2016 (8) TMI 474 - HC - VAT and Sales Tax

Recovery of loss of revenue Whether reduction in rate of Entry Tax/ VAT is against the interest of State of Bihar stone chips, stone boulders and stone ballasts omission to register FIR - Held that - petitioner had drawn the attention of this Court to the alleged illegality in the entire process of issuance of notifications and also noting that such actions were causing loss of revenue to the State, which was detrimental to the public interest. Original records were called to ascertain the truth of the allegations as issue of such vital importance ought to have been placed before the Cabinet for its approval. It was clear from the file placed that the Government, after preparation of the draft notifications, had placed the matter for obtaining legal opinion from the Government Advocate and the Advocate General, Bihar, and it was only after obtaining the same that the matter was placed before the Cabinet and the Cabinet, in its meeting, dated 11.9.2007, accepted the proposed draft notifications and accorded approval for issuance of the same. It was only thereafter that impugned notifications, contained in Annexures 1, 2 and 3, were issued. Thus, the allegations of the writ petitioner are wholly unfounded - writ petition dismissed.

Issues: Alleged loss of revenue due to reduction in VAT and Entry Tax rates through notifications, demand for CBI investigation, recovery of revenue, restoration of tax levies, inquiry into roles of government officials, lack of action by authorities, failure to register FIR, challenge to notifications' legality, approval process of notifications, reduction of tax rates on specific items, alleged anomalies in tax imposition, prior objections raised by Auditor, alleged misconduct by officials, alleged benefit to businessmen, alleged loss exceeding ?100 crores, alleged negligence by authorities.

Analysis:

1. Alleged Revenue Loss and CBI Investigation:
The petitioner alleged a significant loss of revenue to the State of Bihar due to the issuance of notifications reducing VAT and Entry Tax rates on specific items. The petitioner sought a CBI investigation to recover the alleged loss and restore the status quo ante regarding tax levies. The High Court examined the allegations and the process of notification issuance, ultimately finding no merit in the petitioner's claims.

2. Inquiry into Government Officials' Roles:
The petitioner urged an inquiry into the roles of various government officials, including former Chief Ministers and Finance Ministers, in the issuance of the contested notifications. The High Court reviewed the contentions and the approval process of the notifications, concluding that the allegations of unauthorized issuance were unfounded based on the records presented.

3. Lack of Action by Authorities and FIR Registration:
The petitioner highlighted the lack of action by authorities in recovering the alleged revenue loss and initiating proceedings under the Bihar Public Demands Recovery Act, 1994. Additionally, the petitioner criticized the failure of the Economic Offence Unit to register an FIR despite complaints. The High Court considered these arguments but ultimately dismissed the writ application, finding no substance in the petitioner's claims.

4. Challenge to Notifications' Legality and Approval Process:
The petitioner challenged the legality of the notifications reducing tax rates on specific items and claimed that the notifications were issued without proper approval processes. However, the State of Bihar contested these allegations, providing details of the approval process involving Cabinet decisions and legal vetting before notification issuance.

5. Alleged Anomalies in Tax Imposition and Objections Raised:
The High Court examined the alleged anomalies in tax imposition, especially regarding stone chips and boulders, and the objections raised by the Assistant Auditor. The State of Bihar explained the rationale behind the tax rate reductions, emphasizing the government's priorities related to construction and maintenance of roads.

6. Alleged Misconduct and Negligence by Officials:
The petitioner accused officials of misconduct, criminal misconduct, and negligence in issuing the notifications to benefit businessmen and cause revenue loss. The High Court reviewed the records and approval process, ultimately rejecting the allegations of unauthorized issuance and affirming the legality of the notifications.

In conclusion, the High Court dismissed the writ application, finding no merit in the petitioner's claims of revenue loss, unauthorized issuance of notifications, or misconduct by government officials. The detailed analysis of the approval process and rationale behind the tax rate reductions supported the court's decision to reject the petitioner's demands for investigation and revenue recovery.

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