2015 (7) TMI 426 - HC - VAT and Sales Tax

Forced recovery of VAT - It is submitted that respondent had also taken the signatures of the petitioner on blank papers and thereafter, encashed one cheque bearing No.053461 on 21.02.2015, as per the bank s statement. Thereafter, notice had been served upon the petitioner on 09.03.2015 to which a reply had been filed that the two cheques were forcibly taken and one of the cheque, amounting to ₹ 3 lacs had already been encashed and the payment of the second cheque had been stopped by the petitioner. Resultantly, the present writ petition has been filed for the necessary relief, mentioned above. Held that - The said procedure smacks of arbitrariness and highhandedness of the authorities on the face of the record itself, which cannot be appreciated, in any manner. In the absence of any assessment, the action of respondent No.3 to take two cheques on 16.02.2015 amounting to ₹ 3 lacs each in favour of the respondent-Department, was not justified. The encashment five days later to the tune of ₹ 3 lacs, allegedly in discharge of the anticipated liability, as per the reply filed, cannot be appreciated, in any manner. The eagerness of the official-respondents to meet their targets at the end of the financial year, by following this method of recovery, cannot be approved. It is apparent, prima facie that such a huge liability has been made out against the petitioner without giving him proper opportunity to put-forth his case merely on account of the fact that the petitioner was prosecuting his remedy, in accordance with law. The said order, though not specifically challenged, has apparently been passed to spite the petitioner and is necessarily to be quashed. Accordingly, the provisional assessment order dated 26.06.2015 is hereby quashed. Respondents shall refund a sum of ₹ 3,10,000/-, within a period of one week from the receipt of a certified copy of this order and a sum of ₹ 10,000/- shall be recovered from respondent No.3, by the State, for his arbitrary action. The said proceedings shall be decided by an officer of competent jurisdiction, who was not associated with the inspection conducted on 16.02.2015 and who would be appointed by respondent No.2 - Decided in favor of assessee.

Summary

Issues:
Challenge to action of Excise & Taxation Officer in taking cheques without liability and notice.

Analysis:
The petitioner, a registered firm under the Punjab Value Added Tax Act, challenged the action of the Excise & Taxation Officer in taking two cheques amounting to Rs. 3 lacs each without any liability or notice. The petitioner alleged coercion and threats by the officer, who took the cheques under the pretext of anticipated tax liability due to discrepancies found during an inspection. The officer encashed one of the cheques without proper authorization, leading to the filing of the writ petition seeking an independent inquiry.

In response, the officer defended the action stating that the cheques were voluntarily submitted during inspection due to irregularities in maintaining records and evasion of tax. A provisional assessment order was passed, adjusting one cheque against the assessed amount, leaving a balance due. The court noted that the authorities acted arbitrarily and illegally, especially in the absence of a formal assessment or demand against the petitioner.

The court found the actions of the authorities to be arbitrary and high-handed, especially the encashment of one cheque without proper justification. The provisional assessment order, passed during the pendency of the writ petition by an officer involved in the initial inspection, was deemed biased and quashed. The court ordered a refund of Rs. 3,10,000 to the petitioner and imposed a penalty of Rs. 10,000 on the officer for arbitrary actions. The remaining cheque was to be returned to the petitioner, with instructions to maintain a specific amount in the bank account for pending assessment proceedings.

The court directed that the assessment proceedings be conducted by an impartial officer not associated with the initial inspection, to be completed within two months. Any future demands were to be recovered in accordance with the law, allowing the petitioner to appeal if necessary. The original case record was to be returned to the Additional Advocate General for further action, concluding the writ petition in favor of the petitioner.