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PETITIONER: COMMISSIONER OF SALES TAX U.P. LUCKNOW

       Vs.

RESPONDENT: MOOL CHAND SHYAM LAL, BELANGANJ, AGRA

DATE OF JUDGMENT01/08/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR 1860            1988 SCR  Supl. (1) 750  1988 SCC  (4) 486        JT 1988 (3)   337  1988 SCALE  (2)602

ACT:      U.P. Sales  Tax Act,  1948/U.P. Sales  Tax Rules, 1948: Sections  8A(2)(b),  18(3)  and  15A(1)(qq)/Rule  41(7)  and Notification No.  ST 4602/29  dated June 28, 1975. Assessee- Dealer in  wheat products-Realised  wheat sales  tax,  wheat purchase tax  and octroi  in addition to sale price fixed by Government-Whether penalty  can be levied for realisation of excess amount.

HEADNOTE:      The respondent-dealer  who runs  Roller Flour Mills was supplied wheat by the Food Corporation of India and Regional Food Controller  for the  manufacture of  Atta, Maida,  Suji etc. The  sale price  of the wheat products was fixed by the State Government  under the U.P. Roller Flour Mills (Ex-Mill Price) Control  Order, 1975.  The notification  issued under the Control  Order also  authorised the  mills to realise in addition to  the  fixed  ex-mill  price,  the  proportionate amount of  octrol, terminal  tax, purchase tax or sales tax, etc. payable by the mills on the wheat crushed. Accordingly, the respondent  realised this amount. The respondent further realised the  proportionate amount of the wheat purchase tax and wheat sales tax and octroi, as consideration of the sale price in  addition to  the sale  price fixed  by  the  State Government.  For  this  excess  realisation,  the  Assistant Commissioner (Assessment)  imposed a  penalty under  section 15-A(1)(qq) of  the U.P.  Sales Tax Act, 1948 treating it as realisation  of   tax  in   excess  of   tax  payable.   The respondent’s  appeals   before   the   Deputy   Commissioner (Appeals) and  the Tribunal failed. The High Court, however, allowed the revision.      Dismissing the appeal, it was, ^      HELD: (1)  Penalty under  the Sales Tax Act is leviable for excess realisation of tax. Therefore, realisation of the amount should be as tax and not in any other manner. [753G]      (2) The  excess amount  charged was in contravention of the provisions  of the Control Order. But that alone was not sufficient for  initiation or  levy of  penalty  under  sub- clause (qq) of section 15-A (1) of the 751

