2008 (9) TMI 902 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of show-cause/demand notice for entry tax.
2. Issuance of Revenue Recovery Certificate (RRC) without a valid assessment order.
3. Claim of exemption pending before the High Level Screening Committee.
4. Legality of recovery proceedings initiated by the Commercial Tax Department.

Analysis:
1. The petitioner received a show-cause/demand notice for entry tax and raised objections, citing a pending exemption application before the High Level Screening Committee. Despite this, an RRC was issued for recovery. The petitioner argued that no assessment order had been passed, making the demand invalid. The respondents claimed the petitioner defaulted in paying advance tax. The court held that without a valid assessment order, no demand could be raised, emphasizing the necessity of an assessment order for recovery proceedings. The petition was allowed, quashing the RRC and directing no recovery without a valid assessment order.

2. Another recovery notice was issued for a higher amount, leading the petitioner to challenge the legality of the recovery proceedings. The respondents argued that the pending exemption application did not entitle the petitioner to exemption until granted. The court emphasized the importance of a valid assessment order for raising demands and initiating recovery. It directed the Department not to order recovery until a valid assessment order was passed, allowing the petitioner to raise all available pleas during assessment proceedings.

3. The petitioner's claim of exemption pending before the High Level Screening Committee was crucial in the case. The court highlighted the need for an early decision by the Committee to prevent harassment of the petitioner. It directed the petitioner to present the court's order before the Committee for necessary action, emphasizing the importance of timely decisions on pending applications to avoid unnecessary trouble for the petitioner.

4. The judgment emphasized the significance of a valid assessment order for raising demands and initiating recovery proceedings. It criticized the Department for overlooking this basic principle of tax law in their haste to recover the amount. The court's decision to quash the RRC and halt recovery until a valid assessment order was passed underscored the importance of following legal procedures and principles in tax matters to prevent undue hardship on taxpayers.