2013 (3) TMI 229 - HC - VAT and Sales Tax

Spot inspection - demand of payment of tax - cheque forcibly demanded from assessee - Held that - Second respondent and his officers had no power or authority to take a cheque from the petitioner, forcibly, during the inspection of the business premises of the petitioner. It is not proper for the second respondent and his officers to demand the payment of tax, by the petitioner without issuing a prior notice and without passing an assessment order, after giving an opportunity to the petitioner to file its objections, if any. As such, this Court finds it appropriate to direct the respondents to return the cheque, dated 7.9.2012, bearing cheque No.406492, to the petitioner, within a period of fifteen days from the date of receipt of a copy of this order. However, it is made clear that it would be open to the respondents to demand the payment of tax, payable by the petitioner, if any, by following the procedures established by law.

Summary

Issues: Improper collection of tax during a spot inspection without issuing a prior notice or passing an assessment order.

Analysis:
The judgment by the High Court of Madras involved a case where the second respondent and his officers conducted a spot inspection at the business premises of the petitioner and estimated the alleged sales turnover for certain assessment years. The officers collected a cheque and an additional amount from the petitioner without issuing a prior notice or passing an assessment order. The petitioner argued that the second respondent had no authority to collect the tax amount without following due process. On the other hand, the respondents contended that the cheque issued by the petitioner was dishonored, hence the petitioner's claim for its return should not be accepted.

Upon reviewing the submissions from both parties and examining the available records, the Court concluded that the second respondent and his officers acted improperly by collecting the cheque and demanding tax payment without following the necessary procedures. The Court held that the officers had no authority to take a cheque forcibly without issuing a prior notice or passing an assessment order. Consequently, the Court directed the respondents to return the cheque to the petitioner within fifteen days. However, the Court clarified that the respondents could demand the tax payment from the petitioner by following the established legal procedures in the future.

In summary, the Court ruled in favor of the petitioner, ordering the return of the cheque collected during the spot inspection. The judgment emphasized the importance of adhering to proper procedures and giving the petitioner an opportunity to respond before demanding tax payments. The decision highlighted the significance of following due process in tax collection matters, ensuring fairness and legality in such proceedings.