2003 (6) TMI 454 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of instructions issued by the Commissioner of Taxes demanding security at sales tax check-posts.
2. Authority to demand security under the Central Sales Tax Act, 1956.
3. Application of sections 7(2-A) and 7(3-A) of the Central Sales Tax Act, 1956.
4. Quasi-judicial nature of the power to demand security.
5. Applicability of the Assam General Sales Tax Act, 1993, to inter-State transactions.

Issue-wise Detailed Analysis:

1. Legality of Instructions Issued by the Commissioner of Taxes Demanding Security at Sales Tax Check-Posts:
The petitioner challenged the instructions issued by the Commissioner of Taxes directing check-post officers to demand security from vehicles carrying non-ferrous scrap during inter-State trade. The court found that the Commissioner of Taxes had no power to issue such instructions, as it interfered with the quasi-judicial powers vested in the assessing authorities by the Central Sales Tax Act, 1956. The instructions were deemed illegal, without jurisdiction, and set aside.

2. Authority to Demand Security under the Central Sales Tax Act, 1956:
The petitioner argued that the demand for security was not compulsory under the Act of 1956 and required the application of judicial mind by the assessing authority. The court agreed, stating that security can only be demanded by the authority competent to grant the certificate of registration and must be done judiciously, not arbitrarily or routinely.

3. Application of Sections 7(2-A) and 7(3-A) of the Central Sales Tax Act, 1956:
Section 7(2-A) of the Act of 1956 allows the authority to demand security at the time of granting the certificate of registration. Since the petitioner was already a registered dealer, this provision was not applicable. Section 7(3-A) allows for additional security to be demanded after the certificate is granted, but only for good and sufficient reasons, and after giving the dealer an opportunity to be heard. The court emphasized that these provisions require subjective satisfaction based on objective consideration of materials and cannot be applied mechanically.

4. Quasi-Judicial Nature of the Power to Demand Security:
The court reiterated that the power to demand security is quasi-judicial and must be exercised independently and impartially. No superior authority can control the decision of an assessing authority through administrative directions. The court cited the Supreme Court's decision in Orient Paper Mills Ltd. v. Union of India, which held that quasi-judicial powers cannot be controlled by directions from higher authorities.

5. Applicability of the Assam General Sales Tax Act, 1993, to Inter-State Transactions:
The court noted that the provisions of the Act of 1993 regarding security could not be applied to inter-State transactions. Section 46(5) of the Act of 1993 allows for the demand of security only if tax payable under the Act has not been paid or properly accounted for. Since the petitioner's transactions were stock transfers and not sales, they were not taxable under the Act of 1956, making the demand for security illegal.

Conclusion:
The court concluded that the Commissioner of Taxes had no authority to issue instructions demanding security at check-posts and that such instructions were illegal and without jurisdiction. The court set aside the impugned circulars/orders and restrained the respondents from demanding or collecting security at check-posts based on these instructions. The writ petition was disposed of accordingly, with no order as to costs.

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