2015 (11) TMI 1632 - HC - VAT and Sales Tax

Recovery of arrear of turnover tax at third point of sale - attachment of bank property - according to the learned Senior Counsel, the Division Bench of this Court has not attained finality and the matter is pending before the Hon ble Supreme Court and hence demanding the entire amount and seeking to recover through bank attachment is arbitrary - the prtitioners sought time to pay arrears and also sought permission for using the bank accounts - Held that - this Court is of the view that the petitioners may be permitted to operate the respective bank accounts and their entire arrears as demanded by the impugned orders may be directed to be paid in eight equated monthly instalments commencing from 16.11.2015 - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to imposition of sales tax at the third stage of sales and preferential treatment to TASMAC Ltd., legality of demand notices under Section 45 of the Act, granting reasonable time for payment of arrears.

Analysis:
The writ petitions challenged the imposition of sales tax at the third stage of sales and preferential treatment to TASMAC Ltd. The petitioners, licensees under the Tamil Nadu Liquor (Licence and Permit) Rules, 1981, contended that the amended Entry No.2 of the II Schedule and the Explanation to the TNVAT Act, 2006, as amended, were arbitrary, illegal, and unconstitutional. The amendment imposed a third point of tax at 14.5% on the total turnover, which was disputed in the writ petitions. An interim protection was granted initially, but a subsequent Division Bench order dismissed the writ petitions. The petitioners then approached the Hon'ble Supreme Court, and the matters were pending. Meanwhile, the respondents issued demand notices for arrears of tax, leading to the filing of writ petitions challenging the legality of these notices under Section 45 of the Act.

The learned Senior Counsel for the petitioners argued that the demand notices under Section 45 of the Act were arbitrary, illegal, and unsustainable in law. He contended that demanding the entire arrears of tax through bank attachment, especially when the matter was pending before the Supreme Court, was unjust. The Senior Counsel requested reasonable time for payment of the tax amount, emphasizing that coercive steps like bank attachment should not have been taken without providing such a period. The petitioners sought permission to operate their bank accounts and proposed a fixed time limit for paying the arrears.

In response, the Additional Government Pleader (Taxes) supported the impugned orders. After considering the submissions from both sides, the Court directed that the petitioners could operate their respective bank accounts. The entire arrears, as demanded in the impugned orders, were to be paid in eight equated monthly installments starting from a specified date. Upon payment of the first installment, the attachment of the petitioners' bank accounts was to be withdrawn immediately, allowing them to continue operating their accounts. The petitioners were instructed to pay the remaining balance on the 16th of each successive month. Any violation would empower the Assessing Authority to proceed with the recovery of the entire arrears. The writ petitions were disposed of with these directions, and no costs were awarded.