2002 (4) TMI 931 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to orders stopping issuance of form XXVIIIB under Bihar Sales Tax Act.

Analysis:
The petitioner, a manufacturing company of galvanised iron pipes, challenged the orders stopping the issuance of form XXVIIIB under the Bihar Sales Tax Act. The authorities halted the form issuance due to the petitioner's alleged non-payment of four per cent sales tax on sockets purchased externally and fitted with the pipes sold. The petitioner argued that the only provision allowing form withholding is under rule 45 of the Rules, specifically rule 45(b), which outlines three scenarios for withholding the form. None of these scenarios applied to the petitioner as they had been consistently paying taxes as per their submitted returns. No authority had determined any unpaid tax amount by the petitioner, thus the withholding of form XXVIIIB was unjustified.

The State's counsel contended that the provision aimed to prevent tax evasion, alleging that the petitioner evaded tax by not paying the required sales tax on purchased sockets. However, the court found merit in the petitioner's argument. It noted that no sales tax authority had determined the petitioner's liability to pay the four per cent sales tax on the sockets. Without such a determination and unpaid demand, there was no breach of rule 45(b). The court emphasized that the department did not claim the petitioner failed to file returns or pay based on those returns. Consequently, the authority had no justification to withhold form XXVIIIB.

The court quashed the impugned orders and directed the concerned authorities to immediately issue form XXVIIIB to the petitioner. It clarified that the decision did not determine the petitioner's liability for sales tax on socket purchase and sale, leaving it to the sales tax authorities to decide in accordance with the Act and Rules. The judgment concluded by disposing of the writ application with the stated observations and directions.