TaxTMI 
TaxTMI 
2016 (9) TMI 407
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.... she does not have any other property, and is eking out her livelihood with great difficulty; her son was a partner in Sri Devi Dhall Mill; the said firm had applied for registration, under Section 12 of the A.P.G.S.T Act, 1957, in Form-D on 13.10.1997; along with the Form-D application, the partnership firm had filed Form-A return of estimated turnover under Rule 28(8) of the APGST Rules; at the instance of her son she had agreed to be a surety, and had executed a surety bond on 13.10.1997 only to the extent of her sons liability; through her son, she came to know that the firm had carried on business only in the years 1997-98 and 1998-99, and had subsequently stopped it; she did not know what happened thereafter till she received the notice in Form-4 issued under the Andhra Pradesh Revenue Recovery Act demanding that she, as the surety, should pay the tax dues of the partnership firm; the tax dues from the firm, for the years 1997-98 and 1998-99, were Rs. 2,78,533/- and Rs. 6,95,566/- respectively; she addressed a letter to the first respondent requesting him to furnish a copy of the Form-D application filed by the firm, a copy of the surety bond executed by her, a copy of the Fo....
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....7 submitted to the registering authority; in the said surety bond, the petitioner had stated that her son was a partner in the firm; the value of the house at that time was approximately Rs. 1.00 Lakh, and her son had applied for registration as a partner of the firm; the petitioner had also enclosed photostat copies of the documents of title along with the surety bond; she had stated in the bond that, in case her son defaulted in making payment of the tax due to the Government, she would pay the same, and the surety bond was executed by her voluntarily; she had further stated that, along with the Form-D application, the firm had also filed Form-A return of estimated turnover; however no Form-A was filed by the partnership firm while filing the Form-D application for registration; the surety given by the petitioner was for registration of the firm, and not for the share of her sons liability in the partnership firm; by her letter dated 21.12.2014, the petitioner had promised to pay the tax amount due to the department on the details sought for being furnished to her; again, by her letter dated 31.12.2014, she had asked for certain documents; most of the documents sought for were fu....
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....ection 5 of the Act also distinguishes total turnover from turnover, and provides for levy of tax only on the latter; Form A, i.e the return of estimated turnover, makes it clear that the expression estimated turnover, in Column 19, refers to the aggregate of both taxable and non-taxable turnover; the tax estimated in Form A was only Rs. 8,000/-, on the estimated taxable turnover of Rs. 2,00,000/-, from out of the estimated total turnover of Rs. 20,00,000/-; and the attempt by the respondent authorities to demand an amount in excess of Rs. 8,000/- is contrary to law. Dr. S.R.R. Viswanath, Learned Counsel for the petitioner, would submit that the amount which can be collected from the surety is the tax due on the estimated turnover for the first assessment year; the meaning of the expression total turnover is different from estimated turnover; the circular of the Commissioner dated 21.07.1997, issue long prior to the assessment order and even prior to registration of the firm as a dealer, stipulated security of only Rs. 8,000/-; in the absence of estimation of the turnover by the registering authority, he cannot take advantage of his own failure and subject the petitioner to tax;....
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....d. After examining certain problems, which arose on the department insisting on security deposits/sureties for registration of dealers under Section 12 of the A.P.G.S.T. Act, and on the representations made by dealers on the arbitrary fixation of the security deposit, third party surety on stamp paper etc, the Commissioner of Commercial Taxes, Andhra Pradesh issued Circular dated 21.07.1997 wherein he observed that, in practice, security deposit was never demanded for an amount equivalent to the tax due for a year; the security deposit demanded varied from Rs. 1,000/- to Rs. 10,000/-; only in sensitive cases did it exceed that amount; even if a dealer defaulted in payment of tax, the security deposit may not be sufficient for clearing the arrears; and it was therefore necessary to lay down certain guidelines for fixing the amount of deposit to be demanded by the registering authority from a dealer. The dealers, who had applied for registration and were required to furnish security deposit, were grouped into two categories i.e., (a) dealers applying for A.P.G.S.T. registration only, and (b) dealers applying for A.P.G.S.T. and C.S.T. registrations; for dealers, who applied for A.P.G.....
