2002 (7) TMI 765 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the tax demand notice issued to the petitioner.
2. Petitioner's connection with M/s. Sri Sai Wines.
3. Procedural fairness and adherence to legal norms by the tax department.

Issue-wise Detailed Analysis:

1. Legality of the Tax Demand Notice Issued to the Petitioner:

The petitioner sought a writ of mandamus to declare the tax demand of Rs. 1,11,284 for the years 1993-94 and 1994-95 as illegal and arbitrary. The tax demand was based on a notice issued by the third respondent, which threatened arrest and imprisonment under the Andhra Pradesh Revenue Recovery Act, 1864 if the arrears were not paid within seven days. The petitioner promptly replied, denying any connection with M/s. Sri Sai Wines and warning of legal action if steps were taken against him.

2. Petitioner's Connection with M/s. Sri Sai Wines:

The petitioner argued that he had no connection with M/s. Sri Sai Wines, which was licensed to V. Suresh, and that he belonged to a different social group. The respondents contended that M/s. Sri Sai Wines was a partnership firm, with the petitioner holding a 16% share, based on a secret agreement dated January 2, 1991, and other partners' confirmations. However, the court found no registered partnership deed or credible evidence linking the petitioner to the firm. The documents presented by the respondents, including a handwritten agreement and letters from V. Suresh's father, were deemed insufficient to establish the petitioner's liability.

3. Procedural Fairness and Adherence to Legal Norms by the Tax Department:

The court scrutinized the records and found no evidence of an enquiry or opportunity given to the petitioner to present his case. The third respondent's actions were criticized for lacking fairness and adherence to the rule of law. The court held that the third respondent acted arbitrarily, assuming the petitioner's liability based on unverified statements and documents. Consequently, the court quashed the tax demand notice and allowed the writ petition.

Judgment:

The court quashed the notice issued by the third respondent, declaring it illegal and arbitrary. The court also imposed exemplary costs of Rs. 15,000 on the third respondent for initiating proceedings without due process, causing the petitioner mental agony and financial expenditure. The costs were to be recovered from the third respondent's salary in three equal monthly installments. The Commissioner, Commercial Taxes Department, Government of Andhra Pradesh, was directed to ensure compliance and report to the Registrar (Judicial) of the court. The writ petition was allowed with costs.