2003 (8) TMI 511 - HC - VAT and Sales Tax

Issues Involved:
1. Validity and enforceability of the surety bond submitted by the plaintiff-respondents.
2. Requirement of formal acceptance of the surety bond by the Excise and Taxation Department.
3. Implications of the issuance of a sales tax license based on the surety bond.
4. Compliance with Section 23 of the Haryana General Sales Tax Act, 1973, and Rule 61 of the Haryana General Sales Tax Rules, 1975.
5. Legality of the recovery sought by the defendant-appellant from the plaintiff-respondents.

Detailed Analysis:

1. Validity and Enforceability of the Surety Bond:
The plaintiff-respondents filed a civil suit seeking a perpetual injunction to restrain the defendant-appellant from recovering Rs. 6,971 or any other amount as arrears of land revenue or otherwise. The plaintiff-respondents were sureties for a firm with the Excise and Taxation Department. The trial court initially held that the surety bond submitted by Dharam Singh was valid and enforceable, despite the absence of the word "accepted." However, the Additional District Judge reversed this finding, stating that the surety bond required formal acceptance to be valid and enforceable.

2. Requirement of Formal Acceptance of the Surety Bond:
The trial court believed that the issuance of the sales tax license implied acceptance of the surety bond. However, the Additional District Judge ruled that formal acceptance by the competent authority was necessary. The judge emphasized that without formal acceptance, the surety bond remained an offer or proposal and did not constitute a valid contract of guarantee. The Additional District Judge's observations highlighted that the mere issuance of a sales tax license could not imply acceptance of the surety bond.

3. Implications of the Issuance of a Sales Tax License:
The defendant-appellant argued that the issuance of the sales tax license implied acceptance of the surety bond. The learned State counsel supported this view, stating that the license was issued after the surety bond was furnished. However, the Additional District Judge disagreed, stating that the issuance of the license did not imply acceptance. The judge noted that the surety bond could have been rejected for various reasons, and formal acceptance was required to create a valid contract.

4. Compliance with Section 23 of the Haryana General Sales Tax Act, 1973, and Rule 61 of the Haryana General Sales Tax Rules, 1975:
Section 23 and Rule 61 outline the requirements for furnishing security for the issuance of a sales tax license. The learned State counsel argued that these provisions did not mandate express endorsement of acceptance of a surety bond. The court examined these provisions and concluded that the competent authority could impose conditions for issuing a registration certificate, including furnishing security. Rule 61(d) specifies that a personal bond with solvent surety must be to the satisfaction of the specified officer. The court found that none of the provisions required formal acceptance of the surety bond, and the issuance of the license itself satisfied the requirements.

5. Legality of the Recovery Sought by the Defendant-Appellant:
The court ultimately held that the issuance of the sales tax license implied acceptance of the surety bond, aligning with Section 23 and Rule 61. The court emphasized that the revenue of the State should not be dealt with casually and that the plaintiff-respondents could not evade their responsibilities. Consequently, the court set aside the judgment of the Additional District Judge and restored the trial court's decision, dismissing the suit of the plaintiff-respondents and upholding the recovery sought by the defendant-appellant.

Conclusion:
The appeal was allowed, and the judgment of the Additional District Judge was set aside. The court restored the trial court's decision, dismissing the suit of the plaintiff-respondents and upholding the recovery sought by the defendant-appellant. The court emphasized the importance of formal acceptance of surety bonds and compliance with statutory provisions.

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