1966 (7) TMI 58 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of arrest under section 29 of the Madras General Sales Tax Act.
2. Interpretation of section 48 of the Revenue Recovery Act.
3. Jurisdiction of the Commercial Tax Officer to invoke powers of arrest.

Analysis:

The judgment by the High Court of Madras involved a case where the petitioner, a businessman, had his assessments revised by the Sales Tax Department, leading to demand notices for tax payment. Subsequently, the petitioner was prosecuted under section 45(2)(b) of the Madras General Sales Tax Act for allegedly evading tax payment. The petitioner then filed for insolvency, which was opposed by the Sales Tax Department. The Commercial Tax Officer arrested the petitioner under section 29 of the Madras General Sales Tax Act, challenging the legality of the arrest through a writ of habeas corpus.

The Court examined the provisions of section 48 of the Revenue Recovery Act, which allows for the arrest and imprisonment of a defaulter if the arrears of tax cannot be liquidated by the sale of their property and if there is reason to believe the defaulter is withholding payment or engaged in fraudulent conduct to evade payment. The Court emphasized that before invoking arrest powers, the tax officer must establish that the arrears cannot be settled through the sale of the defaulter's property.

Referring to precedents, the Court highlighted a case where it was held that the defaulter's properties should be sold before resorting to arrest. The Court also cited a Supreme Court decision regarding the recovery of income tax arrears, emphasizing the need to exhaust remedies against the defaulter's properties before considering arrest. The judgment clarified that the Commercial Tax Officer lacked jurisdiction to arrest the petitioner without demonstrating that the tax arrears could not be satisfied by selling the petitioner's property.

Ultimately, the Court set aside the order of detention of the petitioner in a civil jail, allowing the writ petition and canceling the petitioner's bond. The judgment concluded by stating that the Commercial Tax Officer could only exercise arrest powers after exhausting remedies against the defaulter's properties.