1971 (8) TMI 196 - HC - VAT and Sales Tax

Summary

Issues:
Validity of notice of demand during pendency of writ petition
Nature of letter dated 14/15th July, 1961, sent after dismissal of writ petition

Analysis:
The judgment pertains to a case where the Commissioner, Sales Tax, referred a question to the court regarding the validity of a notice of demand and a subsequent letter sent to the assessee. The assessee, a cloth and yarn manufacturer, was assessed for tax for the year 1956-57, with an outstanding amount of Rs. 11,65,900.55. A writ petition challenging the assessment order was filed, and an interim order was granted limiting the amount payable by the assessee. During the writ petition's pendency, a notice of demand was served, followed by a letter on 14/15th July, 1961, after the writ petition's dismissal.

The first issue addressed was whether the notice of demand served during the writ petition was valid. The court ruled that the assessment crystallized the liability of the assessee, irrespective of the writ petition's pendency, making the amount due a definite liability. The notice specified the amount and referred to the interim court order, providing statutory time for payment, thus deemed valid.

The second issue involved determining the nature of the letter dated 14/15th July, 1961. The court clarified that the letter was not a notice of demand as it did not comply with legal requirements, serving as a reminder for payment. The court applied principles of notice construction akin to those for a notice to quit, emphasizing the intention to provide sufficient time for compliance. The letter, although lacking explicit payment deadline, was construed to require payment within a reasonable time from the court's order.

The court rejected the argument that the notice was vague, as the assessee did not contest the payment deadline until later stages. It was noted that the penalty proceedings under section 15-A are penal in nature, shifting the burden of proof to the department. Ultimately, the court held that the notice of demand with the assessment order was valid, while the subsequent letter was a reminder, not a formal notice of demand as per the Sales Tax Act and Rules.

In conclusion, the court answered the referred question affirming the validity of the notice of demand and characterizing the July 1961 letter as a reminder. The Commissioner, Sales Tax, was awarded costs, and the counsel's fee was assessed accordingly.