2007 (10) TMI 581 - HC - VAT and Sales Tax

Court Upholds Additional Security for Tax Arrears Under TNVAT Act

The court upheld the decision to direct the petitioner to furnish additional security under the TNVAT Act due to substantial tax arrears. Despite the ... Additional security demanded - Held that:- The tax arrears are about 3.53 crores and in order to safeguard the interest of the Revenue, the second respondent in exercise of his powers under section 39(4) of the TNVAT Act has rightly directed the petitioner to furnish additional security. It is evident from the impugned order that the revisional authority has considered the contention of the petitioner regarding the error in calculation of quantum of the additional security and suo moto has reduced to ₹ 50,86,179 from ₹ 1,01,72,358. While considering the merits of the case, the revisional authority has also examined the contentions of the petitioner with reference to the decision of the Supreme Court reported in M. A. Rahman v. State of Andhra Pradesh [1961 (3) TMI 76 - SUPREME COURT OF INDIA]. Being quasi-judicial authority, he has considered the case on merits with reference to legal principle and also passed the favourable orders, reducing the quantum of additional security. No material irregularity in the procedure followed by the respondents and therefore, there is no ground to interfere with the impugned order. Issues:1. Quashing of order in R.P. No. 3 of 20072. Opportunity of personal hearing under section 54 of the TNVAT Act3. Coercive proceedings in view of SICA Act4. Allegations of harassment5. Failure to respond to department's opportunities6. Imposition of additional security under TNVAT Act7. Failure to appear before authorities for personal hearing8. Granting of adjournments9. Financial status of the petitioner-company10. Reduction of quantum of additional security11. Consideration of legal principlesAnalysis:1. The petitioner sought to quash the order in R.P. No. 3 of 2007, alleging a lack of opportunity for personal hearing. The petitioner argued that the order was arbitrary and violated principles of natural justice. The petitioner also contended that coercive proceedings were not permissible due to proceedings pending before BIFR, and the demand for additional security was deemed harassment.2. The learned Additional Government Pleader argued that the petitioner failed to respond to departmental opportunities and did not avail the opportunity of personal hearing. Referring to the TNVAT Act, the imposition of additional security was justified due to substantial tax arrears. The petitioner's failure to conduct proceedings diligently was highlighted.3. The court noted that the original order directed the petitioner to furnish additional security based on tax collection discrepancies. The petitioner did not file objections or appear for personal hearing, leading to the imposition of security. The court found that the petitioner's failure to respond to opportunities justified the imposition of security to safeguard revenue interests.4. The court addressed the petitioner's claim of not receiving a reasonable opportunity for hearing. It was observed that the petitioner failed to appear before authorities despite granted opportunities. Granting adjournments via fax was deemed irregular, and the petitioner's failure to appear through a representative was noted.5. The court considered the financial status of the petitioner-company in light of the tax arrears. The petitioner's obligation to remit collected taxes to the government was emphasized, especially during pending proceedings before BIFR. The imposition of additional security was deemed necessary to protect revenue interests.6. The court upheld the revisional authority's decision to direct the petitioner to furnish additional security, considering the substantial tax arrears. The authority had also reduced the quantum of security after considering the petitioner's contentions and legal principles. The court found no irregularities in the procedure followed by the authorities and dismissed the writ petition.7. In conclusion, the court found no grounds to interfere with the impugned order, stating that the authorities had acted within their jurisdiction and considered the case on its merits. The writ petition was dismissed, and no costs were awarded.