1996 (6) TMI 312 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the collection of compounding fees and penalty without proper procedure and notice.

Analysis:
The petitioner, a registered dealer under the Andhra Pradesh General Sales Tax Act, challenged the collection of compounding fees and penalty by the respondent without following due process. The respondent had inspected the petitioner's premises and found variations in stocks, leading to the imposition of tax and additional fees. The petitioner sought a writ of mandamus for a declaration that the collection of Rs. 4,000 as compounding fees and Rs. 30,600 as penalty was illegal and arbitrary, requesting a refund of these amounts. The petitioner filed the writ petition in 1992, and despite a notice before admission in 1993, no counter-affidavit was filed by the respondent.

The main contention raised by the petitioner was the lack of a show cause notice before the collection of the penalty. The relevant provision, sub-section (4-B) of section 14 of the Act, mandates that the assessing authority must provide the dealer with a reasonable opportunity to explain any omission before levying a penalty. Additionally, sub-section (8) of section 14 specifies the quantum of penalty, which can range from three to five times the tax amount if the failure to disclose turnover was wilful. The proviso to sub-section (8) provides a defense if the failure was due to a bona fide mistake by the dealer. The court emphasized the importance of issuing a notice to allow the dealer to present a defense, as seen in a previous judgment where the collection of tax and penalty without a show cause notice was deemed illegal and arbitrary.

In light of the legal requirements and precedents, the court declared the collection of the penalty from the petitioner as illegal and arbitrary. The court directed the respondent to refund the penalty amount of Rs. 30,600 to the petitioner. However, the court clarified that its order did not prevent the authority from taking lawful steps to collect the penalty in accordance with the proper procedure. Ultimately, the writ petition was allowed with no costs imposed on either party.