Purchaser deposits with commission agent are not tax collections, so penalty cannot be imposed absent contravention.

Amounts deposited by purchasers with a commission agent to meet a possible contingency on sales of exempt agricultural produce were not collections by way of tax or purporting to be by way of tax under the Mysore Sales Tax Act, 1957. The Court distinguished a dealer's own tax collection from money entrusted by purchasers and held that, on the facts found, the agent held the deposits as a trustee rather than as tax receipts. As there was no contravention of the prohibition against collecting tax-like amounts, the statutory basis for penalty under section 18-A was absent, and the penalty could not stand.

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Issues: Whether amounts received by a commission agent from purchasers as deposits, in relation to sales of agricultural produce not exigible to tax, constituted collection by way of tax or purporting to be by way of tax so as to attract penalty under the Mysore Sales Tax Act, 1957.

Analysis: The relevant statutory language prohibited a non-registered dealer from collecting any amount by way of tax, and after amendment also from collecting any amount purporting to be by way of tax. The Court distinguished between a dealer collecting money as tax and a purchaser depositing money with the dealer to meet a possible contingency. On the facts found, the amounts were deposited by purchasers and stood in the nature of entrustment, with the dealer holding them as a trustee rather than as tax collections. Such deposits did not amount to a collection by way of tax or purporting to be by way of tax. Since there was no contravention of section 18, the foundation for penalty under section 18-A was absent.

Conclusion: The penalty was unlawful and the assessee succeeded.

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