Reimbursement to agents for additional sales tax is not unlawful collection, while agent-routed sales count for turnover rate purposes.

A statutory bar on collecting additional sales tax from purchasers does not prevent principals from reimbursing agents for tax incurred on tea sales made on their behalf, so such reimbursement is not unlawful collection under section 2(2) and does not attract penalty under section 3-A. A circular directing refund on the contrary premise therefore lacked basis and was treated as unenforceable. For rate determination, sales routed through agents were includible in the principals' aggregate taxable turnover, as Rule 6(h) permits exclusion only where the sales have already been taxed in the agent's hands. The turnover computation for applying the correct slab rate was upheld.

---

---

Issues: (i) Whether reimbursement or contribution by principals to agents towards additional sales tax on tea sales contravened section 2(2) of the Tamil Nadu Additional Sales Tax Act, 1970 and attracted penalty under section 3-A; (ii) Whether the Commissioner's circular dated 11 December 1995 directing refund of the amount collected as additional tax was sustainable; (iii) Whether, for determining the rate of additional sales tax, the sales effected through agents had to be included in the principals' total taxable turnover.

Issue (i): Whether reimbursement or contribution by principals to agents towards additional sales tax on tea sales contravened section 2(2) of the Tamil Nadu Additional Sales Tax Act, 1970 and attracted penalty under section 3-A.

Analysis: The statutory prohibition under section 2(2) was directed against collection of additional tax from purchasers and not against reimbursement by principals to agents who had incurred the liability while selling on behalf of principals. The agents acted in a representative capacity, and the additional tax was borne out of the sale proceeds of the principals, not passed on to buyers. On that footing, reimbursement did not amount to unlawful collection by the dealers.

Conclusion: Reimbursement or contribution by principals did not amount to contravention of section 2(2), and penalty under section 3-A was not sustainable.

Issue (ii): Whether the Commissioner's circular dated 11 December 1995 directing refund of the amount collected as additional tax was sustainable.

Analysis: Once reimbursement from principals was held not to be a prohibited collection, the circular founded on the contrary premise lost its basis. The Tribunal also noted that the Commissioner lacked statutory authority to issue such a clarification on tax incidence and assessment matters.

Conclusion: The circular did not survive as an enforceable direction, and the challenge to it was dismissed as infructuous.

Issue (iii): Whether, for determining the rate of additional sales tax, the sales effected through agents had to be included in the principals' total taxable turnover.

Analysis: Rule 6(h) contemplates exclusion from the principal's turnover only of sales already taxed in the agent's hands, but the aggregate turnover of the principals' sales routed through agents remains relevant for applying the correct slab rate of additional tax. The assessment method adopted by the authorities was therefore consistent with the statutory scheme.

Conclusion: Inclusion of sales effected through agents in the principals' total taxable turnover for rate determination was upheld.

Final Conclusion: The Tribunal granted relief against penalty, but upheld the turnover computation adopted for rate purposes, with the circular challenge not surviving independently.

Ratio Decidendi: A statutory bar on collecting additional tax from buyers does not prohibit reimbursement of that liability by principals to agents acting on their behalf, and such reimbursement cannot be treated as a collection attracting penalty when the tax burden is not passed on to purchasers.

---