2005 (5) TMI 616 - HC - VAT and Sales Tax

Issues Involved:
1. Misinterpretation of "sale of goods" under the Delhi Sales Tax Act.
2. Entitlement and delay in refund of excess sales tax paid.
3. Validity of the show cause notice issued for suo motu review.
4. Impact of the 46th Amendment of the Constitution on the assessment order.
5. Violation of principles of natural justice in the issuance of the show cause notice.
6. Jurisdiction and scope of review under Section 48 of the Delhi Sales Tax Act.

Detailed Analysis:

1. Misinterpretation of "Sale of Goods" under the Delhi Sales Tax Act:
The petitioner, a company engaged in the hotel and restaurant business, was assessed to sales tax due to a misinterpretation of the term "sale of goods" under the Delhi Sales Tax Act. This misinterpretation was clarified by the Supreme Court in *Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi*, which held that meals provided to visitors and residents of the hotel were not taxable under the Act.

2. Entitlement and Delay in Refund of Excess Sales Tax Paid:
Following the Supreme Court's decision, the petitioner was entitled to a refund of Rs. 4,34,123.24 for the assessment year 1976-77. Despite filing an application for a refund on April 3, 1981, the amount was deliberately withheld by the respondents, leading the petitioner to file a writ petition in the High Court. The court found no defense to the petition and directed the respondents to make the payment.

3. Validity of the Show Cause Notice Issued for Suo Motu Review:
The respondents issued a show cause notice on February 7, 1983, to review the assessment order dated March 28, 1981. The petitioner objected, arguing that the notice lacked cogent reasons and was issued nearly two years after the original order. The court found the notice to be vague and indefinite, lacking specific grounds for the proposed review, thus opposing the very scheme of Section 48 of the Act.

4. Impact of the 46th Amendment of the Constitution on the Assessment Order:
During the hearing, the respondents contended that the 46th Amendment to the Constitution changed the position on the matter of refunds. However, the High Court held that the 46th Amendment had no bearing on the settled assessment order, and the petitioner's entitlement to the refund remained unaffected.

5. Violation of Principles of Natural Justice in the Issuance of the Show Cause Notice:
The court emphasized that the show cause notice did not provide the petitioner with a reasonable opportunity to defend themselves, violating principles of natural justice. The notice was issued on February 7, 1983, with a hearing date set for February 9, 1983, leaving insufficient time for the petitioner to prepare a defense.

6. Jurisdiction and Scope of Review under Section 48 of the Delhi Sales Tax Act:
The court discussed the jurisdiction of review under Section 48, which allows rectification of mistakes apparent from the records. It was held that a change in opinion does not justify a review. The show cause notice and subsequent orders lacked the essential grounds required for a valid review and were thus invalid.

Conclusion:
The High Court allowed the writ petition, quashing the demand and order dated February 24, 1983. The court held that the show cause notice and the review order violated principles of natural justice and were beyond the scope of Section 48 of the Delhi Sales Tax Act. The petitioner's entitlement to the refund was upheld, and the respondents were directed to bear their own costs.

← Previous Next →