18. Forfeiture

Whether excess tax deposited would be liable to be forfeited ?

Held : Yes

Appellant is a dealer registered under the Works Contract Act. The appellant is engaged in the business of construction of bridges. As per the provisions of the Act in force on 1-10-1986 tax was to be paid @ 4% on the entire contract value. Accordingly the appellant deposited the tax. Subsequently there was an amendment in the Act retrospectively and according to the amended provisions the tax was to be calculated @ 8% on the purchase value. The assessment for the period 1-4-1987 to 31-3-1990 and 1-4-1990 to 31-3-1991, therefore resulted in excess tax payment. The authorities forfeited the same.

Before the Tribunal, the appellant pleaded that any sum collected in excess means any sum collected and pocketed. Merely collecting and depositing and ready to return if eventually it was not taxable does not amount to excess collection calling for forfeiture. The appellant also pleaded that it has not collected any tax and deposited on its own. Further when the tax was deposited, it was governed by the an amended provisions. It has also relied upon the decision of the Supreme Court in Ajit Mills Ltd. (1977 – 40 STC, 497) and Bombay High Court in Ramakrishna Kulwantrai vs. The State of Maharashtra (44 STC 117). In the above decisions the forfeiture was set aside.

Defending the order of forfeiture the revenue submitted that the excess payment is due to the retrospective amendment and the appellant is properly assessed. It was also brought to the notice of the Tribunal that the Superintendent Engineer, Bombay Road Development and Designs had written a letter to the appellant that the Government shall reimburse to the contractor to the extent of works contract tax paid by it to the Government. It has also relied on the judgment of the Supreme Court in Mafatlal Industries Ltd. vs. Union of India & Others (111 STC 467) on the doctrine of unjust enrichment and submitted for confirming the forfeiture.

The Tribunal observed that the lesser tax liability has arisen because of the retrospective amendment to the provisions. The assessing authority came to the conclusion that the appellant had collected taxes on his sales and paid into the Government Treasury and the excess tax collection has been forfeited. According to it an inference can be drawn that the applicant has recovered tax quantum separately in respect of construction of bridge and paid into the Government Treasury under the Works Contract Tax Act. Both the assessment has resulted in excess tax payment. According to the Tribunal in the circumstances the Assessing Officer’s action of forfeiting the excess collection of tax is found just and proper. It also observed that the decision of the Supreme Court in Mafatlal Industries Ltd. vs. Union of India and Others is applicable to the facts of the present case. However penalty levied under section 37 was deleted.

(U.P. State Bridge Corporation vs. The State of Maharashtra – Second Appeal Nos. 861 and 862 of 2001 dated 13th April 2007. The judgment is delivered at the Fifth Bench by the Hon’ble Member Mr. A.V. Naik. The appellant was represented by Mr. D.D. Vashi, Sales Tax Practitioner.)

19. Whether the appellant is entitled for reduced rate of tax under the Notification entry A-47 issued under section 41 of the Bombay Sales Tax Act in the absence of a specific direction in the context of purchase tax liability under section 13AA

Held : No.

The short point fell for consideration before the Tribunal was whether the benefit given under Notification A-47 issued under section 41 can be extended to purchase tax liability under section 13AA. The brief facts relevant for the purpose are as under:

The appellant is an importer/exporter of diamonds and manufacturer of gold jewellery. The appellant has got branches outside the State of Maharashtra. As per Notification A-47 the tax rate applicable in respect of sale or purchase of bullion; i.e., gold and silver was reduced to .05% up to 31-5-2000 and to 1.55% for the period 1-6-2000 to 31-3-2002. At the time of assessment for the periods 2000-01 and 2001-02 the assessing authority imposed purchase tax under section 13AA in respect of the purchases used for manufacture of jewellery transferred outside the State at the rate of 2%. The lower authorities refused to restrict the purchase tax liability to the reduced rate of tax as per the notification. While confirming the action the Appellate Deputy Commissioner had relied upon the Larger Bench decision of the Tribunal in Sadguru Agro (S.A. No.971 of 2000 dated 31-5-2003. In that case the issue involved was Notification entry 154 where the sales of oil cakes were exempted from tax. No exemption was granted to purchases. By following the said decision the Appellate authority confirmed purchase tax under section 13AA at 2% and consequential surcharge.

