1971 (7) TMI 148 - HC - VAT and Sales Tax

Issues Involved:
1. Power of the respondent to revise assessments under Section 16 of the Madras General Sales Tax Act.
2. Validity of the impugned notice under Section 48 of the Madras Revenue Recovery Act.
3. Alleged violation of Article 14 of the Constitution of India.
4. Requirement of exhausting other recovery methods before invoking Section 48 of the Revenue Recovery Act.
5. Maintainability of the writ petition seeking prohibition.

Detailed Analysis:

1. Power of the Respondent to Revise Assessments under Section 16 of the Madras General Sales Tax Act:
The petitioner challenged the respondent's power to revise the assessments for the years 1961-62 and 1962-63 under Section 16 of the Madras General Sales Tax Act. Initially, the petitioner was unsuccessful, but upon appeal, a Full Bench of the court found that the revision of assessment under Section 16 was irregular and illegal, thus allowing the appeal. However, the Legislature enacted Act 18 of 1966, validating such orders, thereby preventing the petitioner from challenging the correctness of the revised order of assessment dated 15th December 1964.

2. Validity of the Impugned Notice under Section 48 of the Madras Revenue Recovery Act:
The petitioner received a notice on 6th April 1966 to show cause why action should not be taken under Section 48 of the Revenue Recovery Act. The petitioner sought a rule of prohibition to restrain the respondent from proceeding further. The court held that Section 48 provides a method for recovery of tax when arrears cannot be liquidated by the sale of the property, and the defaulter is believed to be wilfully withholding payment. The court emphasized that the invocation of Section 48 must be based on objective material and reasonable conclusions.

3. Alleged Violation of Article 14 of the Constitution of India:
The petitioner argued that the various modes of tax recovery under the Sales Tax Act and the Revenue Recovery Act could lead to discrimination, violating Article 14 of the Constitution. The court noted that tax laws can create classifications for the purposes of levy, collection, or penalization if such classifications serve the legislative objective and have a reasonable nexus to it. The court found no discrimination, stating that the different recovery methods provided in the statute are intended to serve the public exchequer's interest in the speedy realization of tax arrears.

4. Requirement of Exhausting Other Recovery Methods Before Invoking Section 48 of the Revenue Recovery Act:
The petitioner contended that the revenue authorities had not sold the distrained properties before proceeding under Section 48. The court, referencing the decision in Haji Gulam Mohideen Sahib v. Commercial Tax Officer, held that the authorities must first attempt to liquidate the arrears through the sale of distrained properties. Only if this proves insufficient can they proceed under Section 48. Since the authorities had not sold the distrained properties, the court ruled that the further proceedings under Section 48 were prohibited by law.

5. Maintainability of the Writ Petition Seeking Prohibition:
The court discussed the conditions under which a writ of prohibition could be issued, noting that it is not issued as a matter of right but when a public duty is neglected or an action is undertaken in violation of public law. The court concluded that the petitioner was entitled to the writ of prohibition on the grounds that the revenue authorities had not satisfied the condition precedent of selling the distrained properties before invoking Section 48.

Conclusion:
The court allowed the petition, making the rule nisi absolute. The revenue authorities were directed to take further proceedings in accordance with the law only after selling the distrained properties and reckoning the sale proceeds. The petition was allowed with no order as to costs.

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