1974 (2) TMI 59 - HC - VAT and Sales Tax

Summary

Issues:
1. Refund of purchase tax on declared goods sold in the course of inter-State sale.
2. Validity of notices of demand issued to pay purchase tax.
3. Liability of assessees to pay taxes under amended Acts.
4. Requirement of rectification of assessment orders before demanding tax.
5. Comparison with a previous court case regarding validation of assessment orders.

Analysis:
1. The petitioners, dealers in declared goods, were initially refunded purchase tax under the Karnataka Sales Tax Act for turnovers related to inter-State sales. However, subsequent amendments to the Central Sales Tax Act and Karnataka Sales Tax Act required that the refund would only be applicable if the Central sales tax on the goods had been paid. As the petitioners had not paid the Central sales tax, notices of demand were issued to recover the purchase tax previously refunded or payable on the goods sold in inter-State sales.

2. The petitioners challenged the notices of demand, arguing that an assessee is only liable to pay taxes as per the assessment orders issued. The assessment orders in question fell into three categories: no levy made, levy with refund order, and levy followed by a separate order for refund on inter-State sales. The government advocate contended that the amendments made the petitioners liable to pay taxes without rectification of assessment orders. However, the court held that a proper order of assessment is necessary to demand tax, and without rectification, assessing officers cannot issue notices of demand.

3. The court rejected the government advocate's submissions, stating that the amendments did not empower assessing officers to demand tax without following proper assessment procedures. The court emphasized the need for rectification of assessment orders to recover taxes from assessees. It clarified that even orders of refund should be considered part of the original assessment order, requiring rectification before demanding tax from the assessees.

4. The court distinguished the present cases from a previous case where assessment orders were validated by legislative amendments. In the previous case, the orders were quashed initially but later validated with retrospective effect. In contrast, the defects in the assessment orders in the present cases arose due to retrospective amendments to the Acts, necessitating rectification before demanding taxes.

5. Ultimately, the court quashed the notices of demand challenged in the petitions, emphasizing the requirement for rectification of assessment orders before demanding taxes. The court ruled in favor of the petitioners, stating that the assessing officers were not entitled to demand purchase tax solely based on the retrospective amendments to the Acts. No costs were awarded in the judgment.