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TMI Blog2010 (7) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment of India. The petitioner holds a green card issued by the FSEZ authority as a unit located in FSEZ. The petitioner, as submitted in this petition, kept respondent No. 3 informed of the fact that the production in the unit located within FSEZ commenced with effect from May 15, 2008. As a unit located in FSEZ, it is under obligation to export the goods manufactured in the said unit. Since the sales of the unit are exported out or made in the course of export, all the sales are exempted from payment of tax. It has only a notional liability. No tax has yet become payable. As per submission made in this petition, the petitioner received a notice from the Deputy Commissioner of Commercial Taxes, Kolkata South Circle (since re-designated as Senior Joint Commissioner) under memo No. 280DC/S dated October 23, 2008 directing the petitioner to show cause as to why a security of Rs. 5 lakhs would not be demanded from it under section 26 of the VAT Act for proper and timely payment of tax. This showcause notice was replied to by the petitioner by a letter dated November 24, 2008 wherein the petitioner explained that being a unit located within FSEZ, it was not required to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of immovable property in West Bengal for providing a source of realization of due taxes in case of default by the dealer in making payment of taxes in the usual manner; (ii) Unsound financial position; (iii) Potential tax liability appeared to be considerable; and (iv) The dealer agreed to pay the security. The learned advocate vehemently opposes the observation made by respondent No. 1 at (iv) above. The petitioner never agreed to pay the security. As regards other points raised by respondent No. 1, the learned advocate submits that such issues were not raised by respondent No. 1 while issuing the notice on October 23, 2008. Therefore, the petitioner was not given any opportunity to rebut the presumptions held by respondent No. 1. However, there was no whisper that the said authority was demanding security for safe custody of way-bill/declaration forms . This was absolutely a new ground taken by respondent No. 3 while modifying the order dated January 8, 2010 of respondent No. 1. It is contended by the learned advocate that the respondent-authorities were not apparently sure on which ground they would demand security. Secondly, the petitioner has not defaulted in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Taxes [1989] 73 STC 256 (Cal) has dealt with the contentions of respondent No. 1 as raised at (i), (ii) and (iii) of his order dated January 8, 2010. In that case, the Assistant Commissioner of Commercial Taxes, Kolkata (North) Circle, demanded security from the petitioner (Bidhubhusan Deb) under section 7(4a)(i) of the Bengal Finance (Sales Tax) Act, 1941 (in short, the 1941 Act ) on the ground that the petitioner was financially unsound, owned no immovable property and had considerable potential tax liability. Permits of declaration forms were also refused to be issued. It was alleged by the Department that the petitioner was maintaining two sets of books of accounts. Even after considering the said allegation made by the Department, the honourable Calcutta High Court while allowing the petition in part observed as below (page 259 in 73 STC): . . . The impugned order dated February 27, 1986 was passed by the Assistant Commissioner of Commercial Taxes, Kolkata (North) Circle, demanding a security of Rs. 1 lakh from the petitioner is due to the reasons that there is no immovable property of the proprietor, and it is financially considered not sound and the potential tax liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d use of forms referred to under sub-section (2A) of section 7 of the Central Sales Tax Act, furnishing of security/additional security by the assessee has become necessary. Similar view has been expressed by a Division Bench of the Rajasthan High Court (Jaipur Branch) in the case of Delhi Cloth General Mills Co. Ltd. v. State of Rajasthan [1980]) 45 STC 128. Therein also the honourable Judges of the Rajasthan High Court observed that, . . . security cannot be demanded as a matter of routine without specifying the reasons for doing so . During the course of hearing, we examined the relevant record. On scrutiny of the records, it appears that the Sales Tax Officer, Park Street Charge (respondent No. 3) sent a proposal to the Deputy Commissioner of Commercial Taxes, Kolkata South Circle, for demanding a security of Rs. 5 lakh under his memo No. 7185 dated September 30, 2008. The reason shown was for safe custody of way-bills/declaration forms, etc. Upon considering the proposal, the Deputy Commissioner of Commercial Taxes, Kolkata South Circle, issued a notice dated October 23, 2008 directing the petitioner to show cause as to why a security of Rs. 5 lakh under section 26 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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