1995 (7) TMI 412 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the compounding fee collected.
2. Coercion in the collection of the compounding fee.
3. Applicability of Section 32(1)(a) or Section 32(1)(b) of the Andhra Pradesh General Sales Tax Act, 1957.

Detailed Analysis:

1. Legality of the Compounding Fee Collected:
The petitioner sought a declaration that the compounding fee collected pursuant to the order dated June 15, 1987, was illegal and vitiated by coercion. The petitioner supplied goods to the District Educational Officer in March 1987 and received payment by cheque dated March 31, 1987. During an inspection on June 15, 1987, a sum of Rs. 27,116 was determined as tax and paid by the petitioner. The petitioner alleged coercion in paying an additional Rs. 27,116 as a compounding fee to avoid arrest.

2. Coercion in the Collection of the Compounding Fee:
The petitioner contended that the impugned order was vitiated by coercion and that the offer to compound the alleged offense was not voluntary. The court referenced previous decisions, including W.P. No. 10668 of 1993 and Sree Rama Trading Company v. Commercial Tax Officer, which established that the discretionary jurisdiction under Article 226 of the Constitution should be exercised only where there is a substantial failure of justice. It was held that whether the consent to compound the offense was obtained under duress could not be decided without an inquiry into facts. The court rejected the contention of coercion, stating there is no presumption of duress merely because the notice to compound emanated from the officer.

3. Applicability of Section 32(1)(a) or Section 32(1)(b):
The petitioner argued that the maximum compounding fee under Section 32(1)(b) of the Act is Rs. 3,000, and any excess amount collected should be refunded. The court examined Section 30, which deals with offenses and penalties, and Section 32, which deals with the composition of offenses. Section 30(1)(c) pertains to willful contravention of the Act's provisions, punishable by a fine. Section 32(1)(a) allows for a compounding fee not exceeding Rs. 3,000 or double the tax recoverable, whichever is greater, for failure to pay or evasion of tax. Section 32(1)(b) applies to other offenses with a maximum fee of Rs. 3,000.

The court noted that the show cause notice and compounding order charged the petitioner under Section 30(1)(c) for willful contravention, not for failure to pay or evasion of tax. Therefore, the case fell under the residuary clause of Section 32(1)(b). The court emphasized that penal provisions must be strictly construed and that all violations under Section 30(1)(c) do not automatically fall under Section 32(1)(a).

The court referenced several judgments, including Kaki Butchi Raju Son v. State of Andhra Pradesh, Sree Rama Trading Company, Ratnam Glass and Crockery House, and P.V. Raghavulu & Co., which supported the interpretation that offenses not involving tax evasion fall under Section 32(1)(b).

In conclusion, the court held that the petitioner's case fell under Section 32(1)(b), limiting the compounding fee to Rs. 3,000. The court partially quashed the impugned order and directed the respondents to refund the excess amount collected beyond Rs. 3,000. No order as to costs was made.

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