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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the amount payable by a surety under a surety bond executed to secure payment of sales tax dues can be recovered by the State as an arrear of land revenue under the Bombay Sales Tax Act, 1959 or the Bombay Land Revenue Code, 1879.
Analysis: Section 38(5) of the Bombay Sales Tax Act, 1959 authorises recovery as arrears of land revenue only of unpaid tax, penalty, or forfeiture falling within the categories specified by that section. The amount claimed from the petitioner was not tax or penalty payable by the dealer, but a separate contractual liability arising under the surety bond. A sum due from a surety under such a bond does not acquire the character of tax or penalty merely because the bond secures the tax liability of another person. Section 187 of the Bombay Land Revenue Code, 1879 also did not assist the State, because the bond contained no express declaration that the amount payable by the surety was leviable as an arrear of land revenue. A mere power to auction property on default is not equivalent to a contractual stipulation making the amount recoverable as arrears of land revenue.
Conclusion: The State was not entitled to recover the amount due under the surety bond as an arrear of land revenue, and the petitioner was entitled to relief by writ of prohibition.
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