2004 (10) TMI 570 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notice under section 17 of the Andhra Pradesh General Sales Tax Act, 1957 regarding alleged arrears of sales tax due from a third party.

Analysis:
The petitioner, a firm engaged in manufacturing and trading of liquor, challenged a notice under section 17 of the Act regarding arrears of sales tax due from an independent third party. The petitioner contended that it was not responsible for the arrears of another proprietary concern as it was an independent partnership firm. The court directed the tax authorities to reconcile payments made by the third party and maintain status quo. However, the second respondent issued a cheque for a reduced amount, and the petitioner filed a writ petition to prevent encashment. Despite this, the cheque was encashed during the proceedings.

The key question was whether a notice under section 17 could be issued to the second respondent for payment due to the petitioner because of a third party's default. The court referred to section 17 of the Act, which allows recovery of dues from persons owing money to the dealer. The court emphasized that before applying section 17, tax authorities must confirm if any amounts are due from the person receiving the notice. In this case, there was no finding that any amount was due from the second respondent to the petitioner; the amount was owed by a third party who was a partner in the petitioner's firm. The court cited a previous judgment to support its view that the sales tax authorities could not order attachment and payment of money due to the petitioner because of a third party's default.

Consequently, the court allowed the writ petition, quashed the notice, and directed the first respondent to refund the amount to the petitioner. The respondents were permitted to recover dues from the defaulting dealer as per the law. The court made the rule nisi absolute, granting relief to the petitioner.