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2017 (12) TMI 1584 - HC - VAT and Sales TaxRecovery attempted as against the security bond executed by the petitioners/appellants - contention raised by the petitioners before the learned Single Judge was that security bond was executed on 22.10.2013. The recovery now proposed was relating to the default made between the period May and September, 2013 - Held that - When a security bond is executed in form No.6, there is no stipulation either in the Rule or in the form that the bond would apply only to the default occasioned in future. The liability though was prior to the execution of the bond by the petitioners, remained due even after the bond was executed. In such circumstances, there can be no fault found in the recovery attempted from the petitioners. Appeal dismissed - decided against appellant.
Issues: Recovery against security bond executed under Kerala Value Added Tax Act, 2003.
In this judgment by the Kerala High Court, the petitioners challenged the recovery attempted against a security bond executed under the Kerala Value Added Tax Act, 2003. The first respondent, the Assessing Officer, demanded additional security under Rule 19 of the Kerala Value Added Tax Rules, 2005. The petitioners had executed a security bond agreeing to satisfy any liability of the second respondent, a dealer, under the KVAT Act up to a specified amount. The petitioners argued that the security bond was executed before the period for which recovery was proposed and that the second respondent's registration was cancelled after the bond was executed. The learned Single Judge considered the terms of the bond and found it clear and unambiguous. The bond indicated that the petitioners stood sureties for any default or failure by the second respondent in satisfying tax liability under the KVAT Act, up to the specified amount. Rule 19 of the KVAT Rules allows for the execution of a security bond as a mode for satisfying additional security demanded by the Assessing Officer. The court noted that the bond did not specify that it applied only to future defaults and that the liability, though prior to the bond's execution, remained due even after. Therefore, the court upheld the recovery attempted from the petitioners, agreeing with the learned Single Judge's decision. The court dismissed the appeal but allowed the petitioners to proceed against the second respondent and his assets for recovery of the amount to the extent covered by the security bond. No costs were awarded in this judgment.
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