2007 (12) TMI 432 - HC - VAT and Sales Tax

Court affirms single judge decision on sandalwood auction dispute, dismisses writ appeal, directs release of goods

State of Tamil Nadu and another Versus Lavanya Enterprises

The court dismissed the writ appeal, affirming the learned single judge's decision in favor of the respondent regarding disputes over sandalwood auction, ... Auction sale - whether the present respondent is required to pay a sum of ₹ 2,74,894 towards the sales tax dues in addition to the amount payable towards the auction? Held that:- Learned single judge was correct coming to the conclusion that there was no justification for the department to insist on payment of sales tax in view of the provisions contained in section 5(3) of the Central Sales Tax Act, 1956. Learned single judge, however, has given a direction to the present respondent to furnish bank guarantee, obviously with a view to ensure that in case it is ultimately found that section 5(3) is not applicable, liability relating to payment of sales tax can be recovered. Learned singe judge had also set aside the order of forfeiture on account of the conclusion that there was no justification for demanding payment of demurrage and penal interest inasmuch as the delay was not on account of the lapse on the part of the present respondent, but was on account of various unsustainable objections raised by the department from time to time. No justification to differ from the ultimate conclusion of the learned single judge. The writ appeal is accordingly dismissed. Issues:- Dispute over sandalwood auction and sales tax liability- Forfeiture of amount deposited by respondent- Validity of directions issued by learned single judge- Contempt proceedings due to delay in delivery of materialsDispute over Sandalwood Auction and Sales Tax Liability:The case involved an appeal by the State of Tamil Nadu and the District Forest Officer against a writ petition filed by an exporter of sandalwood products. The exporter participated in an auction in 1998 and was the highest bidder. Disputes arose regarding payment of sales tax, demurrage charges, and penal interest. The court analyzed various communications and orders related to the auction and sales tax liability. The learned single judge allowed the writ petition, directing the release of goods without demurrage or penalty, subject to compliance with certain conditions. The appellants contended that the respondent unnecessarily prolonged the proceedings by disputing the sales tax requirement and failing to complete the transaction promptly.Forfeiture of Amount Deposited by Respondent:The court examined the order of forfeiture of the amount deposited by the respondent. The learned single judge quashed the direction for forfeiture and instructed the respondent to maintain a bank guarantee. The court considered the justification for demanding demurrage and penal interest, ultimately ruling that the delay was not the fault of the respondent. The court referred to previous decisions and upheld the single judge's decision, emphasizing the unreasonable objections raised by the department.Validity of Directions Issued by Learned Single Judge:The appellants challenged the directions issued by the learned single judge, raising concerns about the sales tax liability, demurrage charges, and the timing of the auction. The court noted that the respondent complied with the requirements after the single judge's order. The Division Bench also issued interim directions related to the release of materials pending the appeal process. The Supreme Court rejected an application by the State Government, directing the release of goods. Contempt proceedings were initiated due to delays in delivery, which were resolved later.Contempt Proceedings Due to Delay in Delivery of Materials:The court discussed the contempt proceedings initiated due to delays in delivering the materials to the respondent. The State Government's application to the Supreme Court was rejected, leading to the initiation of contempt proceedings. Ultimately, the materials were delivered to the respondent after the resolution of the delays. The court referred to past decisions and upheld the learned single judge's decision, dismissing the writ appeal.In conclusion, the court dismissed the writ appeal, citing previous decisions and affirming the learned single judge's decision. The judgment provided a detailed analysis of the disputes over the sandalwood auction, sales tax liability, forfeiture of amounts, and the validity of directions issued by the court. The court emphasized the unreasonable objections raised by the department and upheld the single judge's decision in favor of the respondent.