IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 10.12.2009 Coram The Honourable Mr.Justice K.RAVIRAJA PANDIAN and The Honourable Mr.Justice M.M.SUNDRESH TAX CASE (REVISION) NO.1711 of 2008 The State of Tamilnadu, rep.by the Deputy Commissioner (CT) Madras (Central) Division, Madras-6. ...Petitioner Vs Tvl.Uptron India Limited, No.282 TTK Road, Alwarpet, Madras-18. ...Respondent REVISION under Section 38 of the Tamilnadu General Sales Tax Act against the order of the Sales Tax Appellate Tribunal (Main Bench), Madras dated 30.3.1993 made in TA.No.1181 of 1992 and TMP.No.35 of 1993. Against the order of the appellate Assistant Commissioner (CT) IV Station, VI Floor, Kuralagam Annexe, Madras-108, dated 16.7.92 and made in Appeal No and year AP.748/88, against the order of the Commercial Tax Officer, Mylapore, Assmt Circle No.46, Greenways Road, Madras-600 028, dated 1.7.88 in TNGST 648940/86-87. For Petitioner : Mr.Haja Nazirudeen, SGP O R D E R (ORDER OF THE COURT WAS MADE BY K.RAVIRAJA PANDIAN,J) By formulating the following substantial questions of law : "i. Whether the order of the Tribunal canceling the levy of penalty under Section 22(2) and thereby allowing the appeal of the assessee and dismissing the enhancement petition of the Department is erroneous in law ? ii. Whether the Tribunal ought to have seen that in case of Section 22, the levy of penalty follows as a matter of course wherever the assessee is found to have collected tax in contravention of the provisions of the Act and as held in 57 STC 69 and 72, the Tribunal ought to have confirmed the levy of penalty and dismissed the appeal ? And iii. Whether the Tribunal ought to have seen the fact https://hcservices.ecourts.gov.in/hcservices/ that the tax, which had been remitted to the Government will not sanctify due to the illegal collection and hence the Tribunal ought to have allowed the enhancement petition and restored the Assessing Officer's order ?" the Department has filed this revision under Section 38 of the Tamilnadu General Sales Tax Act (hereinafter referred to as the Act) questioning the correctness of the order of the Tribunal dated 30.3.1993 made in TA.No.1181 of 1992 and TMP.No.35 of 1993 wherein and whereby the Tribunal deleted the levy of penalty in a sum of Rs.10,421/-. 2. The minimum facts required for the disposal of the revision are as follows : During the checking of accounts of the assessee, which is a dealer in electronic goods, the Assessing Officer found that the assessee had collected tax on electronic goods at 15% instead of 10% over a turnover of Rs.3,78,951.65 Ps. The excess collection of tax so made was quantified to Rs.20,842/- and the Assessing Officer, by invoking his power under Section 22(2) of the Act, levied penalty at one and half times of the excess collection, which is quantified at Rs.31,263/-. On appeal at the instance of the assessee, the First Appellate Authority reduced the penalty to 50% of the excess collection, which is quantified to Rs.10,421/-. Before the Tribunal, the assessee filed an appeal. In turn, the Department filed an enhancement petition to restore the penalty imposed by the Assessing Officer. The Tribunal, after hearing the appeal and enhancement petition, found that there was no illegal retention of the amount by the assessee and that the collection of the tax at the rate of 15% was paid over to the Government. On the above said reasoning, the Tribunal has come to the conclusion that the penalty is unwarranted under Section 22(2) of the Act. By holding so, the Tribunal dismissed the enhancement petition filed by the Department. As the relief has been granted in favour of the assessee, the Department is on further revision before this Court against the order of the Tribunal. 3. Learned Special Government Pleader submits that there is no need for any mens rea for imposition of penalty under Section 22(2) of the Act. If the collection of tax by the dealer is unauthorized, it is automatic on the part of the Assessing Officer to levy penalty as per the provisions of the Act. 4. We have heard the learned Special Government Pleader and perused the materials on record. 