The Hindu Business Line : Tax should not be collected without assessment order: HC

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Chennai Feb. 13 The sales tax authorities in Tamil Nadu were not empowered to make any spot collection of taxes due from traders, the Madras High Court has ruled.

Any such collection without following formalities prescribed under the TN General Sales Tax Act, 1959, in the sense of collecting tax even without making any order of assessment, after giving adequate opportunity to the petitioner concerned, was clearly without jurisdiction, the First Bench held.

The petitioner-firm, SPM Constructions, Coimbatore, had contended that on October 5, 2005, its premises was inspected by Enforcement Wing (EW) Officials of the Department.

The firm was stated to have given a statement in writing that it had not obtained registration certificate and its accounts had not been properly kept.

The EW officials were stated to have collected a cheque for Rs 5,46,473 from the firm towards tax dues.

The cheque was subsequently dishonoured and consequently, the Department issued distraint order dated November 3, 2005 demanding a sum of Rs 5,46,913.

The petitioner/appellant submitted that the Assistant Commissioner (Enforcement) — first respondent — had no jurisdiction to direct any payment of taxes without even passing an order of assessment or demand thereof.

The first respondent was not the assessing authority and hence, demand of tax without any order of assessment or even a demand was arbitrary and illegal and without jurisdiction.

The Bench comprising Chief Justice Mr A.P. Shah and Mr Justice K. Chandru said they found considerable force in submission of the petitioner/appellant.

The writ petition was allowed and the Bench quashed impugned distraint order passed by the second respondent (Commercial Tax Officer, Coimbatore).

However, the Bench made it clear that this order would not preclude the Department from taking appropriate action against the petitioner in accordance with sales tax law.

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