goods was invoice amount less the freight and that the form in which the invoice was made out was not determinative of the contract between the company and its customers. The court observed that if apprehending that it may have to pay sales tax on the freight, the company collected sales tax on the freight, the true nature of the contract between the company and the purchases could not on that account be altered. That the company might be liable to refund the amount of excess sales tax to its purchasers was a mater between the company and the purchasers and the State could not seek to levy tax on railway freight if it was not made part of the price. In our opinion, this 6 judgment is of no assistance to the applicants. The question there was whether the freight price would form part of the sales price. In the instant case there is no dispute that 1% of sales tax was included in the sales price which provided by the notification. The selling registered dealer could not have collected the same. Reliance was also placed in the judgment of the Supreme Court in Arun Electrics, Bombay Vs. Commissioner of Sales Tax, 1966 STC 576 to contend that the invoice is insufficient as evidence of the terms of the contract. In the instant case invoice clearly shows the claim of 1% sales tax is charged of the price at which the goods were sold. 8. We then come to the question of imposition of penalty. It was sought tobe contended on behalf of the applicant herein that under Section 46(2) of the B.S.T. Act registered dealer is prohibited from collecting an;y amount by way of tax in excess of the amount of tax payable under the provisions of the B.S.T. Act. Section 37(B)(2) empowers the Government to forfeit any sum collected by the person by way of tax in contravention of the provisions of section 46.When both these sections are read together, it is clear that the Government has powers to apply these sections even to the notification issued under Section 41. The penalty is imposable under Section 37 of the B.S.T. Act. The penalty is imposable if the tax is collected where the dealer is not liable to pay tax under the Act or collects the tax in contravention of the provisions of Section 46. In the instant case, in terms of the notification it was not open to the dealer to collect the tax. Once the dealer collected tax, the dealer became liable to penalty as set out under Section 37. In the instant case, the learned counsel was unable to point out to us any provisions under the Act whereby it was open to 7 forfeit tax and to allow exemption under Entry No. 1 of Group H of the notification issued under section 41 of the B.S.T. Act. For the purpose of exercising the power of forfeiture, there must be a power in the authority. If there is no power to forfeit, the question of forfeiture would not arise. The second question therefore, will have to be answered in the affirmative in favour of the revenue and against the assessee. 9. For the aforesaid reasons, application is accordingly disposed of (D.G. KARNIK,J.) (F.I. REBELLO,J.)