5. Section 22(2) of the Act provides that if any person or registered dealer collects any amount by way of tax or purporting to be by way of tax in contravention of the provisions of Sub.Section (1), whether or not any tax is due from such person or dealer under this Act in respect of the transaction in which he collects such amount, the Assessing Authority may, after giving such person or https://hcservices.ecourts.gov.in/hcservices/ dealer a reasonable opportunity of being heard, by order in writing impose upon him by way of penalty a sum which shall be (i) where the excess amount collected in the bonafide belief that it had to be collected 100% of the amount collected and (ii) where the excess amount has been collected willfully and knowing that it was not due to be collected 150% of the amount collected. 6. A reading of the above provision makes it clear that it not in each and every case the collection is made over and above the rate fixed penalty is warranted. The discretion is vested with the Assessing Officer to impose penalty taking into consideration of the facts of each case. In the facts of the present case, the electronic goods were taxable at the rate of 15% till 17.3.1986. On and from 17.3.1986, the rate of tax has been reduced to 10%. It is the case of the assessee that without being aware of the fact that the rate of tax has been reduced to 10% from 17.3.1986, they had collected the tax at old rate. However, they did not retain even a single pie with them and the entire amount so collected at the rate of 15% has been paid over to the coffer of the Government. There is absolutely no intention on the part of the assessee to collect tax in contravention of Section 22(1) of the Act and retain the same for the benefit of the assessee. 7. A Division Bench of this Court in the case of State of Tamilnadu Vs. Mohd.Ibrahim Sahib (reported in 83 STC 402), after taking note of the ratio of the decision in the case of State of Tamilnadu Vs. Selvakumar Timber Traders (reported in 57 STC 69), which has been referred to in one of the questions of law for automatic imposition of penalty, held that it became apparent that the penalty might be levied by the Authorities under Section 22(2) of the Act after giving the affected person a reasonable opportunity of being heard by an order in writing where there had been a contravention of the provisions of Sub.Section (1) implying thereby that any amount had been collected by way of tax or purporting to be by way of tax under the Act by a person including a registered dealer except in accordance with the provisions of the Act and the Rules framed thereunder and after taking note of the facts of that case, the Tribunal found that it was at the instance of the Commercial Tax Authorities, the decorticating millers had collected sales tax from the purchasing oil millers to be remitted to the Government on behalf of the purchasing merchants for facilitating recovery of sales tax by the Revenue. Posing a question in the facts noticed that could it be said that the assessee had collected any amount by way of tax or purporting to be by way of tax under the Act and while answering the said question, the Division Bench observed as follows : "The Supreme Court in Joshi, Sales Tax Officer Vs. Ajith Mills Ltd. (reported in (1977) 40 STC 497) had an occasion to consider the import of the expression 'collected' by reference to Sections 37(1)(a) and 46(2) of https://hcservices.ecourts.gov.in/hcservices/ the Bombay Sales Tax Act. Section 37(1)(a) of the Bombay Sales Tax Act reads as follows : '37(1)(a). If any person, not being a dealer liable to pay tax under this Act, collects any sum by way of tax, or being a registered dealer collects any amount by way of tax in excess of the tax payable by him, or otherwise collects tax in contravention of the provisions of Section 46, he shall be liable to pay, in addition to any tax for which he may be liable, a penalty as follows : (i) Where there has been a contravention referred to in clause (a), a penalty of an amount not exceeding two thousand rupees;......... and in addition,............any sum collected by the person by way of tax in contravention of Section 46 shall be forfeited to the State Government............. Interpreting this section, the Supreme Court dealt with the expression 'collected', and opined : 'What does 'collected' mean here ? Words cannot be construed effectively without reference to their context. The setting colours the sense of the word. The spirit of the provision lends force to the construction that 'collected' means 'collected and kept as his' by the trader. If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return it if eventually it was not taxable, it was not collected. 