1993 (10) TMI 327 - HC - VAT and Sales Tax

High Court Invalidates Immediate Tax Demand, Emphasizes Procedural Safeguards

Bhagyanagar Metals Ltd. Versus CTO. Ramgopalpet Circle, Secunderabad

Bhagyanagar Metals Ltd. Versus CTO. Ramgopalpet Circle, Secunderabad - [1994] 93 STC 40 (AP) Issues:Whether a Commercial Tax Officer can issue a demand notice for immediate payment without following due process under the Andhra Pradesh General Sales Tax Act.Analysis:The judgment delivered by the Andhra Pradesh High Court in this case primarily revolves around the legality of a demand notice issued by the Commercial Tax Officer to an assessee for immediate payment of a substantial amount allegedly towards sales tax. The Court emphasized that the power vested in the Commercial Tax Officer is not arbitrary and must be exercised in accordance with the law. The Court highlighted that the Officer must follow the prescribed procedure, including notifying the assessee, allowing for explanations, and quantifying the amount due after considering objections. The absence of assessment or reassessment of tax due, or application of the correct tax rate, was noted by the Court as a violation of the Andhra Pradesh General Sales Tax Act and its rules.The Government Pleader for the Commercial Tax Department argued that the demand notice was a provisional proposal and suggested that the assessee could have sought relief directly from the Officer. However, the Court found no indication in the notice inviting such action by the assessee. The Court dismissed the belated explanation by the Officer that the notice was merely a proposal, emphasizing that exercising power arbitrarily is unjustifiable. Consequently, the Court declared the notice dated September 21, 1993, as illegal and in violation of natural justice, leading to its annulment.Furthermore, the Court criticized the Commercial Tax Officer for disregarding procedural safeguards and issuing a demand for immediate tax payment without proper assessment or reassessment. The Court underscored that the Officer should have followed the legal procedure, conducted assessments, allowed for appeals, and respected due process. As a result of the Officer's arbitrariness, the Court ordered the Officer to bear the costs of the petitioner, amounting to Rs. 1,000. The Court directed the Officer to either deposit the specified amount in court for the petitioner's counsel or pay it directly to the counsel within six weeks. The Court concluded by allowing the writ petition and setting aside the impugned order demanding immediate tax payment.In essence, the judgment highlights the importance of adherence to legal procedures and principles of natural justice by tax authorities while issuing demand notices and conducting assessments under the relevant tax legislation.