1956 (12) TMI 31 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of payments made by the plaintiff.
2. Authority of the Proverthicar to receive payment.
3. Liability of the State for the fraudulent act of its servant.

Analysis:

Issue 1: Validity of payments made by the plaintiff
The plaintiff, a merchant, was assessed sales tax and issued a notice of demand for the outstanding amount. The plaintiff made payments, but the State contended that the receipts were not in the prescribed form and the payments were not valid. The court found that the payments were true but questioned their validity. The court below dismissed the suit based on the form of receipts and lack of entry in accounts. However, the High Court held that the payments were valid as they were made to the Proverthicar as authorized under the Revenue Recovery Act. The court emphasized that the plaintiff was entitled to a receipt signed by the officer concerned, and the form of receipt was not specified under the Act. Therefore, the payments made by the plaintiff were deemed valid under the Act.

Issue 2: Authority of the Proverthicar to receive payment
The State argued that the Proverthicar was not authorized to receive payment, and the receipts were not in the prescribed form. However, the court clarified that the Revenue Recovery Act allowed payments to be made to the Proverthicar, and the person making the payment was entitled to a receipt signed by the officer. The court highlighted that the plaintiff was entitled to make payments to the Proverthicar as proceedings under the Revenue Recovery Act had been initiated for tax recovery. The court emphasized that the form prescribed for the notice of assessment did not impact the validity of payments made under the Act.

Issue 3: Liability of the State for the fraudulent act of its servant
The court addressed the State's argument that it could not be held liable for the fraudulent act of the Proverthicar. The court disagreed, stating that the Proverthicar was acting within his authority when receiving payments. The court held that unless the plaintiff was involved in the fraud, the State could not deny the validity of the payments. The court emphasized that the plaintiff should not be held accountable for any fraudulent acts committed by the Proverthicar after receiving the payments. Consequently, the court ruled in favor of the plaintiff, deeming the payment valid and holding the State liable to credit the amount.

In conclusion, the High Court allowed the appeal, reversed the lower court's decree, and decreed the suit in favor of the plaintiff. The plaintiff was awarded costs from the respondent for both the appeal and the court below.