IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM THURSDAY, THE 2ND JULY 2009 / 11TH ASHADHA 1931 ST.Rev..No. 272 of 2003() ------------------------- TA.141/1997 of S.T.A.TRIBUNAL,ADDL.BENCH,KZD. .................... PETITIONER/APPELLANT/ASSESSEE: -------------------------------------------------- M/S. PUNATHIL ROLLER FLOUR MILLS (P) LTD ONDEN ROAD, KANNUR. BY ADV. SRI.T.M.SREEDHARAN RESPONDENT(S): RESPONDENT/REVENUE: ---------------------------------- STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY SPL. G.P. SRI.VINOD CHANDRAN THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 02/07/2009, ALONG WITH STRV NO.273 OF 2003, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR, V.K.MOHANAN & C.K.ABDUL REHIM, JJ. .................................................................... S.T. Rev. Nos.272 & 273 of 2003 .................................................................... Dated this the 2nd day of July, 2009. ORDER Ramachandran Nair, J. The issue stands referred to us by a Division Bench which doubted the correctness of the judgment of another Division Bench in T.R.C. No.226/2001 dated 20.8.2001, wherein this court held that dealers who have collected sales tax are entitled to retain it as an incentive. However, the Bench which referred the matter to us felt that the judgment was issued without referring to the statutory provision namely, Section 46A(1) of the KGST Act which provides for forfeiture of excess collection of tax to enable buyers to claim refund. We have heard counsel appearing for the petitioner and Special Government Pleader appearing for the respondent. 2. The petitioner admittedly was enjoying sales tax exemption as a small scale industrial unit. During the years 1991-92 and 1992-93 the petitioner was engaged in manufacture and supply of Maida, Sooji etc., 2 to the Civil Supplies Department of the State for distribution as ration articles. The price agreed provided for tax at the rate of Rs.22.75 and Rs.23.20 respectively for every quintal. While other dealers who were liable to pay tax collected tax separately besides the agreed price from Civil Supplies Department and remitted the same, petitioner which was enjoying sales tax exemption, included sales tax along with the price and collected a consolidated amount and claimed exemption. The Intelligence Wing of the Sales Tax Department conducted verification of tax payments by those engaged in supply of wheat products for distribution under PDS scheme and noticed illegal collection of tax by the petitioner and brought it to the notice of the Civil Supplies Department. The Civil Supplies Department which made payments for the purchases, directed the petitioner to deposit with the Government the tax collected and retained by them. Even though petitioner deposited the amount in terms of the direction of the Civil Supplies Commissioner, petitioner claimed refund of the same in assessment proceedings. The Assessing Officer found that petitioner being exempted unit, is not liable to collect sales tax and the tax collected is, 3 therefore, liable to be forfeited to the Department in terms of Section 46A(1) of the KGST Act and the said orders were challenged in two level appeals, but without success. It is against the orders of the Tribunal the petitioner has filed these revisions. 3. Counsel for the petitioner relied on Annexure-C issued by the Government and relying on the Division Bench judgment abovereferred contended that petitioner is entitled to retain the collected tax as an incentive. According to the counsel, petitioner is entitled to sales tax exemption by virtue of certificate of exemption issued under Notification SRO 499/1990 which though superceded by SRO 1728/1993, retained exemption. Since petitioner has no liability for payment of tax, petitioner is entitled to collect tax and retain the same as an incentive is petitioner's case. However, Special Government Pleader appearing for the respondent on the other hand contended that Civil Supplies Department made payment of tax on the assumption that tax was payable by the petitioner and what they paid was admittedly inclusive of tax. He brought to our notice the price structure agreed between the petitioner and Civil Supplies Department, 4 wherein along with price, specified amount towards sales tax is provided. In fact, the Tribunal in their orders stated the split up value of the price and the tax collection. We do not think it makes any difference whether the tax was collected separately or the same was included and collected along with the price. When tax is collected by a dealer who is not liable to pay the same, the tax so collected is liable for forfeiture under Section 46A(1) of the Act. In fact, when the same is brought to the notice of the Civil Supplies Department, they directed the petitioner to remit the tax to the department, which petitioner did. The case of the petitioner that petitioner is entitled to retain collected tax as an incentive pursuant to Annexure-C order of the Government is against the Notification based on which exemption is granted to the petitioner. In fact, Notification SRO 1729/93 and the previous Notifications providing for exemption to small scale industrial units gave an option to such industrial units to collect tax and retain the same with them as loan later repayable to the Government. Admittedly petitioner has not opted for collection of tax to avail it as a loan repayable later. On the other hand, petitioner chose to avail exemption 5 which denies petitioner the right to collect tax and if collected, the tax so collected will be forfeited to the Government in terms of Section 46A(1) of the Act. Annexure-E judgment relied on by the petitioner does not lay down the correct law because the decision is rendered without reference to relevant statutory provisions namely, Section 46A (1) and (2) and the provisions of the Notifications abovereferred. We, therefore, uphold the order of the Tribunal and dismiss the revision petitions filed by the petitioner. We also overrule the abovereferred decision of the Division Bench. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge C.K.ABDUL REHIM Judge pms