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Smt. Kothamasu Nasaramma Versus Deputy Commercial Tax Officer-I And Others

Validity of recovery proceedings - attachment of residential property of the surety (mother) of firm in which her son is a partner - Section 12 read with Rule 28(8) of the Andhra Pradesh General Sales Tax Act and Rules, 1957 - Held that: - It is settled law that the surety given by a person, on behalf of the assessee, would remain in force against the tax payable under the APGST Act for a year as estimated by the assessee. - As the estimated turnover declared in Form D is ₹ 20,00,000/ .....

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It is made clear that this order shall not preclude the respondents from proceeding against the partnership firm, or its partners, for recovery of the balance arrears of tax due - petition disposed off - decided in favor of petitioner. - Writ Petition No. 9629 of 2015 - Dated:- 23-8-2016 - ACJ Ramesh Ranganathan And Sri U. Durga Prasad Rao, JJ. For the Petitioner: Dr. S.R.R. Viswanath For the Respondents : Sri Shaik Jeelani Basha, Learned Special Standing Counsel for Commercial Taxes (AP) ORDER .....

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in support of the Writ Petition, the petitioner states that she is living in house bearing No.3-8-23 along with her son, daughter-in-law and grandson; she does not have any other property, and is eking out her livelihood with great difficulty; her son was a partner in Sri Devi Dhall Mill; the said firm had applied for registration, under Section 12 of the A.P.G.S.T Act, 1957, in Form-D on 13.10.1997; along with the Form-D application, the partnership firm had filed Form-A return of estimated tu .....

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, should pay the tax dues of the partnership firm; the tax dues from the firm, for the years 1997-98 and 1998-99, were ₹ 2,78,533/- and ₹ 6,95,566/- respectively; she addressed a letter to the first respondent requesting him to furnish a copy of the Form-D application filed by the firm, a copy of the surety bond executed by her, a copy of the Form-A return of estimated turnover filed by the firm, a copy of the assessment order passed against the firm for the year 1997-98, and a copy .....

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ar and Cafe1, a surety can be enforced to the extent of the tax liability estimated in the Form-A return; the tax estimated, in the Form-A return, was only ₹ 8,000/- on the estimated taxable turnover of ₹ 2,00,000/- from out of the gross turnover of ₹ 20,00,000/-; hence the demand for payment of tax of ₹ 2,78,533/- was contrary to Section 12 read with Rule 28(8); service of the assessment order by affixture on 14.03.2001 is illegal; the partnership firm had admitted liabi .....

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Court in New Kamal Bar and Cafe1, her liability as a surety was only to discharge the tax liability for a year as estimated in the Form-A return; attachment of her dwelling house, without furnishing a copy of the Form-A return, was illegal; her liability as a surety was only to the extent of the admitted tax liability of ₹ 64,791/-, and not on the turnover determined under best judgment assessment; the respondents had not raised a demand for 14 years after the assessment order; and they we .....

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ad applied for registration as a partner of the firm; the petitioner had also enclosed photostat copies of the documents of title along with the surety bond; she had stated in the bond that, in case her son defaulted in making payment of the tax due to the Government, she would pay the same, and the surety bond was executed by her voluntarily; she had further stated that, along with the Form-D application, the firm had also filed Form-A return of estimated turnover; however no Form-A was filed b .....

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the partnership firm did not file the Form-A return while filing the Form-D application for registration; the firm had, however, filed Form-A application which related to issuance of registration certificate under the Central Sales Tax Act; in Column 19 of the Form-D application, the firm had estimated the turnover for the year as ₹ 20.00 Lakhs; the petitioners tax liability as surety is for the tax dues of the firm for the first year 1997-98; the petitioners claim that her liability was .....

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d filed the Form A return of estimated turnover under Rule 28(8); she had offered surety only to the extent of her sons share in the firm not exceeding ₹ 8,000/-; the tax estimated in Form A was only ₹ 8,000/-, and her liability as a surety was only to that extent; the Form A application, for registration under Section 7(1)/7(2) of the CST Act, is different; the Form A, as prescribed under Rule 9 of the APGST Rules, was filed estimating the tax due as ₹ 8,000/-; the practice of .....

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to the tax payable under the Act for the year as estimated; failure of the registering authority, to estimate the tax payable under the Act for a year, absolved the petitioner of her liability as held by this Court in R. Dandayudhapani v. Commercial Tax Officer (2014) 59 APSTJ 130 ; while the term total turnover includes turnover which is exempt from tax, the term turnover represents the taxable turnover; Section 5 of the Act also distinguishes total turnover from turnover, and provides for levy .....

