1988 (12) TMI 322 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of demand for security under Sales Tax Law.
2. Alleged discrepancies in balance-sheets and maintenance of two sets of accounts.
3. Jurisdiction and actions of statutory authorities.
4. Relief sought through issuance of declaration forms and permits.

Analysis:

The writ petition sought a mandamus to compel the respondents to issue declaration forms and special permits under the 1954 Act, cancel a memo demanding security, and release seized books of accounts. The petitioner argued that the initiation of proceedings for security was unwarranted and beyond jurisdiction, causing loss. The respondent's affidavit-in-opposition claimed discrepancies in the petitioner's balance-sheets, leading to the demand for security. The Assistant Commissioner's order demanded a security of Rs. 1 lakh, which the petitioner contested in a reply affidavit.

The central legal issue revolved around the validity of the security demand under Sales Tax Law. The Court examined whether the demand was justified under section 7(4a)(i) of the Act, considering the absence of immovable property, financial soundness, and potential tax liability. The Court noted the lack of specific grounds in the order and the absence of outstanding assessed tax, questioning the validity of the demand. Previous legal challenges related to eligibility certificates were also referenced.

The Court emphasized the objective nature of statutory authority actions, highlighting the need for adherence to the law without subjective considerations. While acknowledging the authorities' right to penalize for unauthorized actions, the Court scrutinized the sufficiency of grounds for demanding security. Ultimately, the Court found the demand invalid and unsustainable, granting relief by quashing the demand for security, allowing the issuance of declaration forms and permits, and refusing the return of seized books of accounts. The judgment allowed for future proceedings if manipulation of accounts was proven.

In conclusion, the Court partially allowed the writ petition, striking down the demand for security, directing the issuance of declaration forms and permits, and maintaining the refusal to return seized books of accounts. No costs were awarded in the judgment.