Case: State Of U.P. And Anr Vs. Annapurna Biscuit Mfg. Co

the deposit into the Government Treasury of the amount by a dealer as has been wrongly realised by him as sales tax. As the said amount does not constitute sales-tax, it is not covered by entry 54 in List II of the Seventh Schedule to the Constitution which relates to taxes on sale or purchase of goods other than newspapers subject to the provisions of entry 92A of List I.4. The argument that provision like Section 29A is ancillary or incidental to the Collection of tax legitimately due under a law made under entry 54 has no force. Such an argument was rejected by this Court in Abdul Quaders case, (1964) 15 STC 403 = (AIR 1964 SC 922 ) (supra) in the following words:"The provision however is attempted to be justified on the ground that though it may not be open to State Legislature to make provision for the recovery of an amount which is not a tax under entry 54 of list II in a law made for that purpose, it would still be open to the legislature to provide for paying over all the amounts collected by way of tax by persons, even though they really are not exigible as tax. as part of the incidental and ancillary power to make provision for the levy and collection of such tax.......But where the legislation under the relevant entry proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry, but even so lays down that though it is not exigible under the law, it shall be paid over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such a provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry."The above observations were quoted with approval by a six-judge Bench of this Court in the case of Ashoka Marketing Ltd. v. State of Bihar, (1970) 26 STC 254 =(AIR 1971 SC 946). In that case the provisions of S. 20A of the Bihar Sales-tax Act which were substantially similar to those of S. 29-A now impugned before us were assailed. Shah J. (as he then was) speaking for the Court observed:"A provision which enables the dealer to pass on the liability for payment of tax is incidental to legislation for sales tax. But we are unable to hold that a provision under which a dealer is called upon to pay to the State an amount which has been collected by him on a representation-express or implied- that an equal amount is payable by him under the Bihar Sales-tax Act, is a provision incidental to the power to levy tax on sale or purchase of goods within the meaning of Entry 54 List II of the Seventh Schedule Entry 54. List II of the Seventh schedule comprehends the power to impose tax, to prescribe machinery for collecting the tax, to designate officers by whom the liability may be imposed and to prescribe the authority, obligation and indemnity of the officers. The State legislature may under entry 54, List II be competent to enact a law in respect of matters necessarily incidental to tax on the sale and purchase of goods. But a provision compelling a dealer who has deliberately or erroneously recovered an amount from the purchaser on a representation that he is entitled to recover it to recoup himself for payment of tax, to pay over that amount to the State cannot, in our judgment, be regarded as necessarily incidental to Entry 54, List II. In effect the provision is one for levying an amount as tax which the State is incompetent to levy. A mere device cannot be permitted to defeat the provisions of the Constitution by clothing the claim in the form of a demand for depositing the money with the State which the dealer has collected, but which he was not entitled to collect."In view of the above decision, the contention that the impugned Act would be covered by entry 54 in list II can plainly be not accepted.5. Argument has been advanced before us on behalf of the appellant that the impugned law would be covered by entry 7 in List III which relates, inter alia, to contracts. A similar argument was advanced in the case of Ashoka Marketing Ltd. (1970) 26 STC 254 = (AIR 1971 SC 946) (supra) and was rejected in the following words :"We fail to appreciate how power to legislate in respect of entries 6, 7 and 13 would authorise the State Legislature to legislate in respect of recovery from the dealer of an amount which the dealer was in law not entitled to collect, but which he has collected. The power to legislate in respect of sub-sections (3), (4) and (5) of Section 20A does not fall under entries 6, 7 and 13 of List III expressly, nor can it be said that the power to legislate is necessarily incidental to the power contained in entries 6, 7 and 13 of List III."6. Lastly, it has been argued that the law in question relates to trust and can be justified under entry 10 in List III. We, however, fail to see as to how such a law can be said to relate to trusts. A trust is an obligation annexed to the ownership of property and arises out of confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner (see Section 3 of the Indian Trusts Act, 1882). It is plain that a law compelling deposit of money wrongly realised as sales-tax cannot in pith and substance be considered to be a law relating to trusts. The mere use of the word "trust" in sub-section (2) of Section 29-A would not make the impugned law to be one relating to trusts.