1991 (10) TMI 283 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of provisional assessments without notice and opportunity to be heard.
2. Levy of surcharge and additional tax without authority of law.
3. Applicability of Supreme Court's quashing of G.O. Ms. Nos. 76, 77, and 78 retrospectively or prospectively.

Detailed Analysis:

Issue 1: Validity of Provisional Assessments Without Notice and Opportunity to be Heard
The petitioners contended that the provisional assessments were illegal because no notice was issued to them, and no opportunity of being heard was afforded. They argued that had they been given notice, they could have produced C form certificates and availed the reduced tax rate of 4 percent on inter-State sales. The court recognized the importance of procedural fairness and noted that the absence of notice and opportunity to be heard rendered the provisional assessments invalid.

Issue 2: Levy of Surcharge and Additional Tax Without Authority of Law
The petitioners argued that the respondents levied surcharge and additional tax without any legal authority, making the provisional assessments liable to be quashed. The court did not specifically address this issue in detail, as the resolution of the primary issue regarding the validity of the provisional assessments without notice rendered this point moot.

Issue 3: Applicability of Supreme Court's Quashing of G.O. Ms. Nos. 76, 77, and 78 Retrospectively or Prospectively
The petitioners argued that since G.O. Ms. Nos. 76, 77, and 78, which granted concessional sales tax rates, were in force during the relevant period, they collected taxes only at the rates specified in the G.Os. They contended that the Supreme Court's quashing of these G.Os. should apply prospectively, not retrospectively. The court examined various precedents, including Indian Cement Ltd. v. State of Andhra Pradesh, where the Supreme Court quashed the G.Os. as violative of articles 301, 303, and 304 of the Constitution. However, the court noted that the Supreme Court did not specifically address the impact on past transactions.

The court referred to several cases where the Supreme Court had directed that past transactions should not be affected when concessional tax notifications were quashed. These cases included:
- Collector of Customs and Central Excise v. Oriental Timber Industries: The Supreme Court held that the judgment should be applied prospectively to avoid undue hardship.
- Union of India v. Godfrey Philips India Ltd.: The Supreme Court applied the doctrine of promissory estoppel, preventing the authorities from retrospectively altering the tax liability.
- West Bengal Hosiery Association v. State of Bihar: The Supreme Court directed that arrears of sales tax should not be collected for the period during which the notification was in force.
- Video Electronics Pvt. Ltd. v. State of Rajasthan: The Supreme Court held that past transactions would not be affected by the quashing of the notification.
- Hi-Beam Electronics Pvt. Ltd. v. State of Andhra Pradesh: The Supreme Court directed that past transactions would not be affected by the quashing of the notification.

The court concluded that it would be unjust and unreasonable to permit the respondents to collect the difference in sales tax based on the assumption that the G.Os. were not in force during the relevant period. The court allowed the writ petitions and quashed the impugned provisional assessment orders. It also directed that any amounts paid by the petitioners pursuant to interim directions could be adjusted against future sales tax liabilities.

Conclusion
The court allowed the writ petitions, quashing the provisional assessment orders due to the lack of notice and opportunity to be heard. It also held that the petitioners should not be liable for the difference in sales tax for the period when the concessional G.Os. were in force, applying the Supreme Court's precedents that past transactions should not be affected by the quashing of such notifications. The court directed adjustments for any amounts already paid by the petitioners.

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