1994 (2) TMI 277 - HC - VAT and Sales Tax

Summary

Issues:
1. Adjustment of refund towards balance tax due under assessment for subsequent year.
2. Legality of coercive proceedings initiated for recovery of tax.

Analysis:
1. The petitioner, while completing the assessment for the year 1976-77, was found entitled to a refund of excess sales tax paid, along with a liability to pay surcharge. The petitioner sought further relief through an appeal against the assessment order. Subsequently, for the assessment year 1977-78, the petitioner was asked to pay a balance of tax due and surcharge. Despite the petitioner's request to adjust the refund from the previous year towards the balance amount due for the subsequent year, the assessing authority did not comply. The petitioner argued that the refund should have been adjusted towards the tax demand for 1977-78, as per the principles of the Indian Contract Act. The court agreed with the petitioner's contention, emphasizing the obligation of the assessing authority to adjust the refund towards the tax demand, especially when requested by the taxpayer.

2. The court referred to a Supreme Court decision emphasizing the necessity of adjusting amounts due to and from the State before initiating coercive recovery proceedings. In this case, the assessing authority failed to adjust the refund due to the petitioner from the previous year towards the tax demand for the subsequent year, despite the refund amount being more than sufficient to cover the entire demand. The court held that the coercive recovery proceedings initiated by the assessing authority were unsustainable and contrary to law. Consequently, the court allowed the petition, quashed the recovery proceedings, and directed the respondents to pay the costs incurred by the petitioner, including advocate's fees.