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Report No. 61

Chapter 6

Disposal of Excess Amounts Collected by a Dealer from a Customer as Sales Tax

6.1. Collection of excess amount by dealers-No legislative competence in States.-

It appears that some difficulty has been felt as regards the disposal of amounts illegally collected as sales tax by a dealer from a customer. Such a situation usually arises when Sales Tax is realised from a person in respect of goods not liable to tax. State Acts sometimes contain provisions to the effect that such amounts will be forfeited to the State Government. But such a provision has been held1 to be beyond the legislative competence of the States, as it is not incidental to the power to levy a "tax" on the sale of goods, because, on hypothesi, the amount in question is not leviable as "a tax".

Thus, section 5(c) of Andhra Pradesh General Sales Tax Act (6 of 1957) as amended was held to be ultra vires the State Legislature,2 on this ground. The section provided for liability of the dealer to pay illegally collected tax to the Government.

1. Abdul Quadar and Co. v. Sales Tax Officer, Hyderabad, (1964) 6 SCR 867: AIR 1964 SC 922 (923 to 925) (Section 11, Hyderabad General Sales Tax Act).

2. V. Audiseshiah & Co. v. State of Andhra Pradesh, (1968) 22 STC 222 (AP), (Section 5, Andhra Act).

Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back

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