SALES TAX OFFICER, SPECIAL CIRCLE, ERNAKULAM & ANR. versus TATA OIL MILLS CO. LTD.

Citation: [1976] 1 S.C.R. 152 · Decided: 29-07-1975 · Supreme Court of India · Bench: HANS RAJ KHANNA · Disposal: Dismissed

cites 1 · see the full citation network in Lexace

Judgment (excerpt)

152 
SALES TAX OFFICER, SPECIAL CIRCLE, ERNAKULAM & ANR. 
A 
v. 
TATA OIL MILLS CO. LTD. 
July 29, 1975 
[H. R. KHANNA, M. H. BEG AND A. C. GUPTA, JJ.] 
Kcroila General Sales 'Tax Act (15 of 1963) s. 22(3) and Kerala 
G'enl:ral 
B 
Sales Tax Rules, 1963, r. 9(1)-Constitutioi' df India 1950, VII Schedule, List fl, 
Entry 54--Section providing for pay111ent tQ Q_ovt. of tax wrongly collected-
lf ultra vires. 
According tor. 9(1) of the Kerala General Sales-tax Rules framed under the 
Kerala General Sales-tax Act, 1963, in determining the taxable turnover of a 
dealer the excise duty, if any, paid by the dealer to the Government of Kerala 
or to the Central Government in respect of the goods sold by hin1 shall be 
deducted. Section Z2(3) uf the /\lt provides that if any dealer or person collects 
C 
tax.on transactions not liable to f[,x under the Act or in excess of the tax leviable 
under the Act such dealer or person shall Pay to the Goverment, in adidtion to 
the tax payable, the amount s0 collected unless it was refunded to the person 
from whom it v1as collected. 
The respondent deducted the sum paid by it as excise duty fro1n its total turn-
over for the purpose of delerm:ning the taxable turnover. The respondent, ho\V-
ever, when it sold the goods, had collectec\ sales-tax from the purchasers on the 
invoice prices \vithout deductinf, therefrom the excise duty paid in respect of the 
D 
said goods. 1his re-suited in the respondent realising a sum in ex:ess of the sales-
tax payable in respect of the goods sold by it. 
The Sales-tax Officer held that 
th;! respondent \Va<> liable to pay that amount to the Government under s. 22 (3). 
The writ petition filed by the respondent \Vas allowed by the High Court on the 
ground thats. 22(3) was not covered by Entry 54 of the State List in the VII 
Sche~lule to the Constitui.ion, and hence, beyond the competence of the State 
1-egislature. 
Dismiss:.ng the appeal to this Court. 
E 
HELD : ( 1) Entry 54 empowers the State Legislatures to n1ake laws, except 
in certain cases, in respect of taxes on the sale or purchase of goods. As Ion~ 
as the law relates to taxes on the sale or purchase of goods, it would be within 
their legislative con1petence. 
Bt:t, it would not be permissible 
fo;_· 
the State 
Legislature to enact a law under Entry 54 for recovery by the State of an amount 
which could not be recovered as sales-tax or purchase-tax in acconhtnce with 
the Jaw on the subject and which was wrongly realised by a dealer as sale'l-tax 
or purchase-tax. Such a J::-,,v would not be a law relating to tax on the sale or 
purchase of goods but would be one i-n respect of an a1nount wrongly realised by 
a dealer as sales-tax or purchase-tax. [155A-C] 
(2) The ambit of ancillary or incidental power would not go to the extent of 
pern1ittinp; the Legislature to provide that. thou.~h the an1ount collected, n1ay be· 
\1/TOngly, by way of tax,, was not tax, it shall still be paid over to the Govern-
ment as if it were a tax. [156D-EJ 
(3) The fact that the nmount realised is in excess of the tax lev.:able and riot 
an amount \\'htch was not at all payable as tax, would not n1ake any difference. 
Any amount realised by a dealer in excess of the tax leviable, stands, for the rur-
·pose of determining the legislative competence under Entry 54, on the sa111e foot-
ing ns an amount not due as tax under the Act. Tax, according to s. 2(xxiv) of 
the Act, means tax payable under the Act. 
This necessarUy rn~ans that e\·cry-
thing outside it, collected by the dealer. would be an exaction not authorised by 
the 1-\ct. 
The <i.mount which \Yas realised by the respondent in excess of what 
\Vas due as tax cannot be held 10 he tax, because, such excess amount \Vas not tax 
payable under the Act. 
If the State Legislature cannot make a law under Entry 
54 directing payn1ent to the State of any amount collected as tax f)n transactions 
not liable to iax under the Act, it would likewise be incompetent to make a hl\V 
directing payn1ent to the State ol' an amount realised by a dealer in excess of the 
!ax payable under the Act. [157G-158C]. 
F 
G 
H 
-
+ 
B 
• 
!E 
!i 
"" 
' 
G 
i, 
I-
H 
S.T.O. V. TATA OIL MILLS LTD. (Khanna, J.) 
15 3 
R. A hdul Quader & Co. v. Sale::; Tax Officer, Hydercibad [1964} SCR 867 and 
A.sl1aka l1farlit'!it1"~· Ltd. v. Sia!.: of Bihar & A nr. [1970] 3 SCR 455, follov1ed. 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1988·198.9 of 
1970. 
firom the Judgment and order d

Excerpt shown. Read the full judgment & AI analysis in Lexace.