2017 (3) TMI 581 - HC - VAT and Sales Tax

Recovery of tax dues - Whether the cheque in question was obtained by the respondent by coercion or it was given voluntarily by the petitioner? - the petitioner has clearly stated that the cheque was obtained from her forcibly. Further, when the respondent sent a reply stating that it was given towards tax payment, the petitioner has again indicated that the liability itself is not established and it is in dispute and therefore, there is no scope for handing over cheque towards payment of taxes - Held that - Unless the liability attains finality through legal process, i.e. except through procedure established by law, the respondents have not right to demand the tax - The facts and circumstances and the correspondence between the parties would go to show that the cheque could not been given voluntarily - first respondent is directed to return the petitioner s cheque dated 17.09.2016 - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to demand for payment, legality of proceedings, principles of natural justice, coercive collection of cheque, mode of payment under TNVAT Act.

Analysis:
The petitioner filed a Writ of Certiorarified Mandamus challenging the proceedings of the 1st respondent directing payment of ?4,50,000 along with interest. The petitioner claimed the demand was illegal, against TNVAT Act, and violated natural justice. The petitioner's cheque for the amount was returned without realization, leading to a dispute. The petitioner alleged the cheque was forcibly obtained during a surprise inspection, while the respondent argued it was voluntarily given based on the petitioner's statement agreeing to pay. The main issue was whether the cheque was obtained by coercion or voluntarily.

The TNVAT Rules 2007 specify modes of payment, including by cheque in favor of the assessing authority. The petitioner contended the cheque was obtained forcibly, while the respondent claimed it was for tax payment and need not be returned. Correspondence between the parties indicated the cheque was not voluntarily given, as the liability was disputed and not legally established. The court held that unless liability is determined through due legal process, tax cannot be demanded. The court directed the return of the petitioner's cheque but allowed the respondent to invoke TNVAT Act if any amount was actually due.

In conclusion, the court disposed of the Writ Petition, ordering the return of the cheque dated 17.09.2016 to the petitioner. The judgment highlighted the importance of legal process in determining liabilities and emphasized that tax demands must be based on established legal procedures. The case underscored the significance of upholding principles of natural justice and ensuring that payments are made voluntarily, in accordance with the law.