2015 (5) TMI 914 - HC - VAT and Sales Tax

Stay application - Penalty imposed under Section 9(2) of the Central Sales Tax Act, 1956 - Held that - A perusal of the recovery notice under the Land Recovery Act dated 24.11.2014 would go on to show that recovery was only made regarding the bank guarantee which has already been done. In such circumstances, once the petitioner himself has given his consent for the recovery of the tax amount along with interest, in view of being unsuccessful in appeal, we are of the opinion that subsequently, the petitioner had a change of heart and has approached this Court on the ground that since he had filed the appeal thereafter, the amount should be refunded to him and it was wrongly encashed, without giving him prior notice. - petitioner has submitted that the petitioner shall furnish adequate security, to the satisfaction of the Assessing Authority, in the manner prescribed under Section 33(5) of the VAT Act. - petitioner is granted the benefit of protection of recovery of the amount in dispute, during the pendency of the appeal, subject to the Assessing Authority being satisfied regarding the furnishing of adequate security, as prescribed under Section 33(5) of the VAT Act, within a period of 4 weeks - Conditional stay granted.

Summary

Issues:
1. Recovery of penalty under CST Act and VAT Act during pendency of appeal.
2. Encashment of bank guarantee without prior intimation.
3. Validity of recovery notice under Land Recovery Act.
4. Liability to recover balance penalty amount during nonfunctional Tribunal appeal.

Analysis:
1. The petitioner, a proprietorship concern, filed a writ petition seeking direction to restrain recovery of penalty under CST Act and VAT Act during the appeal's pendency before the nonfunctional Haryana Tax Tribunal. The petitioner also requested a refund of Rs. 1,46,00,000 recovered via encashing a bank guarantee without prior notice. The First Appellate Authority's dismissal of the initial appeal led to the encashment, prompting the petitioner's plea for refund during the ongoing appeal before the Tribunal.

2. The State opposed the refund request, citing the petitioner's conduct. The assessment order revealed a tax demand of Rs. 72,84,261 due to missing C-Forms, later reduced to Rs. 1,36,228 after form submission. Subsequently, a tax of Rs. 1,46,53,414 along with interest and penalty under CST Act was imposed. The petitioner's appeal to the First Appellate Authority resulted in the encashment of the bank guarantee without prior intimation, leading to the current dispute.

3. The State justified the encashment citing the bank guarantee's imminent expiry and the petitioner's consent provided in a letter to the bank. The recovery notice under the Land Recovery Act confirmed the bank guarantee's recovery. The petitioner's change of stance post-encashment, seeking a refund due to the appeal filing, was considered by the court. However, the court declined to grant immediate relief, stating the petitioner could claim the encashed amount if successful in the appeal.

4. The court addressed the issue of recovering the balance penalty amount during the nonfunctional Tribunal appeal. The petitioner offered to furnish adequate security as per Section 33(5) of the VAT Act. The court granted protection against recovery during the appeal, subject to the petitioner satisfying the Assessing Authority with adequate security within four weeks. Coercive recovery methods were prohibited until the security provision was met, thereby disposing of the writ petition.