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Issues: Whether the petitioners, who had executed surety bonds for a limited period under the sales tax exemption scheme, could be fastened with liability for sales tax arrears arising in subsequent years when no renewed surety was furnished.
Analysis: The exemption scheme under rule 28A of the Haryana General Sales Tax Rules, 1975 required a fresh application for renewal every year, accompanied by the prescribed security for the current year. The surety bond executed in form ST-50 was linked to the period for which it was furnished and could not automatically extend to later years unless additional security was again provided. The record did not show that the petitioners had executed surety for the subsequent period in which the tax demand arose. Since the liability sought to be recovered related to later years after the original surety period had expired, the recovery could not lawfully be enforced against the petitioners as sureties.
Conclusion: The surety bonds did not cover the later tax liability, and the recovery notices against the petitioners were unsustainable.
Final Conclusion: The recovery proceedings against the petitioners were quashed and the writ petition succeeded.
Ratio Decidendi: A surety under a yearly sales tax exemption scheme is liable only for the period and renewal for which the surety/security was actually furnished, and cannot be proceeded against for subsequent years' arrears in the absence of a fresh surety bond or renewed security.
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