Forfeiture of excess sales tax collected on subsidy component upheld under the Karnataka Sales Tax Act.

Where sales tax was computed on the gross invoice amount before deducting subsidy, the amount recovered from buyers included tax attributable to the subsidy component. That excess collection was not payable as tax and could not be retained by the dealer. On that basis, section 18AA(4) of the Karnataka Sales Tax Act, 1957 treated the excess as liable to forfeiture, and recovery by the State correspondingly discharged any refund obligation. The document concludes that the dealer had collected tax on the subsidy component and that the forfeiture order was justified.

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Issues: Whether the assessee collected sales tax on the subsidy component and thereby attracted forfeiture under section 18AA of the Karnataka Sales Tax Act, 1957.

Analysis: The invoice showed that the tax components were computed on the gross amount before deducting the subsidy, while the subsidy was merely reduced from the sale price to arrive at the net invoice value. On that basis, the amount collected from the buyers included tax attributable to the subsidy component. The amount so collected was not due as tax and could not be retained by the assessee. Under section 18AA(4), such excess amount was liable to be forfeited and recovery by the State discharged the dealer from any corresponding refund liability.

Conclusion: The assessee had collected tax on the subsidy component and the forfeiture order was justified, in favour of Revenue.

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