At the time of hearing before the Tribunal the appellant submitted that sales tax/purchase tax in respect of gold bullion was restricted to .05% during the months of April and May 2000 and 1.55% from June onwards and therefore the purchase tax liability should be restricted to .05% or 1.55% as the case may be. The appellant has also relied on the decision of the Tribunal in P.N. Gadgil & Co. (Appeal No.162 of 1995 dated 29-1-2000). According to the appellant the larger Bench decision in Sadguru Agro Industries (supra) will have no application in the present case as Notification entry 154 granted exemption in respect of sales of oil cakes only. No exemption thereunder was granted in respect of purchases of oil cakes. On the other hand the tax concession given under Notification entry A-47 is in respect of sales as well as purchases. It was further submitted that the term ”purchase tax” would include purchase tax leviable under all the relevant provisions such as section 13, section 13A, section 13AA, section 14 etc. In that view of the matter if the Notification unambiguously gives exemption from purchase tax liability in general, the purchase tax under all these provisions would get exempted. It was also submitted that the Notification entry A-47 was amended from 1-4-1999 and the amended entry speaks of sales and purchases.

The Tribunal after referring to the Larger Bench decision in Sadguru Agro Industries in particular and other decisions in general observed that the implication of the Special Bench judgment is that any exemption under section 41 is not applicable to purchase tax under section 13AA unless specifically provided. In other words if the Government Notification gives a specific exemption from purchase tax liability under section 13AA, the exemption would apply, otherwise not . In view of this according to the Tribunal the fact regarding whether the Notification entry covers only sales or whether it covers both the sales as well as purchases, is not at all relevant for the purpose of considering the exigibility of purchase tax under section 13AA. However, the Tribunal held that though the purchase tax under section 13AA would not be governed by the Notification under section 41 and the same would be leviable @2%, the surcharge leviable in the context of such purchase tax liability would however get fully exempted for the period 1-6-2000 onwards by virtue of the said Notification entry A-47 under section 41.

(Kirti Ornaments Pvt. Ltd. vs. The State of Maharashtra – Second Appeal Nos. 1454, 1455 of 2005 dated 21st April, 2007. The judgment is delivered at the Third Bench by the Hon’ble Member Mr.G.G. Kochrekar. The appellant was represented by Mr. C.B. Thakar, Advocate.)

20. Whether the ‘F’ Form containing transactions relating to a period exceeding one month should totally be disallowed or the transactions exceeding one month should be disallowed ?

Answer: The transactions for a period exceeding one month should be disallowed.

The only dispute raised before the Tribunal relates to the disallowance of F forms in respect of transactions of Rs. 29,29,122/-. The claim was disallowed in the assessment on the ground that the Form is defective as it contains transactions relating to a period exceeding one calendar month. As per proviso to Rule 12(5), a single declaration may cover transfer of goods by a dealer to any other place of his business or his agent or principal as the case may be effected during the period of one calendar month. According to the Tribunal strictly speaking a declaration in Form F which contains transactions of more than one month would not be admissible except for the transactions of any one calendar month covered thereby. Therefore the Tribunal held the form is valid but the transactions covered beyond one calendar month is to be disallowed.

Further, in this particular case, the period being before May 2002, the Tribunal accepted the plea of the appellant that the production of Form F is not mandatory. The appellant can prove the transactions by other relevant evidence.

(Euro Metal India , vs. The State of Maharashtra – Second Appeal Nos. 218 of 2007 dated 27th April, 2007. The judgment is delivered at the Fourth Bench by the Hon’ble Member Mr. G.G. Kochrekar. The appellant was represented by Mr. Harshad Mehta, Advocate.)