1979 (8) TMI 190 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the petitioner is liable to pay sales tax for the years 1967-68 to 1969-70.
2. Whether the amount collected by the petitioner was in the guise of sales tax or as Association Fund.
3. Whether the demand notice issued by the respondent is valid.

Analysis:
1. The petitioner, a coconut dealer, collected amounts during the years 1967-68 to 1969-70. The respondent issued a demand notice claiming the petitioner's liability for sales tax under the Central Sales Tax Act and the Tamil Nadu General Sales Tax Act. The petitioner contended that the amounts collected were for conducting appeals and not as sales tax. The court examined the history of confusion regarding the taxation of coconuts and held that the petitioner is not liable to pay sales tax as the amounts were collected for the Association Fund during pending tax cases.

2. The crucial issue was whether the amounts collected by the petitioner were in the guise of sales tax or as Association Fund. The respondent argued that the petitioner had collected 3% of the turnover as tax, while the petitioner claimed it was for the benefit of the association of coconut dealers. The court referred to a similar case where the collection was deemed a deposit and not tax. Applying the same reasoning, the court held that since the petitioner collected the amounts as Association Fund, not as sales tax, the demand for payment was invalid.

3. The validity of the demand notice issued by the respondent was questioned by the petitioner. The court noted that the respondent did not provide any show cause notice or conduct an inquiry before concluding that the amounts were collected as tax. Relying on precedent, the court found that the respondent's demand was unfounded as the amounts were not collected as sales tax. Consequently, the court allowed the writ petition, ruling in favor of the petitioner and directing the respondent to bear the costs.