Forfeiture for wrongful sales tax collection upheld as a valid ancillary enforcement measure under taxing power.

Section 12A(4) of the Bombay Sales Tax Act, 1946 was construed to prohibit collection of any amount by way of tax where no tax was payable, or in excess of the tax due, and the forfeiture mechanism was upheld as a penalty for misuse of the taxing statute. The provision applied to collections on outside-State sales, so the notices and forfeiture made under it were valid. It was also held to be within legislative competence as an ancillary or incidental measure for effective enforcement of sales tax legislation, rather than a fresh tax levy. The challenge to the provision therefore failed and the petition was dismissed with costs.

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Issues: (i) Whether section 12A(4) of the Bombay Sales Tax Act, 1946 applied to amounts collected by way of tax on outside-State sales and whether the notices and forfeiture made thereunder were valid; (ii) Whether section 12A(4) was beyond the legislative competence of the Provincial Legislature and therefore ultra vires.

Issue (i): Whether section 12A(4) of the Bombay Sales Tax Act, 1946 applied to amounts collected by way of tax on outside-State sales and whether the notices and forfeiture made thereunder were valid.

Analysis: Section 12A was construed as prohibiting collection of any amount by way of tax in contravention of the section or collection in excess of the tax actually payable. The forfeiture provision was held to operate as a penalty for misuse of the taxing statute and not merely as a recovery clause limited to tax lawfully exigible. The earlier decision on the same provision had already rejected the contention that collections on outside-State sales were outside its reach, and the argument based on section 30 was also rejected on that footing.

Conclusion: The section applied to the impugned collections and the forfeiture and notice were not invalid on this ground.

Issue (ii): Whether section 12A(4) was beyond the legislative competence of the Provincial Legislature and therefore ultra vires.

Analysis: The provision did not impose a sales tax itself, but created a penal forfeiture to prevent dealers from collecting amounts by way of tax when no tax was payable or when collections exceeded the tax due. Such a measure was held to be ancillary or incidental to effective legislation on taxes on the sale of goods under Entry 48 of List II of the Seventh Schedule to the Government of India Act, 1935. The Supreme Court decision striking down a different provision was distinguished because that provision merely required payment over of amounts not exigible as tax, whereas section 12A(4) expressly imposed forfeiture as a penalty.

Conclusion: Section 12A(4) was within legislative competence and was not ultra vires.

Final Conclusion: The challenge to the forfeiture provision failed, and the petition was dismissed with costs.

Ratio Decidendi: A statutory provision imposing forfeiture as a penalty to prevent abuse of a sales tax law is within the legislature's ancillary or incidental power if it is directed to effective enforcement of the taxing entry and does not merely authorize recovery of an amount as if it were tax.

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