2005 (4) TMI 559 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notice for payment of arrears of tax by the petitioner as surety, liability of the surety under the Andhra Pradesh General Sales Tax Act, legality and correctness of proceedings against the petitioner, liability of the guarantor/surety, order to pay tax for specific years and penalty, authority to proceed against petitioner for tax payable by the fourth respondent, requirement to exhaust remedy against fourth respondent before proceeding against the petitioner.

The judgment addresses the challenge to a notice issued to the petitioner, who stood as surety for the fourth respondent, directing payment of tax arrears. The petitioner accepted responsibility for tax nonpayment by the fourth respondent and offered security, including immovable property and a surety bond. The court clarified that the liability of the guarantor/surety is limited to the tax payable for a year under the APGST Act as estimated by the authority. Therefore, the petitioner cannot be held liable for the entire amount due from the fourth respondent, only up to the tax payable for a year. The court found the notice demanding payment for specific years and penalty impermissible in law, restricting the liability of the petitioner to the tax payable for a year.

Regarding the legality of proceedings against the petitioner, the court emphasized that the petitioner, having offered security and executed a surety bond as required, cannot deny being a defaulter under the Revenue Recovery Act. The court rejected the argument that the department must first exhaust remedies against the fourth respondent before proceeding against the petitioner, noting that the department can proceed against the guarantor/surety if unable to recover from the dealer. The court upheld the department's right to proceed against the petitioner for tax arrears but limited the liability to the tax payable for a year.

In conclusion, the court partly allowed the writ petition, stating that the department could proceed against the petitioner for tax arrears but only up to the amount payable for a year. The petitioner was given the opportunity to provide information on any property held by the fourth respondent to aid in recovery efforts. The court clarified the limitations on the liability of the guarantor/surety and upheld the department's right to proceed against the petitioner within those bounds.