2011 (2) TMI 1387 - HC - VAT and Sales Tax

Summary

Issues involved: Petition seeking quashing of recovery notice for sales tax dues from a surety.

Summary:
In C.W.P. No.3492 of 1992, the petitioner sought to quash a recovery notice issued by the Excise and Taxation Department for sales tax dues, as the petitioner had stood surety in case of default by the dealer. The petitioner argued that the recovery proceedings were illegal as the period of surety had expired, and notice of withdrawal was given. The State contended that unilateral withdrawal with retrospective effect was impermissible, and the liability being enforced related to the period before the surety expired. The Court noted that the recovery period was covered by the surety, and giving notice of withdrawal was not sufficient to absolve the petitioner of liability. Citing legal precedents, the Court held that the guarantor was liable for dues prior to dissolution of the firm and up to six months after cancellation of the surety bond. The Court also referenced a Supreme Court judgment stating that proceeding against the principal debtor before the guarantor was not necessary. Consequently, the Court dismissed the petition, finding no grounds to quash the recovery notice.