1968 (7) TMI 75 - HC - VAT and Sales Tax

Summary

Issues:
1. Lack of notice of demand served to the petitioners.
2. Legality of recovery proceedings without serving notice of demand.
3. Liability of petitioners to pay arrears of sales tax.
4. Levying and realization of interest only against defaulters.

Detailed Analysis:
1. The petitioners, three sons of a deceased individual who was assessed for sales tax, raised a complaint that recovery proceedings were initiated against them without prior notice. They argued that without a notice of demand, they could not be considered defaulters, and thus, recovery proceedings against them were unjustified.

2. The Court examined the provisions of the U.P. Sales Tax Act, particularly Section 8, which mandates the service of a notice of demand to the person liable for tax payment. The Court emphasized that failure to serve a notice of demand renders the individual not a defaulter, preventing the initiation of recovery proceedings against them. Citing a similar case, the Court highlighted that recovery proceedings without a fresh notice of demand were unauthorized.

3. Although the petitioners were liable to pay the arrears of sales tax as legal representatives of their late father, the Court reiterated that serving a notice of demand was a prerequisite to enforce this liability and initiate recovery as arrears of land revenue. The Court emphasized that the petitioners, not being served with a notice of demand, could not be considered defaulters, thus rendering the recovery proceedings against them unauthorized.

4. Regarding the levy and realization of interest, the Court clarified that interest could only be charged against defaulters. The U.P. Sales Tax Act stipulates that interest can be charged if tax remains unpaid after the specified time in the notice of assessment and demand. As the petitioners were not served with the required notice of demand, the Court concluded that the recovery proceedings against them, including interest, were unauthorized.

In conclusion, the Court allowed the writ petition, quashing the recovery proceedings against the petitioners for interest. The Court ruled in favor of the petitioners, emphasizing that without a notice of demand, the recovery proceedings initiated against them were unjustified. The petitioners were awarded costs from the respondents.