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Masitullah Khan and ors. Vs. the Collector and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case Number Civil Misc. Writ No. 1417 of 1968
Judge
Reported in[1969]23STC106(All)
AppellantMasitullah Khan and ors.
RespondentThe Collector and ors.
Appellant Advocate Hari Swarup, Adv.
Respondent Advocate The Standing Counsel
DispositionPetition allowed
Excerpt:
.....well founded. 6. a plain reading of these provisions shows that a notice of demand has to be served upon the person liable to pay the tax and on his failure to pay the amount within the time and in the manner specified in the notice of demand, he becomes a defaulter and can be proceeded against under sub-section (8) of section 8. the petitioners were of course liable to pay the arrears of sales tax due from their late father under section 7-c of the act, but in order to launch recovery proceedings against them, it was necessary that they should have been served with a notice of demand calling upon them to pay the arrears within the time and the manner to be specified in the notice of demand. there a certificate was forwarded to the collector under section 46(2) of the income-tax act,..........of demand had been served upon them, they could not be treated as defaulters and consequently, no recovery proceedings could be commenced against them nor could they be made liable to pay any interest.4. this submission of mr. hari swarup, the learned counsel for the petitioners, appears to be well founded. section 8 of the u.p. sales tax act (hereinafter referred to as the 'act') deals with the demand and recovery of tax and sub-section (1) of section 8 reads thus :the tax assessed under this act shall be paid in such manner and in such instalments, if any, and within such time, not being less than 15 days from the date of service of the notice of assessment and demand, as may be specified in the notice. in default of such payment, the whole of the amount then remaining due shall.....
Judgment:

R.L. Gulati, J.

1. This petition under Article 226 of the Constitution arises out of the proceedings for the recovery of the arrears of sales tax.

2. One Abdul Majid Khan was assessed under the U.P. Sales Tax Act for the assessment years 1952-53, 1953-54 and 1954-55 resulting in a total demand of sales tax in the sum of Rs. 4,617.40 The tax was not paid by Abdul Majid Khan and in 1957 he died. The present petitioners are his three sons. Their complaint is that without any prior notice to them, proceedings for the recovery of the arrears of tax due from their late father were commenced against them and on 15th March, 1968, a sale proclamation was issued by the Sub-Divisional Officer, Shahjahanpur, acting on behalf of the Collector under the U.P. Zamindari Abolition and Land Reforms Act for the sale of their house situated in Deoria and their certain zamindari plots situated in the same village. The sale proclamation stated that the property was to be sold for the recovery of a sum of Rs. 4,617.40 being the sales tax plus interest thereon. According to the petitioners, 15th April, 1968, was the date fixed for the auction of their properties and on that date, they deposited a sum of Rs. 4,648.96 which was the amount of sales tax originally due from their late father. But so far as the demand for interest was concerned, they objected to the payment of the same. On their objection, the Sales Tax Officer postponed the sale by 5 days but did not finally decide their objection. The petitioners go on to state that they tried to contact the Sales Tax Authorities, but neither the Sales Tax Officer nor the Assistant Sales Tax Officer was available as they were reported to be busy in survey work which was to last till 23rd April, 1968. In these circumstances, the petitioners served a copy of the writ petition on the Standing Counsel on the 22nd of April, 1968, and moved the same before this Court on the 8th May, 1968, when an interim order of stay was granted to them.

3. The main submission of the petitioners is that as no notice of demand had been served upon them, they could not be treated as defaulters and consequently, no recovery proceedings could be commenced against them nor could they be made liable to pay any interest.

4. This submission of Mr. Hari Swarup, the learned counsel for the petitioners, appears to be well founded. Section 8 of the U.P. Sales Tax Act (hereinafter referred to as the 'Act') deals with the demand and recovery of tax and Sub-section (1) of Section 8 reads thus :

The tax assessed under this Act shall be paid in such manner and in such instalments, if any, and within such time, not being less than 15 days from the date of service of the notice of assessment and demand, as may be specified in the notice. In default of such payment, the whole of the amount then remaining due shall become recoverable in accordance with Sub-section (8).

5. Sub-section (8) of Section 8 stipulates :

Any tax or other dues payable to the State Government under this Act...shall be recoverable as arrears of land revenue.

6. A plain reading of these provisions shows that a notice of demand has to be served upon the person liable to pay the tax and on his failure to pay the amount within the time and in the manner specified in the notice of demand, he becomes a defaulter and can be proceeded against under Sub-section (8) of Section 8. The petitioners were of course liable to pay the arrears of sales tax due from their late father under Section 7-C of the Act, but in order to launch recovery proceedings against them, it was necessary that they should have been served with a notice of demand calling upon them to pay the arrears within the time and the manner to be specified in the notice of demand. This not having been done in the case of the petitioners, they could not be treated as defaulters and consequently, no recovery proceedings could be instituted against them.

7. In Income-tax Officer v. Seghu Buchiah Setty [1964] 52 I.T.R. 538, a similar point arose before the Supreme Court in an income-tax matter. There a certificate was forwarded to the Collector under Section 46(2) of the Income-tax Act, 1922, for the recovery of the tax as arrears of land revenue after the assessee had failed to pay the tax in respect of which a notice under Section 29 had been served upon him. Thereafter the amount of tax was substantially reduced by the Appellate Income-tax Commissioner, and the Income-tax Officer informed the assessee of the reduced tax liability and called upon him to pay the reduced amount. No fresh notice of demand was however issued. The recovery proceedings were challenged by the assessee and were quashed by the Mysore High Court on the ground that in the absence of a fresh notice of demand, the recovery proceedings were unauthorised. On appeal the Supreme Court held that the amount of tax having been reduced as a result of the order of the Appellate Commissioner, a fresh notice of demand had to be served upon the assessee before he could be treated as a defaulter and the recovery proceedings initiated against him had been rightly quashed.

8. The instant case is on a much stronger footing. The tax had not been originally assessed against the petitioners and no notice of demand had therefore been served upon them. As the legal representatives of their late father, the petitioners are, of course, liable to pay the tax under Section 7-C of the Act, but in order to enforce that liability and to recover the same as arrears of land revenue, it was necessary that they should have been served with a notice of demand as required by Section 8(1) of the Act. It is only after they had failed to comply with the terms of the notice of demand that the recovery proceedings could be instituted against them under Section 8(8) of the Act.

9. As regards the levy and realisation of interest, the position is the same. Interest can only be levied against defaulters. Section 8(1-A) was inserted in the U.P. Sales Tax Act in the year 1964 and it provides that interest at the rate of 18 per cent, shall be charged from a defaulter if the tax remains unpaid after the expiry of the time mentioned in the notice of assessment and demand or the commencement of the U.P. Bikri-Kar (Dwitiya Sanshodhan) Adhiniyam whichever is later. Obviously it is only a defaulter who is liable to pay interest and a person cannot be held to be a defaulter unless a notice of demand for the payment of the sales tax is first served upon him and he commits a default thereof.

10. Admittedly no notice of demand as required by Section 8(1) of the Act had been served upon the petitioners. As such the recovery proceedings launched against them are unauthorised.

11. The result is that this writ petition must succeed. A writ of certiorari shall issue quashing the recovery proceedings pending against the petitioners for the recovery of interest. The petitioners are entitled to their costs from the respondents.


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