Illegal Tax Collection Without Assessment; Burden of Proof on Dealer; Refund Ordered

The court concluded that the tax and penalty collection without an order of assessment was without authority of law. It found that the vigilance and enforcement officers collecting tax and penalty on the spot was illegal. The burden of proof in proving transfer of goods not by way of sale was on the dealer, and the court held that the prescribed procedure under the Central Sales Tax Act must be followed to determine tax liability. As a result, the court allowed the writ petitions, directing respondents to refund the amounts collected and closed any pending miscellaneous petitions.

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Issues Involved:

1. Legality of tax and penalty collection without an order of assessment.
2. Validity of the documents accompanying the goods.
3. Authority of the vigilance and enforcement officers to collect tax and penalty on the spot.
4. The burden of proof in case of transfer of goods claimed otherwise than by way of sale.
5. The procedure for determining tax liability under the Central Sales Tax Act, 1956.

Issue-Wise Detailed Analysis:

1. Legality of Tax and Penalty Collection without an Order of Assessment:

The petitioner, a registered dealer, contended that the tax and penalty were collected arbitrarily and without jurisdiction by the respondents. The court referred to the Full Bench decision in *Ambica Lamp House, Rajahmundry v. Commercial Tax Officer (Int)-I Enforcement, Hyderabad* [2005] 142 STC 551 (AP) [FB], which clarified that no liability can be fastened on the dealer without an assessment. The Commercial Tax Department cannot collect tax/penalty/compounding fee by coercion at the time of inspection alleging suppression of turnover or other irregularities. The court concluded that the collection of tax and penalty without an assessment was without authority of law.

2. Validity of the Documents Accompanying the Goods:

The petitioner argued that the goods were accompanied by all necessary documents and were duly recorded in the books of accounts. However, the respondents alleged that the consignments were not covered by proper documents. The court found that the respondents failed to specify which documents were allegedly not produced at the time of the vehicle check. The burden of proof was on the petitioner to prove that the transaction was not an inter-State sale and was not liable to tax under Section 6A of the Central Sales Tax Act, 1956. The court noted that such liability can only be determined after following the prescribed procedure under the Act.

3. Authority of the Vigilance and Enforcement Officers to Collect Tax and Penalty on the Spot:

The respondents contended that the tax and penalty were paid voluntarily by the consignee (respondent No. 4). The court referred to the Full Bench decision, which stated that the officers of the Vigilance/Intelligence Wing can inspect business premises and records but cannot collect tax and penalty on the spot without passing an assessment order. The court held that the respondents' action of collecting tax and penalty on the spot was illegal.

4. The Burden of Proof in Case of Transfer of Goods Claimed Otherwise than by Way of Sale:

The petitioner claimed that the goods were transferred by way of stock transfer to its consignment agent (respondent No. 4) and not by way of sale. The court referred to Section 6A of the Central Sales Tax Act, 1956, which places the burden of proof on the dealer to furnish a declaration in form F to prove that the transfer was not a sale. The petitioner provided the form F certificate dated February 13, 2012, issued by respondent No. 4. The court found that the respondents could not determine the tax liability immediately after intercepting the vehicles and that the petitioner should have been given the opportunity to prove the nature of the transaction.

5. The Procedure for Determining Tax Liability under the Central Sales Tax Act, 1956:

The court emphasized that the procedure prescribed under the Act must be followed to determine tax liability. This includes granting the dealer sufficient opportunity to adduce evidence and complying with the procedural requirements for assessment and penalty proceedings. The court concluded that the respondents' action of collecting tax and penalty without following the due process was illegal.

Conclusion:

The court allowed the writ petitions, directing respondents 1 to 3 and 5 to refund the amounts collected while releasing the vehicles, together with interest at six percent per annum within eight weeks from the date of receipt of the order or to adjust the same against the petitioner's tax liability, if any, existing as of today. The miscellaneous petitions, if any, pending in the writ petition were also closed.

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