Unauthorized sales tax collection requires clear proof; mere deposit after a lawful duty to collect cannot sustain penalty.

Penalty for unauthorized collection of sales tax cannot stand without a definite finding, supported by credible evidence, that tax was actually realized illegally. The Court noted that after expiry of the exemption period the assessee was obliged to collect sales tax, and mere deposit of the collected amount with the Department did not prove illegal collection. The Tribunal also erred by mixing exempt-period facts with post-exemption facts and by relying on relevant and irrelevant materials together. The penalty for the years 1994-95 and 1995-96 was therefore not sustainable, and the revision petitions succeeded to that extent.

---

---

Issues: (i) whether penalty under Section 9-B(3) of the Orissa Sales Tax Act, 1947 was legally justified for the years 1994-95 and 1995-96; (ii) whether the finding that the assessee had illegally collected sales tax after 1 December 1993 was sustainable; (iii) whether the Tribunal's order was vitiated for having relied on relevant and irrelevant materials together.

Issue (i): whether penalty under Section 9-B(3) of the Orissa Sales Tax Act, 1947 was legally justified for the years 1994-95 and 1995-96.

Analysis: The material on record did not establish any credible or direct proof of unauthorized collection of sales tax by the assessee. For the period after the exemption for the installed capacity ended, the assessee was required to collect sales tax and the amount collected was deposited with the Department. Such deposit could not, by itself, support a conclusion of illegal collection.

Conclusion: The penalty was not legally justified and the answer is in the negative, in favour of the assessee.

Issue (ii): whether the finding that the assessee had illegally collected sales tax after 1 December 1993 was sustainable.

Analysis: The Tribunal's conclusion ignored the distinction between the exempt period and the post-exemption period. It also proceeded without a definite finding that sales tax had in fact been realized illegally. The record showed that the assessee was obliged to collect tax after expiry of the exemption and had merely remitted the collected amount.

Conclusion: The finding that the assessee had illegally collected sales tax after 1 December 1993 was incorrect and not sustainable in law, in favour of the assessee.

Issue (iii): whether the Tribunal's order was vitiated for having relied on relevant and irrelevant materials together.

Analysis: The Tribunal's reasoning was affected because it mixed up the legally relevant facts for the exempt period and the post-exemption period and drew conclusions without a clear evidentiary basis. The resulting determination was therefore unsustainable.

Conclusion: The order was vitiated by consideration of relevant and irrelevant materials together, in favour of the assessee.

Final Conclusion: The sustaining of penalty for the years 1994-95 and 1995-96 could not stand, and the revision petitions succeeded to that extent.

Ratio Decidendi: Penalty for unauthorized collection of sales tax cannot be sustained unless there is a definite finding supported by credible evidence that tax was actually realized illegally; mere deposit of collected tax after a legal obligation to collect it does not establish unauthorized collection.

---