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Act. The  excess amount  has to  be  realised  as  sales  or purchase tax and the tax so charged must have been in excess of tax payable. [754A-B]      (3) Realisation  of excess  amount is not impermissible but what  is not permissible is realisation of excess amount as tax. [754E]      (4) The  imposition of a penalty under the Act is quasi criminal and  unless strictly  proved the  assessee  is  not liable for  the same.  If the purchaser realises more money, that by itself will not attract the penal provisions. [754F- G]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal  No.  2551 (NT) of 1988.      From the  Judgment and  Order  dated  7.7.1982  of  the Allahabad High Court in S.T.R. No.33 of 1982.      A.K. Srivastava for the Appellant.      R.R. Agarwal and C.P. Pandey for the Respondent.      The Judgment of the Court was delivered by      SABYASACHI MUKHARJI,  J.  Special  leave  granted.  The appeal is disposed of by the Judgment herein.      The appeal  relates to  the  assessment  year  1976-77, period being  1.4.76 to 3.1.77 under the U.P. Sales Tax Act, 1948 (hereinafter  called the Act). The dealer runs a Roller Flour Mills  under the  name and  style of  M/s. Mool  Chand Shyam Lal  Roller Flour  Mills, Agra  in which  Atta, Maida, Suji,  Bran   and  Refraction   are  manufactured.  For  the manufacture of Atta, Maida and Suji the wheat is supplied by the Food  Corporation of  India and Regional Food Controller under the  U.P. Roller  Flour Mills  (Regulation of  use  of Wheat) Order. The sale price of the said wheat products i.e. Atta, Maida,  Suji has  been fixed  by the  State Government from time  to time  under U.P.  Roller Flour  Mills (Ex-Mill Price Control) Order, 1975 under the notifications issued by the Government.  The State Government has further issued the notification No.  ST. 4602/29-Wheat-127/175 dated 28th June, 1975 under  the U.P.  Roller  Flour  Mills  (Ex-Mill  Price) Control Order, 1975 fixing the ex-mill price of the sales of wheat products  and also  authorised the  mills in  the said notification to  realise the proportionate amount of octroi, terminal tax, purchase tax or sales tax, duty or excise duty 752 payable by the mills on the wheat crushed in addition to the fixed ex-mill price. The dealers have realised the amount of the wheat  products as  fixed by the U.P. Roller Flour Mills (Ex-Mill Price)  Control Order,  1975 and have also realised the amount  of the wheat sales tax or wheat purchase tax and octroi on  the  wheat  used  in  the  manufacture  of  wheat products, for  the sale  of  Atta,  Maida,  Suji,  Bran  and refraction in  accordance with  the aforesaid  notification. The dealers  have further  realised the proportionate amount of the  wheat purchase tax and wheat sales tax and octroi as consideration of  the sale  price in  addition to  the  sale price fixed  by the  State Government  on the sales of wheat products. It  is the  case of the revenue that the amount of wheat sales  tax and  wheat purchase  tax  as  well  as  the octroi, paid by the dealers for the purposes of purchases of wheat, which was used for the manufacture of wheat products, has been  kept in  the separate account in the account books of the  dealer. It  is further  the case of the revenue that the amount  of wheat sales tax and wheat purchase tax, which the dealer  paid for  the purposes of purchase of wheat, was

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collected by  the dealer  as part  of the  sale price of the wheat  products.   For  the   assessment  year  1976-77  the assessment order  was passed  on 22nd  February, 1979  under Rule 41(7)  of the  U.P. Sales  Tax Rules  read with section 18(3) of  the Act  for the  period from  1.4.76 to 3.1.77 by which the  assessing authority  while passing the assessment order has  accepted the  contention of  the dealer  that the amount of the wheat purchase tax, wheat sales tax and octroi charged separately by the dealer in the cash memo of sale of Atta, Maida  and Suji  are the  part  of  the  turnover  and included in  the  disclosed  turnover  of  the  dealer.  The assessing authority  in the  regular assessment  had treated this wheat  purchase tax,  wheat sales  tax and octroi which were paid by the dealer separately in the cash memos and the wheat products  sold by  the dealer,  as part of the ex-mill price of  the wheat  product. The  assessing  authority  had imposed the  tax on this amount treating it as a part of the turnover of  the dealer.  But after  the completion  of  the assessment, the Assistant Commissioner (Assessment) issued a notice under section 15-A(1)(qq) of the Act to show cause as to why  penalty should  not be  imposed in  respect  of  the realisation of wheat purchase tax and wheat sales tax during the aforesaid period. A reply was filed by the dealer to the said notice.  The Assistant  Commissioner by his order dated 24th February,  1979 imposed  a sum  of Rs.25,000 as penalty under section  15-A(1)(qq).  Section  15-A(1)(qq)  reads  as follows:           "(qq)  realises   any  amount  as  sales  tax,  or           purchase tax,  where no  sales tax or purchase tax           is legally  payable or  in excess of the amount of           tax, legally payable under this Act: or" 753      In the  aforesaid circumstances  after an inquiry as it may deem necessary the assessing authorities may direct that such dealer shall pay, by way of penalty, in addition to the tax, if  any payable  by him  mentioned therein. Against the aforesaid order  of the  Assistant Commissioner,  the dealer filed an  appeal before  the Deputy  Commissioner (Appeals). The Deputy  Commissioner (Appeals)  dismissed the appeal and confirmed the  order of  imposition of  penalty. Against the said order  of the  Deputy Commissioner (Appeals) the dealer filed a second appeal before the Tribunal. The Tribunal also upheld the  order of the lower authorities and dismissed the appeal.  Against  the  judgment  and  order  passed  by  the Tribunal, the  dealer moved  the High  Court  by  way  of  a revision. The High Court allowed the revision.      The High  Court held that on the facts found, it should be examined  if the  excess  realisation  was  of  sales  or purchase tax thus incurring penal liability under sub-clause (qq) of  sub-section (1)  of section  15-A or  it was excess realisation of  price over  and above  that the assessee was entitled to charge from its customers under Notification No. 4602 of the Essential Commodities Act. It was urged that the assessee did  not commit  any breach  of  the  Act.  It  was contended that  the assessee  was entitled  to realise price and the  purchase tax  from customers under notification but if it realised more than it was excess realisation by way of price, there  would be breach of the Control Order for which no penalty could be levied under this Act. What the assessee has realised  from customers  was price and not tax. Section 15-A postulates  as set  out hereinbefore  under clause (qq) certain conducts.  As it is apparent from the provisions set out above, that the realisation must be by the dealer of the amount as  sales tax  or purchase  tax where no sales tax or purchase tax  was legally payable or in excess of the amount

