2015 (3) TMI 388 - HC - VAT and Sales Tax

Return of cheques collected illegally and without authority of law - Held that - according to the petitioner, even if there is a violation, before an assessment order, there cannot be a collection of tax amount at the time of inspection, which is fortified by this Court in the judgment reported in (1992 (9) TMI 309 - MADRAS HIGH COURT) followed by this Court in an unreported judgment in M/s.Arun Engineering Industries Vs. The Commercial Tax Officer (Enf), for the proposition that without assessment order or without giving an opportunity of personal hearing, there cannot be collection of tax, at the time of inspection. - In view of the settled principles of law, the petitioner's legal right has to be safeguarded, but, at the same time, liberty should be given to the Department to take action in accordance with law. Accordingly, the writ petition is disposed of with a direction to the respondents to return the cheques in question to the petitioner within a period of four weeks from the date of receipt of a copy of this order. - Decided in favour of Petitioner.

Summary

Issues:
1. Coercive collection of tax amount during inspection without assessment order.
2. Legality of cheques collected by authorities.
3. Validity of petitioner's claim of forced payment.
4. Applicability of legal principles on tax collection without assessment.
5. Freezing of petitioner's bank account.
6. Direction for return of cheques and unfreezing of account.

Analysis:
1. The Writ Petition was filed seeking a Writ of Mandamus to direct the respondents to return cheques collected during inspection without legal authority. Petitioner argued that the authorities coerced him into giving the cheques under threat of peril, emphasizing that tax collection without assessment is unlawful.

2. The respondent contended that the petitioner voluntarily provided the cheques upon being informed of the assessment value under TNVAT Act, 2006. The petitioner later stopped payment on the cheques, raising concerns about the voluntary nature of the transaction.

3. The Court considered the petitioner's claim that tax collection during inspection, without an assessment order, is impermissible. Citing precedents like Hotel Blue Nile Vs. State of Tamil Nadu, the Court reiterated that tax collection without assessment or a hearing opportunity is illegal.

4. Upholding the legal principles, the Court acknowledged the petitioner's rights while allowing the Department to act lawfully. The judgment directed the return of the cheques to the petitioner within four weeks, emphasizing the need to safeguard the petitioner's legal rights.

5. Subsequently, the petitioner informed the Court about the freezing of his bank account following the inspection. The Court intervened, stating that without proper assessment or demand, forcible tax collection is unjustified. It directed the authorities to unfreeze the account upon the petitioner depositing a specified amount within four weeks.

6. The judgment concluded by clarifying that failure to deposit the specified amount would empower the authorities to take legal action. No costs were awarded, and the connected miscellaneous petition was closed, ensuring compliance with the Court's directives.