1993 (11) TMI 228 - HC - VAT and Sales Tax

Issues Involved:
1. Repeated detention in civil prison for non-payment of sales tax.
2. Validity of ex parte assessments and demands.
3. Physical and financial incapacity of the petitioner.
4. Legal provisions and their application regarding recovery of dues.
5. Rights under Articles 14 and 21 of the Constitution of India.
6. Department's efforts to ascertain the petitioner's assets.

Detailed Analysis:

Issue 1: Repeated Detention in Civil Prison for Non-Payment of Sales Tax
The primary question is whether a defaulter of sales tax can be detained in civil prison repeatedly. The petitioner, a sole proprietor and partner in two firms, was detained for 40 days due to non-payment of sales tax. The court examined the legality of re-arresting the petitioner to recover the dues. It was argued that repeated detention would be futile and violative of Articles 14 and 21 of the Constitution of India. The court noted that while the department has the authority to arrest and detain defaulters, this should be the last resort and only if there is evidence of the defaulter's ability to pay or fraudulent behavior.

Issue 2: Validity of Ex Parte Assessments and Demands
The petitioner contended that the ex parte assessments and demands were created without proper service. The respondent-department countered that notices were duly issued, but the petitioner intentionally did not appear. The court acknowledged the department's claim that the assessments were made following due process, and the petitioner had filed appeals against some orders, which were pending.

Issue 3: Physical and Financial Incapacity of the Petitioner
The petitioner claimed to be physically weak and financially incapable of meeting the tax demands. He stated that he was 65 years old, a heart patient, and living on charity. The respondent-department denied knowledge of the petitioner's physical condition and asserted their right to arrest him if he failed to pay the arrears. The court emphasized the need for the department to verify the petitioner's financial status before considering re-arrest.

Issue 4: Legal Provisions and Their Application Regarding Recovery of Dues
The court examined Sections 34 and 59A of the Haryana General Sales Tax Act, 1973, which allow for the recovery of tax as arrears of land revenue and declare fraudulent transfers void. These provisions were found insufficient to address the specific question of repeated detention. The court also referenced judgments in Gomti Devi v. Kalka Co-operative House Building Society Ltd. and Maruti Ltd. v. Pan India Plastic Pvt. Ltd., which stressed that detention should be the last resort.

Issue 5: Rights Under Articles 14 and 21 of the Constitution of India
The court considered the implications of Articles 14 and 21, which guarantee equality before the law and the right to life and personal liberty. The petitioner argued that repeated detention violated these rights. The court referred to the Supreme Court's judgment in Jolly George Varghese v. Bank of Cochin, which held that imprisoning a debtor due to poverty was violative of Article 21 unless there was proof of willful failure to pay despite having the means.

Issue 6: Department's Efforts to Ascertain the Petitioner's Assets
The respondent-department claimed to be actively gathering information on the petitioner's assets. The court held that until the department had concrete evidence of the petitioner's ability to pay or fraudulent asset transfers, re-arrest would not be justified. The court allowed the department to re-arrest the petitioner if they obtained positive information about his financial status or fraudulent behavior.

Conclusion:
The petition was disposed of with the court directing that the petitioner should not be re-arrested unless the department gathered substantial evidence of his ability to pay or fraudulent actions. The court emphasized the need for fairness and reasonableness in enforcing tax recovery, balancing the petitioner's rights under the Constitution with the department's authority to recover dues. No order as to costs was made.

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