1998 (8) TMI 552 - HC - VAT and Sales Tax

Court upholds composition order validity, denies refund. Admitting violations and compounding preclude later challenges.

Phasalkar Liquor Agency Versus Commercial Tax Officer, Intelligence-II, North Zone, Belgaum

Phasalkar Liquor Agency Versus Commercial Tax Officer, Intelligence-II, North Zone, Belgaum - [1999] 114 STC 9 (Kar) Issues Involved:1. Validity of composition order and refund of composition fee.2. Proper inspection and verification of stocks.3. Allegation of undue influence and coercion.4. Requirement of notice before passing the composition order.5. Legality of the compounding fee exceeding the statutory limit.Detailed Analysis:1. Validity of Composition Order and Refund of Composition Fee:The core issue was whether a dealer who opted to compound an offence under the Karnataka Sales Tax Act, 1957, could later challenge the composition order and seek a refund of the composition fee paid. The court held that the petitioner, having admitted the violations and agreed to the composition, could not later question the factual basis of the violations. The court emphasized that the scope of judicial review in such cases is limited to determining if the order could have been made based on the admitted facts, not to reassess the factual foundation.2. Proper Inspection and Verification of Stocks:The petitioner argued that the inspection and verification of stocks were not conducted properly and without a valid basis. The court dismissed this argument, stating that whether unaccounted stocks existed is a factual question that cannot be revisited in the writ proceedings. The court noted that the petitioner had admitted the violations and compounded the offences, which implied an unequivocal admission of the findings from the inspection.3. Allegation of Undue Influence and Coercion:The petitioner contended that the offer to settle the matter departmentally was made under undue influence and coercion by the departmental officials. The court found no merit in this submission, noting that the petitioner was assisted by a sales tax consultant throughout the process. The court concluded that the voluntary payment of the composition fee indicated that the petitioner was a willing party to the compounding, as supported by the Full Bench decision in S.V. Bagi v. State of Karnataka.4. Requirement of Notice Before Passing the Composition Order:The petitioner claimed that no notice was issued before the composition order was passed, violating the principles of fair play. The court found this claim baseless, as the official records showed that a notice detailing the violations and proposed actions was issued and acknowledged by the petitioner. The court held that the notice provided sufficient compliance with the requirement of fair play, and no further notice was necessary before accepting the petitioner's offer for composition.5. Legality of the Compounding Fee Exceeding the Statutory Limit:The petitioner argued that the compounding fee of Rs. 37,500 was excessive and beyond the statutory limit prescribed by section 31 of the Act. The court clarified that for an offence under section 29(2)(c), the compounding fee could be up to double the amount of the estimated tax evaded, which in this case was Rs. 25,000. Thus, the fee could extend up to Rs. 50,000, making the Rs. 37,500 fee within the permissible limit. The court rejected the argument that the fee was illegal, noting that the offer to compound implied an admission of the facts constituting the offence.Conclusion:The court dismissed the writ petition, holding that the petitioner, having voluntarily offered to compound the offences and paid the composition fee, could not later challenge the composition order or seek a refund. The court assessed costs of Rs. 2,000 against the petitioner.