Second-sale tax recovery treated as tax collection, making penalty under the sales tax law properly exigible.

Amounts recovered by a second seller in excess of the price paid at the earlier stage were treated as collections by way of tax, where invoices and accounts showed that the sums corresponded to the applicable tax and surcharge. The Court held that such excess recovery could not be treated as mere profit absent a convincing basis for a consolidated price unconnected with tax collection. On those facts, the collection fell within section 22(1) of the Tamil Nadu General Sales Tax Act, 1959, and penalty under section 22(2) was properly attracted; the Tribunal's deletion of penalty was set aside.

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Issues: Whether the amount collected by the assessee in second sales, though shown as part of the sale price and profit margin, was in substance a collection by way of tax or purporting to be by way of tax so as to attract penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The invoices and account entries showed that the assessee collected amounts over and above the price paid by it, and those additional amounts corresponded to the rate of tax and surcharge applicable to the transactions. The Court held that where a second seller recoups the tax borne at the earlier stage and collects an amount in excess of that tax incident, the excess cannot be treated as mere profit in the absence of a convincing basis showing a consolidated price unconnected with tax collection. On the facts, the additional recovery was found to be an amount collected by way of tax within the meaning of section 22(1), and the Tribunal's view that it was only profit was held unsustainable.

Conclusion: The collection attracted section 22(1), and the penalty levied under section 22(2) was rightly exigible. The deletion of penalty by the Tribunal was set aside.

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