2004 (9) TMI 625 - HC - VAT and Sales Tax

Summary

Issues:
Recovery of arrears of penalty under section 29-A of the Kerala General Sales Tax Act, 1963; Release of bank guarantee by the sales tax authorities; Entitlement to stay against recovery proceedings; Liability for penalty; Need for departmental enquiry.

Analysis:
The petitioner sought a stay against recovery proceedings for arrears of penalty imposed under section 29-A of the Kerala General Sales Tax Act, 1963. The penalty was upheld in two rounds of appeal, with the Tribunal order being under revision before the division Bench. The petitioner argued that the goods were released based on a bank guarantee provided by the transporter, even after the penalty was imposed on the petitioner directly. The court noted that since the penalty was in the petitioner's name, it was recoverable from the petitioner, and there was no automatic entitlement to a stay against recovery proceedings just because the bank guarantee was released by the department before collecting the penalty. The petitioner was advised to seek recourse through a suit against the department or transporter if they suffered a loss due to the release of the bank guarantee.

The court emphasized that there was no basis for interference in the recovery proceedings for the penalty, which had been upheld at two levels. However, recognizing the irregularity in releasing the bank guarantee without proper security, the Commissioner of Commercial Taxes was directed to conduct an inquiry and take necessary action against the person responsible for releasing the bank guarantee. It was highlighted that the normal procedure would have been for the transporter and the petitioner to settle the liability between them, with the bank guarantee serving as security. The court concluded by disposing of the writ petition in the above terms, indicating the need for a departmental investigation into the matter.