Collection by way of tax on sale value attracts penalty when it is not confined to tax already suffered.

The Madras HC held that amounts collected from a purchaser on the sale value, at the rate applicable to the goods resold, were not mere incidental charges or exact reimbursement of tax already suffered. On the factual findings, the collection exceeded the prior tax burden and was made as if the second sale itself were taxable. That brought the receipts within collection by way of tax, in breach of the prohibition in section 22(1) of the Tamil Nadu General Sales Tax Act, 1959. Penalty under section 22(2) was therefore attracted, and the revision failed.

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Issues: Whether the collection made by the assessee from its purchaser was only incidental charges or recoupment of tax suffered, or whether it was 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 authorities below had concurrently found that the amount was not collected as incidental charges. The material on record showed that the amount was charged at the rate applicable to the goods resold, was calculated on the sale value, and exceeded the tax earlier suffered by the assessee. The Tribunal's view that the entire collection was merely tax already suffered was not supported by the findings recorded by the Appellate Assistant Commissioner or by the documentary material. On the facts, the collection represented tax on the assessee's sale turnover as if the second sale were taxable, and not a mere reimbursement of prior tax suffered.

Conclusion: Penalty under section 22(2) was attracted, and the revision failed.

Ratio Decidendi: A collection made on the sale value as if the transaction were taxable, and not confined to exact tax already suffered, constitutes collection by way of tax in contravention of section 22(1) and attracts penalty under section 22(2).

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