Wrongful tax collection on coffee sales: purchase tax liability does not justify collecting sales tax at the sale stage.

A coffee curer liable for purchase tax on coffee seeds bought from unregistered dealers could not lawfully collect sales tax at the later sale stage on the same goods. Once purchase tax attached under the statutory scheme, no sales tax was payable at sale, and section 18 barred collection of tax where none was due at that point. Any amount collected as tax in contravention of section 18 attracted section 18AA, so wrongful collection could not be retained. The Tribunal's view that sale-stage collection was permissible because purchase tax was payable was inconsistent with the Act's structure.

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Issues: Whether a coffee curer who was liable to pay purchase tax on coffee seeds purchased from unregistered dealers could lawfully collect sales tax at the time of sale and avoid the consequence of wrongful collection under section 18AA of the Karnataka Sales Tax Act, 1957.

Analysis: The liability under the Karnataka Sales Tax Act, 1957 was at the point of purchase for coffee seeds purchased by a coffee curer from persons not liable to tax. Once that statutory liability attached, the dealer was not liable to pay tax at the point of sale on the same goods. Section 18 prohibited collection of tax where no tax was payable at that point, and section 18AA applied where any amount was collected by way of tax in contravention of section 18. The Tribunal's view that collection at sale was permissible merely because purchase tax was payable was inconsistent with the statutory scheme.

Conclusion: The collection of sales tax in such circumstances was in contravention of section 18, and the invocation of section 18AA was justified. The assessee was not entitled to retain the collected amount, and the Revenue's challenge succeeded.

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