Wrongful tax collection provisions upheld: "person" extends beyond dealers and forfeiture for breach is within State competence.

Section 46(2) of the Bombay Sales Tax Act, 1959 is construed broadly: the word "person" is not confined to a dealer and extends to persons other than dealers, preventing wrongful collection of tax by anyone not entitled to recover it. Section 37, which imposes penalty and forfeiture for collection made in breach of that prohibition, is treated as an ancillary and incidental measure within the State's legislative competence on sales tax. The forfeiture scheme is therefore valid, although forfeiture of amounts collected merely as deposits is not sustained.

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Issues: (i) Whether the word "person" in section 46(2) of the Bombay Sales Tax Act, 1959 is confined to a dealer. (ii) Whether section 37 of the Bombay Sales Tax Act, 1959, providing for penalty and forfeiture for wrongful collection of tax, is within the legislative competence of the State.

Issue (i): Whether the word "person" in section 46(2) of the Bombay Sales Tax Act, 1959 is confined to a dealer.

Analysis: Section 46(2) prohibits a registered dealer from collecting tax in excess of the amount payable by him and also prohibits a person who is not a registered dealer and liable to pay tax from collecting any sum by way of tax. The scheme of the Act shows that the prohibition is meant to prevent any person who is not liable to pay tax on the transaction from recovering tax from purchasers under the guise of liability. The inclusive statutory definition of "person" in section 2 also supports a wider meaning. Restricting the term to dealers alone would leave an obvious gap in the prohibition and defeat the object of the provision.

Conclusion: The word "person" in section 46(2) is not confined to a dealer and includes persons other than dealers.

Issue (ii): Whether section 37 of the Bombay Sales Tax Act, 1959, providing for penalty and forfeiture for wrongful collection of tax, is within the legislative competence of the State.

Analysis: Section 37 operates with section 46 to prohibit wrongful collection of tax and to impose penal consequences, including forfeiture, for collection made in breach of that prohibition. Unlike the provisions considered in the cited Supreme Court decisions, the Bombay Act contains an express prohibition, a penal consequence, and a connected forfeiture mechanism directed to enforcing the taxing scheme. The provision is therefore ancillary and incidental to the power to levy sales tax under the relevant legislative entry and is not a mere attempt to levy an unauthorised tax. The retrospective refund machinery introduced later does not alter the penal character of the forfeiture scheme.

Conclusion: Section 37 is within legislative competence and is valid.

Final Conclusion: The references fail on the main question of law and the validity of the forfeiture scheme is upheld, though the forfeiture of the amount collected merely as a deposit is not sustained.

Ratio Decidendi: A statutory prohibition against wrongful collection of tax, coupled with penal forfeiture for breach of that prohibition, is an incidental and ancillary measure within the State's power to legislate on sales tax.

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