Penalty for unlawful tax collection cannot be reopened once no tax collection is found and final assessments stand.

Where a tribunal has found that a dealer collected only sale price and not any amount by way of tax, the statutory prohibition on unlawful tax collection is not breached and penalty under the Gujarat Sales Tax Act cannot survive. On those findings, further inquiry into the independent taxability of the underlying sales is irrelevant to penalty proceedings, particularly when the assessments have attained finality. A remand to the Sales Tax Officer for reconsideration of taxability was therefore unjustified, and the amounts recovered as penalty had to be refunded. The reference was answered in favour of the assessee and against the revenue.

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Issues: Whether, after recording a clear finding that no amount was collected by the dealer by way of tax and that penalty under section 46(1)(ii) was not leviable, the Tribunal was justified in remanding the matter to the Sales Tax Officer to reconsider taxability and in refusing to order refund of the amounts recovered as penalty.

Analysis: Section 56 of the Gujarat Sales Tax Act, 1969 prohibits collection from the purchaser of any amount by way of tax unless the dealer is liable to pay tax in respect of the sale, and section 46(1)(ii) makes such collection in contravention of section 56 punishable by penalty equal to the amount so collected. The Tribunal had expressly found, on the facts, that the dealer had recovered only sale price and not any amount by way of tax, and that the statutory prohibition was therefore not breached. Once that finding was reached, the penalty proceedings stood concluded in favour of the dealer. On those findings, no further inquiry into whether the sales were independently liable to tax was relevant for deciding penalty, especially when the underlying assessments had become final. The Tribunal therefore had no basis to remand the matter or to deny refund of the penalty amounts.

Conclusion: The remand was not justified, and the dealer was entitled to refund of the penalty amounts. The answers to both referred questions were in the negative, in favour of the assessee and against the revenue.

Final Conclusion: The reference was answered entirely in favour of the assessee, and the Tribunal's remand order and refusal to direct refund were set aside.

Ratio Decidendi: Where a tribunal records a conclusive finding that no tax was collected in breach of a statutory prohibition, the penalty proceedings must end on that finding and cannot be reopened by remanding the matter to examine independent taxability of the underlying sales.

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