Govinda Bhat, J.:— This Writ Petition, preferred under Art. 226 of the Constitution of India by an assessee under the Mysore Sales Tax Act, 1957, hereinafter called the Act, is directed against the order of penalty made by the Commercial Tax Officer, Haveri (respondent 1) under S. 18A of the Act, by which he imposed a penalty of Rs. 4,915.
2. The contention of the petitioner is that on the facts found by the first respondent there has been no contravention of sub-secs. (1) or (2) of S. 18 of the Act and consequently the levy of penalty is illegal.
3. In order to appreciate the contention, the material facts which are not in dispute may be briefly stated: The petitioner is a Commission Agent dealing in chillies besides other goods.
4. The petitioner sells the chillies supplied by his principals, who are agriculturists. Though the sales by a Commission Agent of agricultural produce supplied by agriculturists for sale are not exigible to tax under the Act, the petitioner was assessed to sales tax on the turnover of chillies sold during the year 1966-1967. That Order of assessment was taken up by the petitioner in appeal to the Deputy Commissioner of Commercial Taxes, who is the first appellate authority. The said appeal was pending during the period 13-10-1967 to 1-10-1968. During the said period the purchasers deposited a sum of Rs. 4,912-06 with the petitioner to be appropriated towards sales tax in the event of the sale being ultimately held to be exigible to tax. The appeal preferred by the petitioner for the year 1966-1967 was allowed by the Deputy Commissioner of Commercial Taxes. Following the said Order, when the first respondent made the assessment Order for the period 13-10-1967 to 1-10-68, the turnover of chillies was exempted from sales tax. The assessment Order dated 26-6-1969 stated that the petitioner had collected a sum of Rs. 4,912-06 by way of deposit relating to commission agency sales of chillies and separate action was being taken under S. 18A so far as the collection was concerned. The said Order was followed by a notice dated 27-6-1969. That notice stated that the petitioner during the period from 13-10-1967 to 1-10-1968 had collected a sum of Rs. 4,912.06 as deposit on the sale of chillies effected on behalf of the grower principals. The petitioner was asked to show cause why penalty should not be levied under S. 18A of the Act since the said amount represents collection by way of tax or purporting to be by way of tax. In reply to the said notice, the petitioner stated the facts, already set out, regarding the non-exigibility to tax of the sales turnover and also that there is no contravention of S. 18. The first respondent overruling the objection of the petitioner passed an Order on 1-9-1969 imposing a penalty of Rs. 4,915. The said Order state that the petitioner during the relevant period had collected the sum aforesaid as deposit on the sale of chillies effected on behalf of the grower principals. But, such collection in the opinion of the first respondent amounts to collection of an amount by way of tax or purporting to be by way of tax.
5. In V.B Patil… v. Commercial Tax Officer, Haveri & Others…, Haveri(1), we have held that if a transaction is not exigible to tax or when a dealer is not liable to pay tax on any transaction then the collection made by him would fall outside the scope of S. 18(1) and such collection does not amount to a contravention of sub-sec. (1) of S. 18 as the Act stood prior to its amendment on 1-4-1967. S. 18(1) as it then stood read thus:
“No person who is not a registered dealer shall collect any amount by way of tax under this Act; nor shall a registered dealer make any such collection except in accordance with such conditions and restrictions, if any, as may be prescribed:”
6. There is no alteration in the provisions of S. 18A. S. 18(1) as it now stands reads:
“No person who is not a registered dealer shall collect any amount by way of tax or purporting to be by way of tax under this Act; nor shall a registered dealer make any such collection except in accordance with such conditions and restrictions, if any, as may be prescribed:”
7. The only amendment made is the addition of the clause underlined (italics).
8. Sri P.K Shyamsunder the learned Government Pleader contended that the amendment of S. 18(1) by the addition of the clause referred to above makes V.B Patil's case distinguishable from the instant case. He argued that where a transaction is not exigible to tax but a registered dealer collects any amount professing to be by way of tax the dealer contravenes the provisions of S. 18(1) of the Act.
9. Sri K. Srinivasan, the learned Counsel for the petitioner, submitted that the deposit of the amounts by the purchasers with the petitioner in the circumstances stated does not amount to collection of the said amounts ‘purporting to be by way of tax’. The word ‘deposit’ means ‘entrustment’. When a dealer collects any amount professing to be by way of tax, the customer who pays the amount does not deposit the amount with the dealer. The dealer gathers the money as tax. But where the customer in order to meet a contingent deposits any amount with the dealer, there is only the entrustment of the amount and the position of the dealer is in the nature of a trustee for the amount. The taking of deposit by a dealer cannot be construed as collection of any amount by way of tax or purporting to be by way of tax.
10. In our judgment, on the facts found by the first respondent, the petitioner has not contravened the provisions of S. 18 and consequently the imposition of penalty under S. 18A is clearly illegal.
11. In the result this Writ Petition succeeds and the impugned Order dated 1-9-1969 is quashed. In the circumstances, no costs.