1992 (9) TMI 309 - HC - VAT and Sales Tax

Tax Court Orders Refund for Overzealous Collection

The court directed respondents 2 and 3 to refund the amounts collected from the petitioner, criticizing the overenthusiastic attitude of the 2nd ... - Issues:1. Compulsory collection of amount by respondents 2 and 3.2. Violation of provisions of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981.3. Legality of the compounding fee collection process.4. Lack of proper opportunity and violation of principles of natural justice.5. Authority of law for on-the-spot tax collection.6. Proper procedure for tax collection and enforcement.Analysis:Issue 1: Compulsory collection of amountThe petitioner sought a writ of mandamus to direct respondents 2 and 3 to refund the amount of Rs. 37,577 collected by cheque and Rs. 1,000 as a compounding fee. The petitioner argued that the collection was compulsory and without proper authority of law.Issue 2: Violation of Act provisionsThe petitioner, an assessee under the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981, was assessed for sales tax. The petitioner contended that the catering service provided did not constitute sales as per the Act's provisions, leading to a dispute over tax liability.Issue 3: Legality of fee collectionThe petitioner alleged that the compounding fee and tax were collected without following due process and without issuing a show cause notice. The authorities defended the collection, stating it was voluntary and based on the turnover observed during inspection.Issue 4: Lack of opportunity and natural justiceThe petitioner claimed that no proper opportunity was given to present their case, and the collection was against the principles of natural justice. The court noted discrepancies in the collection process and the petitioner's subsequent protests.Issue 5: Authority of on-the-spot tax collectionThe court scrutinized the authority of the respondents to collect tax on the spot without proper notice or enquiry. It emphasized the importance of adhering to the prescribed procedures under the Act, especially in the absence of the petitioner during the inspection.Issue 6: Proper tax collection procedureThe judgment highlighted the necessity for authorities to follow the correct procedure for tax collection, even in cases of non-compliance by the assessee. It condemned the practice of on-the-spot collection without due process and emphasized the need for adherence to legal requirements.In conclusion, the court directed the respondents to refund the amounts collected from the petitioner, criticizing the overenthusiastic attitude of the 2nd respondent and emphasizing the importance of upholding procedural fairness and legal standards in tax enforcement. The judgment serves as a reminder for tax authorities to act in accordance with the law and ensure due process in dealings with taxpayers.