Tax collection in name only did not breach sales tax law; remitted amounts without retention attracted no penalty.

Amounts received from purchasing merchants at the instance of sales tax authorities and remitted to the Government without retention were not treated as tax "collected" by the dealer under section 22(1) of the Tamil Nadu General Sales Tax Act, 1959. On those facts, the court held there was no contravention because the sums were passed on for remittance on behalf of the purchasers. Penalty under section 22(2) was also held discretionary rather than automatic, and the Tribunal's deletion of penalty was upheld as a reasonable exercise of discretion in the absence of unlawful gain.

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Issues: (i) Whether the assessees had collected any amount by way of tax or purporting to be by way of tax in contravention of section 22(1) of the Tamil Nadu General Sales Tax Act, 1959. (ii) Whether the deletion of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 was justified on the facts and circumstances of the case.

Issue (i): Whether the assessees had collected any amount by way of tax or purporting to be by way of tax in contravention of section 22(1) of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The collection provision was read in its context and in light of the admitted facts. The amounts were received from the purchasing merchants at the instance of the sales tax authorities and were remitted to the Government against the account of those merchants. The sums were not retained by the assessees, and the record showed that they had consistently maintained that the tax was collected only to facilitate remittance on behalf of the purchasers. On that footing, the expression "collected" was held not to cover amounts merely received and passed on to the State without retention.

Conclusion: The assessees did not contravene section 22(1) of the Tamil Nadu General Sales Tax Act, 1959.

Issue (ii): Whether the deletion of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 was justified on the facts and circumstances of the case.

Analysis: The penalty provision was treated as discretionary, not automatic. The assessing authority was required to consider the surrounding facts before imposing penalty. Since the tax was collected and remitted under the department's directions, without retention and without any unlawful gain, the Tribunal's view that penalty was unwarranted was found to be a proper and reasonable exercise of discretion.

Conclusion: The deletion of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 was justified.

Final Conclusion: The revision cases failed because the assessee's conduct did not amount to a contravention attracting penalty, and the Tribunal's order was upheld.

Ratio Decidendi: Penalty for unlawful tax collection is not automatic; where amounts are received only for remittance to the revenue at its instance and are not retained as the dealer's own collection, section 22(1) is not contravened and penalty under section 22(2) is not attracted.

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