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2005 (1) TMI 632 - HC - VAT and Sales TaxAssessments determining the tax liability or passing orders - Payment of cash or through post-dated cheques - whether the action of the departmental officials in collecting the tax as well the compounding fee on the same day of the inspection is in accordance with the provisions of the Ac - Difference Of Opinion between learned members - HELD THAT - In the light of the two separate judgments prepared by Mr. Justice S. Ananda Reddy and Mr. Justice L. Narsimha Reddy, the reference is answered with the following observations and directions (i) Under the provisions of the Act and the Rules, the Officers of the Vigilance/Intelligence Wing of the Department can exercise the powers that are conferred, such as inspection of the business premises, books of accounts, stock verification, etc., apart from recording any statement from any of the responsible person of the business concern. (ii) Basing on such information, if any of the officer of the said Vigilance or Intelligence Wing Department is empowered to make assessments, such officer can proceed to frame assessments basing on the material and such assessments could be completed only after complying the procedure provided under the provisions of the Act and Rules, i.e., granting sufficient opportunity to adduce evidence by the dealer for the proposed assessment, i.e., as to the quantities as well as valuation of the stocks, etc.; otherwise such material or information can be forwarded to the assessing authority having jurisdiction for taking appropriate action including the assessment, reassessment, etc. (iii) There shall be at least a gap of one week between the date of an order of assessment, or demand notice, as the case may be, and an order compounding the offence, wherever the dealer comes forward with such an offer. (iv) The judgments in S.R. Traders and Bhavani Traders v. Assistant Commissioner of Commercial Taxes 1993 (3) TMI 339 - ANDHRA PRADESH HIGH COURT , Kaki Butchi Raju Son v. State of Andhra Pradesh 1994 (4) TMI 371 - ANDHRA PRADESH HIGH COURT , cannot be said to be the authorities for the proposition that the inspecting officials of the Commercial Tax Department are empowered to pass orders compounding the alleged offences on the same day of inspection and to collect the amount specified in such orders on the same day. (v) After completion of the assessment, it is open to the department to issue a demand notice along with the assessment order by providing time as contemplated under the provisions of the Act for collection of the tax. (vi) If any penalty proceedings are initiated by the competent authorities, even such proceedings are to be completed after giving notice and sufficient opportunity to the dealer, and thereafter the penalty order could be served along with a notice of demand, giving sufficient time for payment of the amount of penalty, if levied. (vii) If the penalty proposed is unrelated to the assessment of the tax liability, such penalty could be levied independent of the assessment proceedings, but if penalty is related to the assessable tax, such penalty proceedings could be initiated and completed only after completion of the assessment and not before. (viii) The petitioners shall be refunded the amounts collected from them, or be provided with an option to agree for adjustment of the same towards payment of the tax in future. (ix) If the inspecting authorities are of the opinion that the books of account are required to be seized, they can do so only in accordance with the procedure contemplated under the Act and the Rules and not otherwise. Similarly even with reference to the seizure of the goods, the same is to be done as per the procedure provided, and in such cases, the dealer can also avail the benefit of getting the release of the goods on furnishing security as provided under the provisions of the Act and Rules. (x) The Commissioner of Commercial Taxes is further directed to issue necessary circular to comply the directions of this Court by all the concerned officers. With these directions, the writ petitions are allowed. No costs.
Issues Involved:
1. Legality of the action of the vigilance wing of the sales tax department in collecting tax and compounding fee on the day of inspection. 2. Compliance with the procedural requirements under the Andhra Pradesh General Sales Tax Act, 1957. 3. Validity of the compounding fee collected without formal assessment. Summary: Issue 1: Legality of the Action of the Vigilance Wing The dealers challenged the action of the vigilance wing of the sales tax department, claiming that tax and compounding fees were collected on the day of inspection without framing necessary assessments or passing orders. The department allegedly coerced dealers into compounding the alleged offense and collecting fees through cash or post-dated cheques. The court found that the vigilance wing's actions were contrary to the provisions of the Act and illegal. The court emphasized that the vigilance officers have no power to collect tax or compounding fees on the spot and must follow the prescribed procedure. Issue 2: Compliance with Procedural Requirements The court examined the relevant provisions of the Andhra Pradesh General Sales Tax Act, 1957, including sections 12, 13, 14, 15, 16, 28, 30, and 32. The court noted that the Act provides a detailed procedure for assessment, including the submission of returns, provisional assessment, final assessment, and the imposition of penalties. The court emphasized that the assessing authority must issue notices, provide an opportunity for the dealer to explain, and pass an assessment order before any tax or penalty can be collected. The court found that the vigilance wing's actions violated these procedural requirements. Issue 3: Validity of Compounding Fee Collected Without Formal Assessment The court found that the compounding fee collected by the vigilance wing was almost equivalent to the alleged tax due on the suppressed turnover. The court held that such collection of compounding fees without formal assessment was contrary to the provisions of the Act. The court emphasized that compounding of offenses under section 32 of the Act requires a formal assessment and an order fixing the liability to pay the tax. The court directed that the amounts collected as compounding fees without formal assessment must be refunded or adjusted against any existing outstanding demands. Conclusion: The court allowed the writ petitions, setting aside the impugned orders where no assessments were made for the disputed turnover. The court directed the refund or adjustment of the amounts collected under the impugned orders. The court also issued several directions to ensure compliance with the procedural requirements of the Act, including the issuance of circulars by the Commissioner of Commercial Taxes to all concerned officers. Separate Concurring Judgment by L.N. Reddy, J.: Justice L.N. Reddy concurred with the views expressed by Justice S. Ananda Reddy and supplemented the judgment with additional observations. Justice L.N. Reddy emphasized the importance of following the procedural safeguards provided under the Act and reiterated that no authority of the commercial tax department is entitled to levy and collect tax on the spot. Justice L.N. Reddy also highlighted the need for a gap of at least one week between the date of an order of assessment or demand notice and an order compounding the offense.
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