Judgment

H. R. KHANNA, J. - This judgment would dispose of civil appeals Nos. 1988 and 1989 of 1970, filed on certificate against the judgment of the Kerala High Court, whereby that court held that it was beyond the competence of the State Legislature to enact law contained in sub-section (3) of Section 22 of the Kerala General Sales Tax Act, 1963 (Act 15 of 1963) (hereinafter referred to as the Act) in so far as it related to payment of an amount collected as tax on transactions not liable to tax under the Act or in excess of the tax leviable under the Act.

2. We may now set out the facts giving rise to one of the appeals. Both the learned counsel are agreed that the decision in that would also govern the other appeal.

3. Under Section 5 of the Act, tax is payable by a dealer on his taxable turnover. "Taxable turnover is defined in Section 2 (xxv) of the Act as the turnover on which a dealer is liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed by the rules under the Act. It does not, however, include the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export or import of foods. The Kerala General Sales Tax Rules have been framed by the State Government in exercise of the power conferred by Section 57 of the Act. According to clause (i) of rule 9 of the said rules, in determining the taxable turnover the following amount shall be deducted from the total turnover of the dealer: "the excise duty, if any, paid by the dealer to the Government of Kerala or the Central Government in respect of the goods sold by him". It may be stated that clause (i) was omitted subsequently but we are concerned with the period when that clause was an integral part of the rule.

4. The respondent is an incorporated company engaged in the manufacture and sale of soaps, toilets and other goods. The 1992 respondent s accounts disclosed that it had collected from the persons to whom it sold goods a sum of Rs. 30,591.71 as sales tax in excess of the tax which the respondent was liable to pay under the Act. The respondent, it would appear, paid Rs. 6,62,958 as excise duty and deducted the same from its total turnover for the purpose of determining the taxable turnover. When, however, the respondent company sold the goods it collected sales tax from the purchasers on the invoice price without deducting therefrom the excise duty paid in respect of the said goods. This resulted in the respondent company realising Rs. 30,591.71 in excess of the sales tax payable in respect of the goods sold by it. The Sales Tax Officer held that the respondent was liable to pay the aforesaid amount of Rs. 30,591.71 to the Government under Section 22 (3) of the Act. The respondent then filed writ petition in the Kerala High Court to challenge its liability to pay the aforesaid amount on the ground that the provisions of Section 22 in so far as they imposed a liability on a dealer to pay over to the Government any amount collected by him as sales tax, even though that amount was not payable as tax, was unconstitutional. The learned single Judge dismissed the petition filed by the resopndent. On appeal, however, the Division Bench held, as already mentioned earlier, that the impugned provision was beyond the legislative competence of the State Legislature.

5. Sub-section (3) of Section 22 of the Act reads as under:

"(3) If any dealer or person collects tax on transactions not liable to tax under this Act or in excess of the tax leviable under this Act, such dealer or person shall, unless it is established to the satisfaction of the assessing authority that the tax so collected has been refunded to the person who had originally paid tax, pay over to the Government in addition to the tax payable, the amount so collected within such time and in such manner as may be prescribed.

The learned Judges of the High Court in holding the above provision, in so far as it relate