TaxTMI 
TaxTMI 
1964 (2) TMI 65
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.... a notification in that behalf. We are here concerned with the assessment period from May 1, 1953 to March 31, 1954, covered by the assessment year 1953-54. The appellant collected sales tax from the purchasers in connection with the sales made by it on the basis that the incident of the tax lay on the sellers and assured the purchasers that after paying the tax to the appellant, there would be no further liability on them. After realising the tax, however, the appellant did not pay the amount realised to the Government but kept it in the suspense account of its principals, namely, the purchasers. When the accounts were scrutinized by the Sales Tax Department, this was discovered and thereupon the appellant was called upon to pay the amounts realised to the Government. The appellant however objected to the payment on the ground that it was the seller, and the relevant notification for the relevant period imposed tax at the purchase point, i.e., on the purchaser. This objection was overruled and the appellant was directed to pay the amount to Government. The main contention raised on behalf of the appellant in the High Court was that section 11(2) of the Act, which authorised the ....
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....) Notwithstanding anything to the contrary contained in any order of an officer or tribunal or the judgment, decree or order of a Court, every person who has collected or collects on or after 1st May, 1950, any amount by way of tax otherwise than in accordance with the provisions of this Act, shall pay over to the Government, within such time and in such manner as may be prescribed the amount so collected by him, and in default of such payment the said amount shall be recovered from him as if it were arrears of land revenue." It will be seen that section 11(1) forbids an unregistered dealer from collecting any amount by way of tax under the Act. That pro- vision however does not apply in the present case, for the appellant is admittedly a registered dealer. Further section 11(1) lays down that a registered dealer shall not make any such collection before May 1, 1950, except in accordance with such conditions and restrictions, if any, as may be prescribed. This provision again does not apply, for we are not concerned here with any collection made by the appellant before May 1, 1950. The prohibition therefore of section 11(1) did not apply to the appellant. Then comes section 11(2).....
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....dental to the topics mentioned therein. Even so, there is a limit to such incidental or ancillary power flowing from the legislative entries in the various lists in the Seventh Schedule. These incidental and ancillary powers have to be exercised in aid of the main topic of legislation, which in the present case, is a tax on sale or purchase of goods. All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded are comprised within the ambit of the legislative entry as ancillary or incidental. But where the legislation under the relevant entry proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry, but even so lays down that though it is not exigible under the law, it shall be paid over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such a provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry. We do not think that the ambit of ancillary or incidental power goes to the extent of permitting the Legislature to provide that though the am....
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.... provision makes the person punishable for his failure to pay the amount which is not authorised as a tax at all under the law, to Government. It does not provide for a penalty for collecting the amount wrongly by way of tax from purchasers which may have been justified as a penalty for the purpose of carrying out the objects of the taxing legislation. If a dealer has collected anything from a purchaser which is not authorised by the taxing law, that is a matter between him and the purchaser, and the purchaser may be entitled to recover the amount from the dealer. But unless the money so collected is due as a tax, the State cannot by law make it recoverable simply because it has been wrongly collected by the dealer. This cannot be done directly for it is not a tax at all within the meaning of Entry 54 of List II, nor can the State Legislature under the guise of incidental or ancillary power do indirectly what it cannot do directly. We are therefore of opinion that section 11(2) is not within the competence of the State Legislature under Entry 54 of List II. The respondent in this connection relies on the decision of this Court in The Orient Paper Mills Limited v. The State of Oris....