1998 (7) TMI 669 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the tax levied without an assessment order and preceding notice.
2. Classification of the offence under section 32(1)(a) or 32(1)(b) of the Andhra Pradesh General Sales Tax Act, 1957.

Detailed Analysis:

Issue 1: Legality of the Tax Levied Without an Assessment Order and Preceding Notice
The primary contention by the petitioner was that the tax of Rs. 11,198 levied by the respondents was illegal as it was not preceded by an assessment order and notice. The petitioner's counsel argued that the Vigilance and Enforcement officials lacked the authority to demand tax without an assessment order and prior notice, as per section 28 of the Act. The counsel cited case law to support the argument that a demand notice without an assessment order is illegal.

In response, the Special Government Pleader contended that the notice dated November 25, 1991, was not a demand notice but a notice seeking objections to the proposed tax and compounding of the offence. The court, after reviewing the notice, concluded that it was not a demand notice but a proposal for tax and compounding, giving the petitioner until November 30, 1991, to file objections. The court noted that the petitioner voluntarily accepted the proposed tax and compounding fee on November 26, 1991, and thus, the notice could not be considered a demand notice. Consequently, the court held that the tax levied was justified, and the notice was not a demand notice, making the assessment order preceding the demand notice irrelevant.

Issue 2: Classification of the Offence Under Section 32(1)(a) or 32(1)(b)
The second issue was whether the offence committed by the petitioner fell under section 32(1)(a) or 32(1)(b) of the Andhra Pradesh General Sales Tax Act, 1957. The petitioner's counsel argued that the irregularities should be classified under section 32(1)(b), which would limit the compounding fee to Rs. 3,000. The counsel cited a decision where similar irregularities were classified under section 32(1)(b).

The court examined the provisions of section 32 and the facts of the case. It noted that the petitioner had suppressed a turnover of Rs. 1,56,610, which indicated an attempt to evade tax. The court held that this suppression amounted to tax evasion, falling under section 32(1)(a), which allows for a compounding fee of double the tax recoverable or Rs. 3,000, whichever is greater. Given the voluntary confession and acceptance to pay the tax and compounding fee, the court found the respondents' action justified in collecting Rs. 22,396 as the compounding fee.

Conclusion:
The court dismissed the writ petition, holding that the tax levied was justified and the notice was not a demand notice. The offence was correctly classified under section 32(1)(a), and the compounding fee of Rs. 22,396 was appropriate. The petitioner's request for relief was denied.