1963 (11) TMI 69 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of the phrase "liability already incurred" under Section 41 of the Andhra Pradesh General Sales Tax Act.
2. Whether the liability to pay tax is contingent upon the assessment.

Issue-wise Detailed Analysis:

1. Interpretation of the phrase "liability already incurred" under Section 41 of the Andhra Pradesh General Sales Tax Act:

The core issue in the writ petitions revolves around the interpretation of the phrase "liability already incurred" in Section 41 of the Andhra Pradesh General Sales Tax Act, 1957. The petitioner contends that this expression does not include the liability to pay tax, arguing that it only refers to tax that has already been ascertained and levied. This interpretation is supported by references to the Supreme Court decision in Chatturam Horilram Ltd. v. Commissioner of Income-tax and the Orissa High Court decision in Chakoo Bhai v. State of Orissa and Others.

Contrarily, the respondents argue, supported by previous judgments from the Andhra Pradesh High Court in Budhan Khan v. State of Andhra Pradesh and Damma Pedda Yellappa v. State of Andhra Pradesh, that the phrase "liability already incurred" indeed includes the liability to pay tax. The Andhra Pradesh High Court in these cases had interpreted the phrase to mean liability to pay, not just quantified liability.

2. Whether the liability to pay tax is contingent upon the assessment:

The petitioner's counsel argues that the liability to pay tax does not arise until an assessment is made, citing the Orissa High Court's distinction between "liability to be assessed" and "liability to pay." The Orissa High Court had posited that liability is contingent and does not arise until the amount is ascertained through assessment.

However, the Andhra Pradesh High Court disagrees with this interpretation. The court clarifies that the liability to pay tax arises from the charging section of the statute, independent of the assessment. The assessment process is merely a mechanism to quantify the liability that already exists. This view is supported by the judgment in Whitney v. Inland Revenue Commissioners, which outlines three stages in the imposition of tax: declaration of liability, assessment, and methods of recovery. The court emphasizes that liability does not depend on assessment; it is fixed by the statute itself.

The court also references the Federal Court's judgment in Chatturam v. Income-tax Commissioner, Bihar, which states that the jurisdiction to assess and the liability to pay tax are not conditional on the validity of the notice. The liability to pay tax is founded on the charging sections of the Act, and the assessment merely determines the amount payable.

In conclusion, the Andhra Pradesh High Court holds that the phrase "liability already incurred" includes the liability to pay tax, and this liability arises from the statute itself, not from the assessment process. The court dismisses the writ petition, affirming that the department's actions in assessing and demanding tax payment were legal.

Judgment:
The writ petition is dismissed, and the court concludes that the liability to pay tax is independent of the assessment and is included in the phrase "liability already incurred" under Section 41 of the Andhra Pradesh General Sales Tax Act. There will be no order as to costs.