2009 (5) TMI 871 - HC - VAT and Sales Tax

Whether, on the facts and circumstances of the case, the Trade Tax Tribunal after recording a finding in favour of the applicant that the notice by affixation on March 27, 1985 was not legal and valid, was not justified in treating the service of notice on Madan Lal, who was admittedly the brother of the wife of the sole proprietor of the applicant as legal and valid? Whether, on the facts and circumstances of the case, the Tribunal was not justified in holding that in the absence of the proprietor of the applicant, the service of notice on Madan Lal shall be treated as valid? Whether the observation of the Tribunal that the conduct of Madan Lal was that of an agent is based on surmises and conjectures since there is no material whatsoever on record to indicate that either Madan Lal was managing the business affairs or acting as an agent? Held that - The Tribunal has on its own recorded firstly that the notice sent through process server was not served upon the assessee. Secondly, the mode of notice used by the assessing authority was by pasting on the premises of the assessee. However, the order of the Tribunal does not reflect in any manner that the assessing authority has given any reason for resorting to this mode and, therefore, the Tribunal, on its own, has recorded that the mode of fixation used by the assessing authority was illegal. Thirdly, the notice, which has been held to be valid by registered post by the Tribunal, is also in the teeth of the finding recorded by the Tribunal itself that it has not come on record anywhere that Madan Lal, who was the brother-in-law of the assessee was either the agent or the munim, manager or the person authorized by the assessee in writing to act on his behalf and to accept the notice. This court comes to the conclusion that the notice issued under section 21 was not properly served on the assessee and, therefore, the proceedings initiated on the basis of such a notice were bad and are liable to be set aside by this court.

Summary

Issues:
1. Validity of notice served under section 21 of the U.P. Sales Tax Act, 1948.
2. Compliance with rule 77 of the U.P. Trade Tax Rules, 1948.
3. Jurisdictional requirements for initiating proceedings under section 21.
4. Proper service of notice as a condition precedent.

Issue 1: Validity of Notice:
The revision pertains to an order of the Trade Tax Tribunal for the assessment year 1982-83. The primary contention revolves around the validity of the notice served under section 21 of the U.P. Sales Tax Act, 1948. The Tribunal found discrepancies in the service of the notice, including failure to serve the notice through a process server and lack of authorization for the notice served via registered post to the brother-in-law of the assessee. The court emphasized that proper service of notice is a jurisdictional requirement for initiating proceedings under section 21.

Issue 2: Compliance with Rule 77:
The learned counsel for the assessee argued that the notice under section 21 did not comply with rule 77 of the U.P. Trade Tax Rules, 1948. Specifically, the counsel highlighted the necessity for the notice to be served either on the assessee or an authorized agent in writing. Failure to adhere to this requirement renders the service of notice invalid. The court reiterated that proper compliance with rule 77 is essential for initiating legal proceedings under section 21.

Issue 3: Jurisdictional Requirements:
The judgment underscored that the notice under section 21 acts as a jurisdictional notice, and any deviation from the prescribed procedures, such as improper service, can render subsequent proceedings void. The court emphasized that the service of notice is not merely a procedural formality but a condition precedent for assuming jurisdiction under section 21 of the Act.

Issue 4: Proper Service as a Condition Precedent:
The court referenced previous legal decisions to emphasize that proper service of notice is a condition precedent for initiating proceedings under section 21. Even if the assessee later participates in the proceedings, improper service of notice renders subsequent orders illegal and void. The judgment highlighted the importance of strict adherence to procedural requirements to maintain the legality of proceedings initiated under section 21.

In conclusion, the High Court of Allahabad set aside the proceedings initiated based on the faulty notice served under section 21. The court found that the notice was not properly served on the assessee, leading to the invalidation of subsequent proceedings. As a result, the order of the Tribunal dated March 14, 2001, and the order under section 21 were both set aside, with the revision being allowed in favor of the assessee.