2001 (6) TMI 797 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of detaining the first petitioner and treating him as a casual trader.
2. Collection of tax and penalty from the first petitioner by coercion.
3. Entitlement to the refund of the collected tax and penalty.
4. Compliance with procedural requirements and jurisdiction.

Issue-wise Detailed Analysis:

1. Legality of Detaining the First Petitioner and Treating Him as a Casual Trader:
The court examined whether the respondent acted legally in detaining the first petitioner and treating him as a casual trader. It was not disputed that the second petitioner is a registered dealer carrying on business in silver articles. The first petitioner, a representative of the second petitioner, was transporting old silver articles and cash for business purposes when detained. The respondent issued notices alleging the first petitioner was transporting silver ornaments without valid documents and conducting unregistered business. However, the court found that the first petitioner had clearly stated his role as a representative of the second petitioner and the purpose of his travel. The respondent failed to verify the facts or consider the material available, leading to an illegal and unauthorized assessment of the first petitioner as a casual trader.

2. Collection of Tax and Penalty from the First Petitioner by Coercion:
The court scrutinized whether the tax and penalty were collected by coercion. The respondent issued notices proposing tax and penalty, demanding objections within three days. The first petitioner allegedly consented to pay immediately, but the court noted a letter from the first petitioner seeking 15 days to file objections. The respondent's actions, including the immediate collection of tax and penalty, were deemed coercive. The court highlighted the absence of a proper proceedings sheet and the respondent's contradictory statements regarding the recorded statement, reinforcing the coercion claim.

3. Entitlement to the Refund of the Collected Tax and Penalty:
The court determined that the respondent's actions were illegal and unauthorized, thus entitling the petitioners to a refund. The court directed the respondent to refund the collected tax and penalty to the first petitioner. The respondent's failure to follow due process and the coercive collection of tax and penalty were central to this decision.

4. Compliance with Procedural Requirements and Jurisdiction:
The court found that the respondent did not comply with procedural requirements. The respondent's notices and actions lacked proper legal foundation, as the articles in question were old and not subject to tax at the point of possession by the first petitioner. The court emphasized that the respondent's reliance on section 2(h-i) and rule 45(4)(i) was misplaced, as these provisions did not apply to the petitioner's situation. The court also noted the improper handling of the petitioners' request for a copy of the recorded statement, further demonstrating the respondent's procedural lapses.

Conclusion:
The court declared the respondent's actions illegal and unauthorized, set aside the impugned action, and directed a refund of the collected tax and penalty. The court also allowed for a fresh inquiry, if necessary, by the appropriate authority. The writ petition was allowed with costs, highlighting the respondent's highhanded and coercive actions.