1981 (2) TMI 201 - HC - VAT and Sales Tax

Summary

Issues:
1. Refund of Central sales tax and subsequent amendment.
2. Application for instalment payment of refunded tax.
3. Imposition of penalty under section 13(2) of the Karnataka Sales Tax Act.
4. Circular issued by the Commissioner of Commercial Taxes regarding penalty on tax arrears.
5. Compliance with payment of instalments and absence of tax arrears.

Analysis:
1. The petitioner, a betel-nut dealer, obtained a refund of Central sales tax due to a Supreme Court decision but was required to return the refunded tax following a retrospective amendment to the Central Sales Tax Act. The petitioner requested to pay back the tax in instalments for the assessment years 1957-58 to 1964-65, which was approved by the Commissioner. The refunded amount was repaid as per the Commissioner's order within the stipulated timeframe.

2. A circular issued by the Commissioner, based on representations from trade associations and the State Government, clarified that no penalty should be imposed on tax arrears prior to September 1, 1976. The petitioner, receiving a demand notice for penalty under section 13(2) of the Karnataka Sales Tax Act, challenged its legality through a writ petition under Article 226 of the Constitution, arguing that it lacked legal authority.

3. The court rejected the argument that the Commissioner lacked authority to order repayment in instalments, citing a previous decision that absolved an assessee from penalty under section 13(2) if payment was made as per government directions. The circular further supported the position that no penalty was intended on tax arrears before September 1, 1976. As the petitioner had paid all instalments by September 1, 1976, and had no tax arrears, the demand notice for penalty was deemed unauthorized and quashed.

4. Consequently, the court ruled in favor of the petitioner, quashing the demand notice for penalty. No costs were awarded in the matter. The ruling emphasized adherence to government instructions and the Commissioner's orders, affirming the petitioner's compliance with the repayment schedule and the absence of outstanding tax liabilities.