'Collected' in an Australian Customs Tariff Act, was held by Griffith, C.J., not 'to include money deposited under an agreement that if it was not legally payable it will be returned'. (Words & Phrases page 274). We, therefore, semanticise 'collected' not to cover amounts gathered tentatively to be given back if found non-exigible from the dealer. It would be relevant to notice here that the above opinion was rendered by the Apex Court on terms of Section 37(1) of the Bombay Act, wherein the expression used was 'any sum collected by the person by way of tax......... shall be forfeited...'. Thus, even where the forfeiture was preceded by the use of the word 'shall', the Court held that the expression 'collected' must have reference to 'collected illegally and retained' or 'collected and kept as his', to attract the penalty of forfeiture. Thus, the circumstances under which the tax was 'received' have to be considered by the Authorities before imposing the penalty." https://hcservices.ecourts.gov.in/hcservices/ 8. If so construed from the facts noticed supra, it could be seen that all that the assessee has done in this case was that they collected tax at the rate of 15% as per the original rate without being aware of the reduction of tax at the rate of 10%. The tax so collected was duly remitted to the Government. No amount was retained by the assessee, which factum has not been disputed by the Revenue. 9. In view of the law laid down by the Apex Court in Ajith Mills case (cited supra) and on the admitted facts, it cannot, therefore, be said that the assessee has collected any amount by way of tax or purporting to be by way of tax so as to be held liable or render itself liable for contravention of Section 22(1) of the Act. The assessee collected the amount, brought the same on account and remitted it to the Government faithfully. Therefore, it is not possible to hold that the assessee had collected tax as interpreted by the Supreme Court in Ajith Mills' case (cited supra) in contravention of the provisions of Section 22(1) of the Act. In Selvakumar Timber Traders's case (cited supra), the Assessing Officer levied penalty for violation of Section 22(1) of the Act. The Appellate Assistant Commissioner reduced the quantum of penalty. The Tribunal considered the second appeal of the assessee as well as the Department's enhancement petition asking for restoration of penalty as originally levied by the Assessing Officer and held that there was no case for restoration of the penalty levied by the Assessing Officer and that the Appellate Assistant Commissioner was justified in reducing the quantum of penalty. The enhancement petition filed by the Government was dismissed. The High Court upheld the order of the Tribunal and dismissed the revision filed by the Department. So is the judgment in the case of P.Ramasamy Vs. State of Tamilnadu (reported in (1984) 57 STC 72). Similar view has been taken by this Court in the case of State of Tamilnadu Vs. Samsan and Company (reported in (1984) 57 STC 160) and in the case of State of Tamilnadu Vs. Jaya Pharmacy (reported in (1984) 57 STC 164). The above judgments show that depending upon the facts and circumstances of the case, it is a matter for discretion of the Assessing Officer to determine as to whether the penalty provision under Section 22(2) of the Act is attracted in a case where collection has been made in violation of Section 22(1) of the Act and that the imposition of penalty is not warranted. The discretion, indeed, has to be exercised judiciously, properly and bonafidely. 10. In the given set of facts, as stated above, we are of the view that the Tribunal exercised its jurisdiction under Section 22(2) of the Act judiciously, properly and bonafidely, which requires no interference at our hands in the revisional jurisdiction of this Court under Section 38 of the Act. https://hcservices.ecourts.gov.in/hcservices/ 11. Therefore, the revision petition is dismissed. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar RS To 1. The Sales Tax Appellate Tribunal (Main Bench), Madras. 2. The Appellate Assistant Commissioner (CT) IV, Statation VI Floor, Kuralagam Annexe, Madras-108. 3. The Commercial Tax Officer, Mylapore Assmt Circle, No.46, Greenways Road, Madras-600 028. + 1 cc to Spl. Govt., Pleader (CC SR 67906) TC(R)NO.1711 OF 2008 GV (CO) RH (31.12.09) https://hcservices.ecourts.gov.in/hcservices/