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of tax  legally payable  under the  Act.  Therefore,  it  is necessary that  realisation must  be of  the  sales  tax  or purchase tax,  secondly, that  realisation must be in excess and thirdly  the amount  of tax  should be  legally  payable under the  Act. The  High Court has construed the expression "as" in  the beginning  of the  sub-clause  as  significant. Penalty  is   leviable  for   excess  realisation   of  tax, therefore, realisation  of the  amount should  be as tax and not in  any other  manner. Then  excess should  be over  and above the  amount of  tax legally  payable. This  expression obviously  means   tax  payable  under  the  Act,  rules  or notification. Therefore,  realisation by  the assessee  from customers should  not be  of only  sales or  purchase but it should be  of the  tax legally  payable.  If  the  purchaser realises more  money that  by itself  will not  attract  the penal provisions.  In the instant case, the High Court noted that it has been found that the dealer charged sales tax at 754 the rate  of Rs.5  per quintal.  There is no finding that it was in  excess of  tax leviable or legally payable under the Act. The  excess thus  charged was  in contravention  of the provisions of  the notification.  But  that  alone  was  not sufficient for initiation or levy of penalty under subclause (qq) of section 15-A(1) of the Act. It has to be realised as sales as  purchase tax and the tax so charged must have been in excess of tax payable. The assessing authorities have not found in  the instant  case that  Rs.5 per  quintal  was  in excess of tax payable under the Act.      On behalf  of the  revenue, our  attention was drawn to sub-clause (b) of sub-section (2) of section 8-A of the Act. The said sub-clause read as follows:           "(b) Where sales tax is payable on any turnover by           a dealer  (including a  commission agent or any of           the persons mentioned in the Explanation to clause           (c) of  Section (2),  registered under  this  Act,           such a dealer may recover an amount, equivalent to           the amount  of sales  tax payable, from the person           to whom  the goods are sold by him, whether on his           behalf or on behalf of his principal."      This is  a method  of realisation  in case  of indirect tax. Penalty can be levied or is leviable for realisation of excess of  tax legally  payable and not for contravention of section 8-A(2)(b).  Realisation  of  excess  amount  is  not impermissible but  what is not permissible is realisation of excess amount as tax. The High Court noted that the assessee did not act fairly in this case. By way of price it realised from its  customers more  than what is was entitled to under notification No. 4602 but in order to avoid any consequences under  the   Essential  Commodity   such  as  suspension  or cancellation of  its licence etc. the excess realisation was shown  as   amount  covered   by  Explanation   II  of   the Notification. On  these facts  the High Court found that the provisions of  section 15-A(1)(qq)  were not  applicable. It has to  be borne  in mind  that the  imposition of a penalty under the  Act is  quasi criminal and unless strictly proved the assessee is not liable for the same.      In that view of the matter, the High Court was right in the view  it took.  There is no scope for interference under Article 136  of the  Constitution.  The  appeal,  therefore, fails and  is dismissed  accordingly. There will be no order as to costs. R.S.S.                                Appeal dismissed. 755

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