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Dr. S.R.R. Viswanath, Learned Counsel for the petitioner, would submit that the amount which can be collected from the surety is the tax due on the estimated turnover for the first assessment year; the meaning of the expression total turnover is different from estimated turnover; the circular of the Commissioner dated 21.07.1997, issue long prior to the assessment order and even prior to registration of the firm as a dealer, stipulated security of only ₹ 8,000/-; in the absence of estimati .....

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otal turnover as ₹ 20,00,000/-; the tax rate, prescribed during the relevant period, was only 4%; in any event the respondents were not justified in recovering from a surety the tax dues beyond ₹ 80,000/-; and the liability of a surety is limited only to the tax due on the turnover estimated by the assessee, and not on the net turnover determined by the assessing authority. Learned Counsel would rely on Nagappa Naik v. Manianath Das Desai (AIR 1959 Mysore 165); Jiban Krishna Mukherje .....

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firm had estimated its turnover as ₹ 20,00,000/-, the surety was liable to discharge this liability of the firm for the first assessment year. Learned Standing Counsel would rely on Sunkara Narayanamma v. The Deputy Commercial Tax Officer ((2015) 61 APSTJ 246); and Gullapudi Someswara Rao v. The Commissioner of Commercial Taxes [(judgment in WP No.17017 of 2002 dated 12.04.2005)]. As the assessment order passed on 14.03.2001, for the assessment years 1997-98 and 1998-99, has attained fina .....

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covered from a surety, is misplaced. After examining certain problems, which arose on the department insisting on security deposits/sureties for registration of dealers under Section 12 of the A.P.G.S.T. Act, and on the representations made by dealers on the arbitrary fixation of the security deposit, third party surety on stamp paper etc, the Commissioner of Commercial Taxes, Andhra Pradesh issued Circular dated 21.07.1997 wherein he observed that, in practice, security deposit was never demand .....

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and were required to furnish security deposit, were grouped into two categories i.e., (a) dealers applying for A.P.G.S.T. registration only, and (b) dealers applying for A.P.G.S.T. and C.S.T. registrations; for dealers, who applied for A.P.G.S.T. registration, a security deposit of ₹ 2,000/- was directed to be demanded, and for those who had applied for registration both under the A.P.G.S.T. and the C.S.T. Acts, a security deposit of ₹ 6,000/- was directed to be demanded uniformly. I .....

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s, due from the defaulting dealer, for a period of one year. Section 12(5) of the APGST Act stipulated that no dealer, who is liable to get himself registered under sub-section (1) or sub- section (2) or sub-section (4), shall carry on business as a dealer unless he has been registered and is in possession of a certificate of registration. Section 12(6) stipulated that an application for registration shall be made to the prescribed authority in such manner and within such time as may be prescrib .....

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hat the dealer shall furnish in the prescribed manner, and within such time as may be specified in the order, such security as may be specified for all or any of the aforesaid purposes. Rule 28(1) of the APGST Rules stipulated that every dealer, liable to get himself registered under sub-section (1) of Section 12 of the Act, shall submit an application for registration to the registering authority. Rule 28(6) provided that every application for registration, under sub-rules (1) to (5), shall be .....

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ulated that the security, referred to in sub-rule (8), may be in any of the following forms, namely: (a) deposit in Government Treasury by cash, (b) government promissory notes, loan bonds, post office savings bank deposits, National Saving Certificates, deposits made in the scheduled banks or Andhra Pradesh State Cooperative Bank or Central Cooperative Bank duly pledged to the registering authority, (c) surety bond, (d) guarantee from a Scheduled Bank agreeing to pay to the State Government on .....

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r Section 12 of the APGST Act, required, among others, the applicant-dealer to furnish information regarding the goods ordinarily purchased by him, the sale in the course of inter-state trade or commerce, export outside the State, and details of goods, if any, imported into the State by the dealer from foreign countries or from other States in India. In addition thereto the applicant dealer was also required, in column 17 thereof, to provide information regarding the total turnover of the year p .....

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ounsel for the petitioner, would submit that the surety is required to be furnished only on the estimated turnover, and not on the estimated total turnover of a dealer for the year, it is necessary to note that the prescribed Form D did not require the applicant to furnish information regarding the estimated turnover, but stipulated that they provide details of the estimated total turnover for the year. Rule 9 of the APGST Rules, 1957 required every dealer, liable to get himself registered under .....

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al turnover, in column 4 the estimated turnover on which exemption is claimed, and in column 5 the estimated net turnover. In the Circular dated 21.07.1997, the Commissioner of Commercial Taxes had also held that most of the information required for registration was covered by the application in Form D; if all the information, required in the Form D application was furnished, the application for registration should be considered; for want of additional information, the issue of the registration .....

