2005 (7) TMI 634 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of orders passed under Section 28-AAA of the Karnataka Sales Tax Act, 1957.
2. Constitutional validity of Section 28-AAA.
3. Adherence to procedural safeguards under Rule 52 of the Karnataka Sales Tax Rules, 1957.
4. Consequential directions following the quashing of impugned orders.

Detailed Analysis:

1. Legality of Orders Passed Under Section 28-AAA:
The petitioners, dealers under the Karnataka Sales Tax Act, 1957, challenged the orders passed by the Commercial Tax Officers at check-posts and the Commercial Tax Officer, Mobile Squad, who intercepted goods vehicles and exercised powers under Section 28-AAA to effect compulsory purchase of goods. The petitioners argued that the power under Section 28-AAA was not exercised in a bona fide manner and that the authorities conducted a roving enquiry, improving their versions stage by stage. The court found that the orders were suspect and not sustainable, as the authorities failed to adhere to the procedural safeguards required under Rule 52 of the Karnataka Sales Tax Rules, 1957.

2. Constitutional Validity of Section 28-AAA:
The petitioners questioned the constitutional validity of Section 28-AAA, arguing that it enabled the deprivation of property and did not fit into the scheme of the Sales Tax Act. However, the court noted that with the changeover to the Value Added Tax (VAT) system and the goods in question (supari) no longer being taxable under the Act, it was not necessary to examine the constitutional validity of Section 28-AAA in the present context.

3. Adherence to Procedural Safeguards Under Rule 52:
The court emphasized the importance of adhering to procedural safeguards when exercising drastic powers under Section 28-AAA. Rule 52 requires that the exercise of powers under Section 28-AAA be subject to the control and direction of the Joint Commissioner and the Commissioner of Commercial Taxes. The court found that the authorities failed to obtain the necessary consent, approval, and supervision from higher officers as required by Rule 52. The record indicated that permission for compulsory purchase was taken post facto, which rendered the exercise of power contrary to the requirements of Rule 52 and therefore bad in law.

4. Consequential Directions Following the Quashing of Impugned Orders:
The court quashed the impugned orders passed under Section 28-AAA by issuing a writ of certiorari. Consequently, the goods seized and compulsorily purchased were to be returned to the petitioners. In cases where the goods had already been sold, the court directed the respondent-department to return the net proceeds of the sale to the petitioners after deducting any amounts already paid. The court also clarified that the respondent-department is at liberty to take other actions for any violations independent of Section 28-AAA, in accordance with the law.

Conclusion:
The court allowed the writ petitions, quashed the impugned orders under Section 28-AAA, and issued directions for the return of goods or sale proceeds to the petitioners. The court underscored the necessity of strict adherence to procedural safeguards when exercising drastic powers and left open the possibility for the respondent-department to pursue other legal actions for any independent violations.