1997 (11) TMI 511 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to demand notices based on tax rate discrepancy and procedural irregularities.

Analysis:
The petitioner, a dealer in diesel generator sets, contended that the items fall under a specific tax rate but received demand notices at a higher rate. The petitioner relied on government notifications reducing the tax rate to one percent, as per the Kerala General Sales Tax Act, 1963. The assessing authority issued form 14D notices demanding tax at ten percent despite the petitioner's compliance with the lower rate. The petitioner challenged these notices.

The first respondent argued that the petitioner's sales were taxable at ten percent based on a notice issued earlier. The respondent highlighted the petitioner's application to amend their registration certificate and the remittance of tax at one percent for specific months. The respondent justified the issuance of demand notices for the balance tax amount based on rule 21(10) of the Kerala General Sales Tax Rules.

The court examined the relevant rules governing tax assessments. It noted that if an assessee's turnover exceeds the taxable limit, they must file returns and pay the due tax. Failure to pay the tax allows the assessing authority to issue form 14D demand notices. However, if the return is unacceptable or not filed, the authority can assess the tax under different rules and issue a notice in form 13. In this case, the assessing authority directly issued form 14D notices without following the proper procedure under rule 21(9), indicating a procedural flaw.

The court concluded that the demand notices issued were not in compliance with the law due to the procedural irregularity. As a result, the court quashed the demand notices but directed the first respondent to expedite the assessment for the relevant year if not already completed. The original petition was allowed, with no costs imposed. An additional order related to a specific application was dismissed.