2007 (11) TMI 578 - HC - VAT and Sales Tax

Garnishee notices/demand notices challenged - Held that - On a comprehensive examination of the petition pleadings, conduct of the petitioner, contents of the policy and the actions of the respondentauthorities, it emerges that the petitioner is not at all a bona fide person seeking for any valid relief; that the petition is more misusing the process of this court only to stall the recovery of quantified tax that the petitioner had collected from the customers on behalf of the State but failed to remit it to the State treasury, the petition is totally devoid of merits and in such circumstance, this writ petition deserves to be dismissed with exemplary costs, which is quantified at ₹ 1,00,000 (rupees one lakh only). In such circumstance, the Secretary to Government, Finance Department and the Commissioner of Commercial Taxes in Karnataka, are directed to cause a proper enquiry into such state of affairs particularly to ascertain who are the officers/officials of the department who are responsible for not realising the tax due from the petitioner for the years 2002-03 and 2003-04 and even up to date and as to their conduct in not realising he amount due to the State and take commensurate action, if it is found that there is any violation or misconduct on their part. A follow-up report is to be placed before the registry of this court in this regard within a period of six months from today. On and after submission of such report, the report may be placed before this court for further orders. W.P. dismissed.

Summary

Issues Involved: Abuse of writ jurisdiction, garnishee notices, tax exemption claims, discrimination allegations, and conduct of the respondent authorities.

Issue-Wise Detailed Analysis:

1. Abuse of Writ Jurisdiction:
The court found the writ petition to be a "typical illustration of gross abuse of the writ jurisdiction." The petitioner, a company registered under the Companies Act, 1956, sought reliefs that were "not achievable" and supported by "inadequate pleadings" and "irrelevant grounds."

2. Garnishee Notices:
The petitioner challenged garnishee notices issued to its bankers under section 14 of the KST Act and section 8A of the KTL Act, indicating a liability of Rs. 5,05,80,704. The court found no factual or legal basis to quash these notices, stating that the petitioner had collected substantial amounts of tax from customers but failed to remit them to the State, amounting to "misappropriation of fund of the State."

3. Tax Exemption Claims:
The petitioner sought a writ of mandamus to direct the State to extend tax exemption benefits as per the tourism policy of 1992-1997. The court noted that the petitioner had not made efforts in accordance with the prescribed procedures for obtaining such benefits. The petitioner's first attempt was an application dated December 23, 2000, which was promptly rejected by the Department of Tourism. The court found no basis for issuing a mandamus, as the petitioner had not complied with necessary requirements and procedures.

4. Discrimination Allegations:
The petitioner alleged discrimination, claiming that other entities like M/s. Eagleton Golf Resorts and M/s. Leela Ventures Ltd. had received tax exemptions. The court found that the petitioner had not made a proper application and that the prevailing policy did not allow for such exemptions in the petitioner's location. The court emphasized that even if the respondent-authorities had extended benefits improperly to others, it would not justify issuing a writ of mandamus to compel similar treatment for the petitioner.

5. Conduct of Respondent Authorities:
The court criticized the conduct of the respondent authorities, noting "gross negligence" in failing to timely recover taxes from the petitioner. The court directed the Secretary to Government, Finance Department, and the Commissioner of Commercial Taxes in Karnataka to conduct an inquiry into the officials' conduct and submit a report within six months.

Conclusion:
The writ petition was dismissed with exemplary costs of Rs. 1,00,000 payable by the petitioner to the respondent-State of Karnataka. The court found the petition to be devoid of merits and an attempt to misuse the court's process to stall tax recovery. The court also highlighted the need for accountability and corrective measures within the Commercial Taxes Department.