2004 (9) TMI 614 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the seizure of books of accounts and documents.
2. Obligation to pay tax at pre-assessment stage.
3. Interpretation of "tax due" and "tax payable".
4. Legality of the search and seizure under Section 66 of the West Bengal Sales Tax Act, 1994.

Issue-wise Detailed Analysis:

1. Validity of the Seizure of Books of Accounts and Documents:
The petitioners challenged the judgment dated December 24, 2003, passed by the West Bengal Taxation Tribunal, which declared the seizure of books of accounts and documents from respondent No. 1 on January 17, 2001, as bad in law. The Tribunal had allowed the petitioners to take steps under Section 30(3) of the West Bengal Sales Tax Act, 1994, based on the materials disclosed by the seized documents and records.

2. Obligation to Pay Tax at Pre-assessment Stage:
The petitioners argued that respondent No. 1, a dealer using the veil of a "broker," delivered taxable goods without paying the required taxes or obtaining compulsory registration under the Act. The Assistant Commissioner of Commercial Taxes issued a notice to respondent No. 1 for a hearing, which was challenged by respondent No. 1 under Section 8 of the Act. The Tribunal held that tax liability arises only after assessment and issuance of a demand notice, and thus, no tax was due from respondent No. 1 at the time of seizure.

3. Interpretation of "Tax Due" and "Tax Payable":
The petitioners contended that the tax liability arises the moment a dealer makes taxable sales or purchases, independent of the assessment. They cited legal precedents to support their argument that the obligation to pay tax exists at the pre-assessment stage. The Tribunal's interpretation that tax becomes due only after assessment was challenged as a misconception of the scheme under the Act. The court ultimately agreed with the petitioners, stating that the liability to pay tax starts from the day of the first sale of taxable goods, independent of any future assessment.

4. Legality of the Search and Seizure under Section 66 of the West Bengal Sales Tax Act, 1994:
The petitioners argued that Section 66 is designed to act against tax evaders who do not comply with their statutory duties. The Tribunal's observation that no tax was due and payable before assessment, and thus the seizure was invalid, was challenged. The court held that the provisions of Section 66 are not meant for determining the liability to pay tax but are aimed at preventing tax evasion. Therefore, the search and seizure conducted by the petitioners were deemed legal and not arbitrary.

Conclusion:
The court set aside the judgment dated December 24, 2003, passed by the West Bengal Taxation Tribunal, declaring it illegal and arbitrary. The petitioners were given liberty to take further steps against respondent No. 1 in pursuance of the notice dated November 19, 2001. The writ petition was allowed, and there was no order as to costs.