Forfeiture of non-tax collections held unconstitutional where amounts were taken on transactions not liable to sales tax.

Collections taken from purchasers for transactions not liable to sales tax were not tax recoverable by the State, because no underlying tax liability arose at all. The Mysore High Court held that a statutory forfeiture of such sums would amount to compulsory deprivation of property without lawful justification and would offend Article 19(1)(f). Section 18(3) of the Mysore Sales Tax Act, 1957 was therefore unconstitutional and void to the extent it authorised forfeiture of the disputed collections, and the demand notices and assessment orders requiring payment to the Government were quashed.

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Issues: Whether amounts collected by a dealer from purchasers in respect of transactions not liable to sales tax could be forfeited to the State under section 18(3) of the Mysore Sales Tax Act, 1957, and whether that provision was unconstitutional as offending Article 19(1)(f) of the Constitution of India.

Analysis: The collected sums were not amounts recoverable as tax, because the underlying transactions were not liable to sales tax at all. Money taken from purchasers in anticipation of a possible tax liability did not, in substance, become tax collected on behalf of the State or money payable to the Government under the statute. The legal position was unlike a genuine tax collection or a true contingent deposit arrangement. A statutory provision directing forfeiture of such sums would, in effect, divest the customer or dealer of property without lawful justification. Such deprivation was inconsistent with the protection of property guaranteed by Article 19(1)(f).

Conclusion: Section 18(3) of the Mysore Sales Tax Act, 1957 was held unconstitutional and void insofar as it authorized forfeiture of the disputed collections. The demand notices and assessment orders requiring payment of those sums to the Government were quashed, and the petitioners succeeded.

Final Conclusion: The statutory forfeiture mechanism could not be applied to collections made in respect of transactions not exigible to sales tax, and the impugned demands were set aside.

Ratio Decidendi: A statute cannot validly forfeit money collected from purchasers where the underlying transactions are not liable to tax, because such collections are not tax due to the State and their compulsory appropriation amounts to unconstitutional deprivation of property.

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