2010 (8) TMI 854 - HC - VAT and Sales Tax

Whether a recovery issued on February 16, 1985 even if it had remained unsatisfied can it be pressed into motion after 19 years and would not be barred by time? Whether the payment of ₹ 845 and ₹ 3,36,000 satisfies the arrears of tax dues with interest accrued? Held that - The recovery of the tax dues as arrears of land revenue after 19 years may not be barred by limitation, nonetheless it is important to consider whether the said recovery after such a long lapse of time is legally justified or not. It was certainly unfair, unreasonable and unjust to press for it after a gap of 19 years that too without any prior intimation or notice. The respondents are not justified in charging interest on the unpaid amount for all these years at least after 12 years which we have held to be a reasonable period to recover the amount in the present case. This entitles petitioner to have a clear statement of account of the amount of tax dues; the interest levied thereon; adjustment of the amount paid and realized towards the principal amount; and the calculation of the balance amount, if any

Summary

Issues Involved:
1. Validity of the recovery citation dated February 16, 1985, and the letter dated August 20, 2004.
2. Legality of the recovery of Rs. 3,36,000 from the petitioner's post office account.
3. Adjustment of the recovered amount towards the principal and interest.
4. Reasonableness of the 19-year delay in recovery proceedings.
5. Liability of the legal representative of the deceased petitioner.

Detailed Analysis:

1. Validity of the Recovery Citation and Letter:
The petitioner sought to quash the recovery citation dated February 16, 1985, and the letter dated August 20, 2004, directing the payment of Rs. 7,55,948 from the petitioner's post office account. The court noted that the recovery was for arrears of sales tax for the assessment years 1972-73 to 1975-76, totaling Rs. 1,34,793.59. The liability of this amount was not disputed by the petitioner.

2. Legality of the Recovery from Post Office Account:
The court examined the legality of the recovery of Rs. 3,36,000 from the petitioner's post office account without prior notice. It was observed that the amount was withdrawn without informing the petitioner, which violated the principles of natural justice. The court emphasized that the petitioner should have been given a formal notice about the outstanding dues and the interest accrued before any amount was realized from his accounts.

3. Adjustment of Recovered Amount:
The court found that the amount of Rs. 3,36,000 was not properly adjusted. It was partly adjusted towards the principal arrears of tax for some years and partly towards interest, leaving the principal arrears for the year 1975-76 unsatisfied. The court held that any amount realized should first be adjusted towards the principal sum due before adjusting towards interest, in the absence of any contrary covenant.

4. Reasonableness of the 19-Year Delay:
The court addressed whether the recovery after 19 years was legally justified. It was noted that while no specific limitation period was prescribed for such recoveries, the power to recover dues must be exercised within a reasonable period. The court referenced several precedents, including Sharda Devi v. State of Bihar and Ibrahimpatnam Taluk Vyavasaya Coolie Sangham v. K. Suresh Reddy, which emphasized that actions should be taken within a reasonable time. The court concluded that 19 years was not a reasonable period and that the delay was unfair and unjust.

5. Liability of Legal Representative:
The court considered the argument that the legal representative of the deceased petitioner should not be liable for the dues. It was noted that the legal representative is liable to satisfy the decree only to the extent of the property inherited from the deceased. The authorities were directed to examine whether the petitioner had inherited property from her husband exceeding the amount sought to be recovered.

Conclusion and Directions:
The court concluded that while the recovery was not barred by limitation, it was unfair to press for it after 19 years without prior notice. The court did not quash the recovery or order a refund but directed the respondents to:
1. Prepare and furnish a complete statement of account within a month, showing the principal amount of tax dues and interest accrued, with adjustments for any amounts paid or realized.
2. Ensure no interest on interest accrued is charged and no interest on unpaid principal after 12 years of the recovery certificate.
3. Refund any excess amount realized with interest at the same rate charged.
4. Recover any deficient amount only after providing the petitioner an opportunity of hearing and confirming that she inherited property from her husband exceeding the balance amount.

The writ petition was disposed of accordingly.