1983 (4) TMI 236 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of recovery proceedings without issuing fresh demand notices to legal representatives.
2. Liability of legal representatives under Section 16 of the Karnataka Sales Tax Act.
3. Validity of garnishee notices issued under Section 14 of the Karnataka Sales Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Recovery Proceedings Without Issuing Fresh Demand Notices to Legal Representatives:
The petitioners argued that upon the death of Neelakanta Iyer, fresh demand notices were required to be issued to them as legal representatives before initiating recovery proceedings. The respondent contended that no such notices were necessary. The court noted that the original assessee, Neelakanta Iyer, had defaulted on tax payments, and upon his death, the liability transferred to his legal representatives. However, the court emphasized that Section 16 of the Karnataka Sales Tax Act does not allow for the continuation of recovery proceedings against legal representatives without issuing a fresh notice of demand. The court cited precedents, including the Privy Council's ruling in Doorga Prosad Chamaria v. Secretary of State and the Full Bench decision in Raja Pid Naik v. Agricultural Income-tax Officer, Yadgiri, which underscored the necessity of issuing a demand notice to the legal representatives to constitute them as defaulters.

2. Liability of Legal Representatives Under Section 16 of the Karnataka Sales Tax Act:
Section 16 of the Act allows for the continuation of assessment proceedings against the legal representatives of a deceased assessee and the recovery of taxes, penalties, and fees to the extent of the deceased's assets in their hands. The court clarified that Section 16 creates a legal fiction against the legal representatives, but it does not dispense with the requirement of issuing a fresh notice of demand. The court ruled that the notice dated 6th October 1977, issued by the CTO to petitioner No. 1, could not be construed as a proper notice of demand under the Act and the Rules.

3. Validity of Garnishee Notices Issued Under Section 14 of the Karnataka Sales Tax Act:
The garnishee notices dated 2nd January 1978, issued to various entities under Section 14 of the Act, were challenged by the petitioners. The court noted that Section 14 is analogous to Section 226 of the Indian Income-tax Act of 1961 and the provisions regulating garnishee proceedings in the Code of Civil Procedure. The court held that the garnishees themselves had not objected to the notices, and as such, the petitioners could not challenge them. The court further stated that the garnishees are liable to pay the amounts due to the State to the extent they hold or become payable to the deceased assessee.

Conclusion:
The court dismissed the writ petition to the extent of challenging the notice dated 6th October 1977, and the garnishee notices dated 2nd January 1978. However, the court prohibited the respondent from initiating recovery proceedings against the petitioners without issuing proper notices of demand under the Act to the extent of the assets of the deceased in their hands. The writ petition was disposed of with each party bearing their own costs.