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....ed by such authority, security not exceeding an amount equal to the tax payable under the APGST Act for a year as estimated by him, for the proper realisation of the tax and other dues payable under the Act and/or for the proper custody and use of the forms referred to in the Act, the rules made and the notification issued thereunder. Rule 28(9) stipulated that the security, referred to in sub-rule (8), may be in any of the following forms, namely: (a) deposit in Government Treasury by cash, (b) government promissory notes, loan bonds, post office savings bank deposits, National Saving Certificates, deposits made in the scheduled banks or Andhra Pradesh State Cooperative Bank or Central Cooperative Bank duly pledged to the registering authority, (c) surety bond, (d) guarantee from a Scheduled Bank agreeing to pay to the State Government on demand the amount of security fixed by the registering authority, and (e) immovable property. Rule 28(10) provided that (a) the registering authority receiving the application shall, if he is satisfied after making such enquiry as he considers necessary that the application is bonafide and the particulars contained therein are correct and complet....
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....uired for registration was covered by the application in Form D; if all the information, required in the Form D application was furnished, the application for registration should be considered; for want of additional information, the issue of the registration need not be kept pending; and the supplementary information could be obtained during the course of the year. It is clear, from the Circular of the Commissioner dated 21.07.1997, that grant of registration under the APGST Act is on the basis of the information furnished by the dealer in Form-D which, as noted hereinabove, only required the dealer to provide, in column 19 thereof, information regarding their estimated total turnover. Rule 28(8) of the APGST Rules, which required the applicant seeking registration to furnish security for an amount not exceeding an amount equal to the tax payable under the A.P.G.S.T. Act for the year as estimated by him, relates only to the estimated total turnover for the year as referred to in column 19 of Form D. Form A on the other hand, as stipulated under Rule 9 of A.P.G.S.T. Rules, required the dealer to furnish information regarding the estimated total and net turnover. It would be wholly ....
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....talvad [62 Ind App 23 = AIR 1933 PC 21]). The terms of a surety bond should be strictly construed, and any ambiguity therein should go to the benefit of the surety. (Nagappa Naik3; Pannaji Devchand v. Basappa Virappa [AIR 1943 Bom 243 = 45 Bom L R 510]). The rule that a security bond must be strictly construed according to its own terms is certainly true where there is no ambiguity in the terms but, where there is a contradiction in terms, Section 95 of the Evidence Act allows a reference to antecedent circumstances. (Jiban Krishna Mukherjee4; Mohendranath v. Satish Chandra [AIR 1934 Calcutta 569] ). The terms of the surety bond, whenever there is any doubt, should he construed reasonably with reference to the surrounding circumstances. (Nagappa Naik3; Abdul Majid Sab v. Abdul Majeed [7 Mys LJ 159]). If it is reasonably clear that the contingency in which the bond is sought to be enforced would not fall within the language of the condition, it is not permissible to override that language in the light of what the parties intended if they did not succeed in expressing that intention in suitable language. If on the other hand, on a fair reading of the Bond in the light of the surro....
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....istinguish between the estimated total turnover, and the estimated net turnover, to submit that, in the absence of the dealer furnishing details of the estimated net turnover in Form A, the surety cannot be held liable to discharge the tax dues of the dealer. It is no doubt true that the expression "total turnover" is of wide import, it consists of all the transactions whether they be subjected to tax under the Act or whether they be exempt from tax, and net turnover is arrived at only after deducting certain amounts from out of the gross turnover. (Guduthur Thimmappa and Son v. The State of Andhra Pradesh [(1964) 15 STC 299 (A.P)]). As noted hereinabove what is referred to in column 19 of Form D (application for registration) is the estimated total turnover, and the said Form neither makes any reference nor does it separately provide for details being furnished of the estimated turnover as distinct from the estimated total turnover. It is evident, therefore, that the estimated turnover, as referred to in Rule 28(8), is the estimated total turnover referred to in column 19 of Form D. The assessment order dated 14.03.2001 records the assessee-dealer as having admitted a net turno....
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....reason to delve on this aspect any further as Sri S.Krishna Murthy, learned counsel for the petitioner, has fairly stated that the liability of the surety is for the tax due and payable by the defaulting dealer for the assessment year 1994- 95. Leaving it open to the respondent to recover the tax due, if any, of the defaulting dealer, for the assessment year 1994-95, from the petitioner herein the distraint orders are set aside as they relate to the subsequent assessment years.. " It is clear, from the afore-extracted portion of the order, that the Division Bench considered it wholly unnecessary to examine the scope of Rule 28(8) of the APGST Rules. It is also saw no reason to delve on the aspect whether failure of the registering authority to estimate the tax payable for a year absolved the surety of his liability to pay the amount. Passing observations in the said judgment cannot be read out of context or be understood as the declaration of law binding on a co-ordinate bench. While the impugned order required the petitioner, as a surety, to pay the tax dues of the partnership firm for the years 1997-98 and 1998-99 i.e for Rs. 2,78,533/- and Rs. 6,95/566/- respectively, it i....