2003 (4) TMI 514 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the encashment of the bank guarantee without supplying a copy of the penalty order.
2. Compliance with the statutory requirement of issuing a demand notice.
3. The right to avail the remedy of appeal.
4. Conduct of the Assistant Excise and Taxation Commissioner in handling the case.

Detailed Analysis:

1. Legality of the Encashment of the Bank Guarantee Without Supplying a Copy of the Penalty Order:
The petitioner argued that the action of respondent No. 2 to encash the bank guarantee without supplying the copy of the penalty order was illegal. The court held that the duty to communicate the penalty order is implicit in section 14-B(7)(iii) of the Punjab General Sales Tax Act, 1948. The court emphasized that every quasi-judicial authority must record reasons for its decision and communicate the same to the affected person. The necessity of giving reasons flows from the concept of the rule of law, ensuring observance of fair procedure and minimizing arbitrariness in the decision-making process. The court concluded that the officer imposing the penalty under section 14-B(7)(iii) is legally obligated to supply a copy of the penalty order to the affected person.

2. Compliance with the Statutory Requirement of Issuing a Demand Notice:
The petitioner contended that respondent No. 2 did not issue a demand notice in terms of section 11(7) of the Act. The court noted that section 11(7) requires the dealer to pay the amount of any tax, penalty, or interest payable under the Act by a specified date, which should not be less than fifteen days and not more than thirty days from the date of service of such notice. The court found that respondent No. 2 manipulated the encashment of the bank guarantee without issuing the required demand notice, thereby acting arbitrarily and illegally.

3. The Right to Avail the Remedy of Appeal:
The petitioner argued that the encashment of the bank guarantee deprived it of the right to avail the remedy of appeal. The court observed that under section 20(1) and (5) of the Act, a person aggrieved by an order of penalty can file an appeal within the prescribed period of limitation, subject to the payment of 25 percent of the penalty imposed along with interest accrued thereon. The court held that the actions of respondent No. 2 were designed to prevent the petitioner from effectively availing the remedy of appeal, as the officer acted with a pre-determination to encash the bank guarantee swiftly, thereby hindering the petitioner's attempt to seek judicial intervention.

4. Conduct of the Assistant Excise and Taxation Commissioner in Handling the Case:
The court criticized the high-handedness of respondent No. 2 in dealing with the petitioner's case. The vehicle was detained on July 15, 2002, and the bank guarantee was furnished on July 25, 2002. Instead of releasing the goods, respondent No. 2 imposed a penalty and manipulated the encashment of the bank guarantee by sending a special messenger to obtain bank drafts and get them encashed. The court remarked that the officer's conduct left much to be desired and was indicative of a pre-determined effort to deprive the petitioner of its legal rights. However, the court refrained from commenting further on the officer's conduct as he was not impleaded by name.

Conclusion:
The court rejected the objection of alternative remedy raised by respondent Nos. 1 and 2, noting that the petitioner had already availed the remedy of appeal. The court allowed the writ petition and directed respondent Nos. 1 and 2 to refund an amount equivalent to 75 percent of the bank guarantee furnished by the petitioner. The refund was to be made within one month, failing which the petitioner would be entitled to interest at the rate of 9 percent per annum from the date of encashment of the demand drafts. Additionally, the petitioner was awarded costs of Rs. 5000, which the State Government could recover from the officer who held the post of Assistant Excise and Taxation Commissioner at the relevant time.

Writ petition allowed.

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