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ing registration to furnish security for an amount not exceeding an amount equal to the tax payable under the A.P.G.S.T. Act for the year as estimated by him, relates only to the estimated total turnover for the year as referred to in column 19 of Form D. Form A on the other hand, as stipulated under Rule 9 of A.P.G.S.T. Rules, required the dealer to furnish information regarding the estimated total and net turnover. It would be wholly inappropriate to read the condition stipulated in Form A rea .....

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y cannot neglect to do that which the law mandates and requires doing, failure of the authority to discharge its statutory duty cannot prejudice the other party (Kusheswar Prasad Singh6), if a certain statutory formality is required to be complied with, or permission is required to be obtained, the said requirement must be complied and a party may not be permitted to take advantage of his own wrong in not taking steps to comply with the statutory provision (Panchanan Dhara5), cannot be said to b .....

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y due and payable by the assessee-dealer, on the specious plea that the respondents had failed to obtain Form-A from them. Such a contention has only to be noted to be rejected. A surety is considered a "favoured debtor" and his liability is strictissimi juris. (M.S. Anirudhan v. The Thomcos Bank Ltd. [AIR 1963 SC 746 = (1963) Supp 1 SCR 63]). A surety is bound to the letter of his engagement. Beyond the proper interpretation of that engagement, there can be no hold upon him. He receiv .....

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the surety. (Nagappa Naik3; Pannaji Devchand v. Basappa Virappa [AIR 1943 Bom 243 = 45 Bom L R 510]). The rule that a security bond must be strictly construed according to its own terms is certainly true where there is no ambiguity in the terms but, where there is a contradiction in terms, Section 95 of the Evidence Act allows a reference to antecedent circumstances. (Jiban Krishna Mukherjee4; Mohendranath v. Satish Chandra [AIR 1934 Calcutta 569] ). The terms of the surety bond, whenever there .....

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reading of the Bond in the light of the surrounding circumstance, the Court considers that the contingency in which the security is sought to be availed of falls reasonably within the language of the condition which is sufficiently wide to comprehend it, there is no rule compelling the Court to adopt the stricter of the two constructions to both of which the language may be susceptible. (Jiban Krishna Mukherjee4; Elaya Pillai v. Muhammad Ibrahim Sahib [AIR 1948 Mad 302]). The surety furnished by .....

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he Government, she would pay the same; and the surety bond was executed and filed by her voluntarily. While a surety can only be bound by the letter of his/her engagement (i.e the letter of surety furnished by him/her), the surety bond, in the present case, makes no reference to the estimated tax, and refers only to the petitioner having voluntarily agreed to pay the tax dues to the Government in case her son defaulted in payment. It is also evident from the counter affidavit filed by the respon .....

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rnover referred to in the Form D application filed on behalf of the dealer. Dr. S.R.R. Viswanath, Learned Counsel for the petitioner, would submit that the security required to be furnished under Rule 28(8), not exceeding an amount equal to the tax payable under the Act for the year as estimated by the authority, is with reference to the estimated net turnover in Form A, and not the estimated total turnover in Form D. He would seek to distinguish between the estimated total turnover, and the est .....

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ver. (Guduthur Thimmappa and Son v. The State of Andhra Pradesh [(1964) 15 STC 299 (A.P)]). As noted hereinabove what is referred to in column 19 of Form D (application for registration) is the estimated total turnover, and the said Form neither makes any reference nor does it separately provide for details being furnished of the estimated turnover as distinct from the estimated total turnover. It is evident, therefore, that the estimated turnover, as referred to in Rule 28(8), is the estimated .....

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rnover as stated by the assessee should form the basis of recovery of the tax due from the surety, is only to be noted to be rejected. If the said net turnover was to form the basis then the assessee, having paid the tax thereon of ₹ 64,791/-, would not be liable to pay any other amount, and consequently no tax would remain due to be recovered from the surety. We are satisfied that the tax payable on the net turnover, as determined by the assessing authority, would form the basis of its re .....

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submission of Sri P.Balaji Verma, learned Special Standing Counsel for Commercial Taxes, were to merit acceptance, the registering authority was required to have estimated the amount of tax payable under the Act for a year; and to have called upon the petitioner to produce a surety for the said sum. Neither has any such exercise been undertaken by the registering authority nor has any material been produced before this Court to show that the petitioner was required to furnish a surety for the e .....

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petitioner of his liability as a surety to pay the said amount, we see no reason to delve on this aspect any further as Sri S.Krishna Murthy, learned counsel for the petitioner, has fairly stated that the liability of the surety is for the tax due and payable by the defaulting dealer for the assessment year 1994- 95. Leaving it open to the respondent to recover the tax due, if any, of the defaulting dealer, for the assessment year 1994-95, from the petitioner herein the distraint orders are set .....

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