2006 (6) TMI 487 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Authority of the Commissioner of Taxes to direct the deposit of security money.
2. Compliance with procedural requirements for demanding security.
3. Distinction between stock transfer and sale.
4. Validity of general orders versus individual orders.
5. Legal precedents and their applicability.

Detailed Analysis:

1. Authority of the Commissioner of Taxes to Direct the Deposit of Security Money:
The petitioner, a registered dealer under the Assam General Sales Tax Act, 1993, and the Central Sales Tax Act, 1956, challenged the Commissioner of Taxes' directive to realize security money on truckloads of iron scrap at the check gate. The petitioner contended that the Commissioner lacked the power to demand such security without following the prescribed procedure.

2. Compliance with Procedural Requirements for Demanding Security:
The petitioner argued that the demand for security must comply with Section 7(2A) and 7(3A) of the 1956 Act, which necessitate a written order with recorded reasons and an opportunity for the dealer to be heard as per Section 7(3B). The court found that the Commissioner's orders dated February 4, 1995, and May 5, 1995, did not provide reasons or follow the required procedure, thus violating the statutory provisions.

3. Distinction Between Stock Transfer and Sale:
The petitioner claimed that the dispatch of non-ferrous metal scraps to a consignment agent constituted a stock transfer, not a sale, and therefore was not liable for tax. The court noted that the burden of proof lies on the petitioner to demonstrate that the dispatches were stock transfers and not sales. This determination is to be made by the appropriate assessing authority.

4. Validity of General Orders Versus Individual Orders:
The court emphasized that the 1956 Act requires individual orders with specific reasons and after giving the dealer an opportunity to be heard. The general orders issued by the Commissioner were deemed invalid as they did not comply with these requirements. The court referenced previous judgments, including Pradip Kumar Sarawgi & Sons (HUF) v. Commissioner of Taxes and Lallamookh Tea Company (P) Ltd. v. Commissioner of Taxes, which supported the need for individualized orders.

5. Legal Precedents and Their Applicability:
The court reiterated the principles established in Pradip Kumar Sarawgi's case, which quashed similar orders by the Commissioner for being contrary to the statutory provisions. The court also cited Lallamookh Tea Company, which underscored the necessity for notices demanding security to disclose reasons and material facts.

Conclusion:
The court concluded that the orders passed by the Commissioner on February 4, 1995, and May 5, 1995, were contrary to the provisions of the 1956 Act and the 1993 Act. The respondents were restrained from demanding security based on these orders. However, the court allowed the assessing authority to pass appropriate orders requiring the petitioner to furnish security, provided the statutory requirements were met and the petitioner was given a hearing. The court also left open the question of whether the transportation of non-ferrous scraps was a stock transfer or a sale to be determined by the assessing authority.

Judgment:
The writ petition was allowed to the extent indicated, with no costs awarded. The amount already realized as security deposit would be subject to final assessment under the relevant provisions of law.