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Section 29-A deals with the amount wrongly realised by a dealer on sale of goods to any person. Sub-section (1) of Section 29-A of the principal Act makes it obligatory on the part of the dealer to deposit such amount into the Government Treasury "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 this Act. Sub-section (2) provides that the amount so deposited by a dealer shall to the extent it is not due as tax from him be held by the State Government in trust for the person from whom it was realised by the dealer or for his legal representatives. It further provides that when a dealer has deposited the amount into the Treasury, he shall no longer be liable to the person from whom he has realised the amount. According to sub-section (3) of the section, the amount deposited into the Government Treasury by the dealer or any part thereof shall, on a claim being made in that behalf in such manner and form as may be prescribed, be refunded to the person from whom the dealer had actually realised the amount or part, or to his legal representatives. Section 29-A thus seeks to ensure the deposit into the Government Treasury of the amount by a dealer as has been wrongly realised by him as sales tax. As the said amount does not constitute sales-tax, it is not covered by entry 54 in List II of the Seventh Schedule to the Constitution which relates to taxes on sale or purchase of goods other than newspapers subject to the provisions of entry 92A of List I.4. The argument that provision like Section 29A is ancillary or incidental to the Collection of tax legitimately due under a law made under entry 54 has noan argument was rejected by this Court in Abdul Quaders case, (1964) 15 STC 403   = (AIR 1964 SC 922  ) (supra) in the followingprovision however is attempted to be justified on the ground that though it may not be open to State Legislature to make provision for the recovery of an amount which is not a tax under entry 54 of list II in a law made for that purpose, it would still be open to the legislature to provide for paying over all the amounts collected by way of tax by persons, even though they really are not exigible as tax. as part of the incidental and ancillary power to make provision for the levy and collection of such tax.......But where the legislation under the relevant entry proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry, but even so lays down that though it is not exigible under the law, it shall be paid over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such a provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxingabove observations were quoted with approval by a six-judge Bench of this Court in the case of Ashoka Marketing Ltd. v. State of Bihar, (1970) 26 STC 254  =(AIR 1971 SC 946). In that case the provisions of S. 20A of the Bihar Sales-tax Act which were substantially similar to those of S. 29-A now impugned before us were assailed. Shah J. (as he then was) speaking for the Courtprovision which enables the dealer to pass on the liability for payment of tax is incidental to legislation for sales tax. But we are unable to hold that a provision under which a dealer is called upon to pay to the State an amount which has been collected by him on a representation-express or implied- that an equal amount is payable by him under the Bihar Sales-tax Act, is a provision incidental to the power to levy tax on sale or purchase of goods within the meaning of Entry 54 List II of the Seventh Schedule Entry 54. List II of the Seventh schedule comprehends the power to impose tax, to prescribe machinery for collecting the tax, to designate officers by whom the liability may be imposed and to prescribe the authority, obligation and indemnity of the officers. The State legislature may under entry 54, List II be competent to enact a law in respect of matters necessarily incidental to tax on the sale and purchase of goods. But a provision compelling a dealer who has deliberately or erroneously recovered an amount from the purchaser on a representation that he is entitled to recover it to recoup himself for payment of tax, to pay over that amount to the State cannot, in our judgment, be regarded as necessarily incidental to Entry 54, List II. In effect the provision is one for levying an amount as tax which the State is incompetent to levy. A mere device cannot be permitted to defeat the provisions of the Constitution by clothing the claim in the form of a demand for depositing the money with the State which the dealer has collected, but which he was not entitled toview of the above decision, the contention that the impugned Act would be covered by entry 54 in list II can plainly be nothowever, fail to see as to how such a law can be said to relate to trusts. A trust is an obligation annexed to the ownership of property and arises out of confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner (see Section 3 of the Indian Trusts Act, 1882). It is plain that a law compelling deposit of money wrongly realised as sales-tax cannot in pith and substance be considered to be a law relating to trusts. The mere use of the word "trust" in sub-section (2) of Section 29-A would not make the impugned law to be one relating to trusts.