Sri Murali Krishna Binny Modern Rice Mill vs Commercial Tax Officer and Another

S. Parvatha Rao, J.—This is again another writ petition where the petitioner questions the arbitrary, illegal and extortive demands made by the Commercial Tax Officer on the basis of instructions given by his superior, that is, Deputy Commissioner (Commercial Taxes).

The facts are self-explanatory. The petitioner is a registered dealer under the A.P. General Sales Tax Act, 1957 (for short, "the Act") and, it is stated, has been doing business since 1981. As and when necessary, on an application being made by the petitioner, the concerned sales tax authorities have been issuing books of way bills in the prescribed form on payment of requisite amount, which is Rs. 30 for every book of 50 way bills.

It is the case of the petitioner that on April 3, 1995, an application was made on its behalf for issue of 100 way bills, after making the requisite payment for the same. The first respondent, i.e., the Commercial Tax Officer, Jadcherla, Mahabubnagar, issued only one book containing 50 way bills on April 3, 1995, stating that the remaining 50 way bills would be issued after the 50 way bills issued were exhausted. It is stated that the petitioner approached the first respondent on November 9, 1995, for the issue of remaining 50 way bills. As there was no response, on November 21, 1995, once again a request was made on behalf of the petitioner for the for the issue of a fresh book of 50 way bills. As that was also of no avail, the petitioner has approached this Court by way of the present writ petition on December 14, 1995 for a writ of mandamus "declaring the action of the respondent in not issuing way bills even after receipt of requisite fee, as arbitrary and illegal and consequently direct the respondent to issue way bills".

Notice before admission was directed in this writ petition on December 15, 1995. The Commercial Tax Officer, Jadcherla (first respondent) gave his counter-affidavit dated December 18, 1995, in reply to the writ petition. He states that the petitioner gave an application on January 31, 1995, intimating him about the loss of 40 way bills and that pursuant to the said intimation, his department gave wide publicity to all assessing authorities in the State and also the check-posts about the loss of way bills with a view to see that those lost way bills were not misused by anybody to defraud the Revenue and that similar wide publicity was also given by the Deputy Commissioner (C.T.), Nalgonda on May 29, 1995. He further states that on April 3, 1995, the petitioner applied for 100 way bills duly depositing the requisite fee of Rs. 60 and that only 50 way bills were issued with instructions that the balance of 50 way bills would be issued after those were exhausted. He then states that the Deputy Commissioner (C.T.), Nalgonda, instructed him "to collect tax and penalty through her letter dated June 15, 1995, on the lost way bills from the petitioner" and that pursuant to the said letter, the petitioner was asked to pay tax and penalty on the lost way bills - which loss was reported on January 31, 1995. He further states that the petitioner voluntarily gave a cheque dated July 13, 1995, for Rs. 64,000 "towards the tax at the rate of Rs. 40,000 turnover for each way bill"; but that when the cheque was presented to the bank, it was returned on the ground that the petitioner stopped payment of that cheque and that thereafter he issued notice dated October 10, 1995 to the petitioner informing the Deputy Commissioner (C.T.), Nalgonda - second respondent, of the same and that the petitioner received that notice on October 19, 1995. He then states as follows :

"Having received the notice, the petitioner did not take any steps either to pay the estimated amount of tax or furnish security for the lost way bills. It is submitted that on November 9, 1995 and November 21, 1995, the petitioner filed letters requesting me to issue the balance way bills applied for on April 3, 1995. On November 21, 1995, the petitioner was orally informed to file indemnity bond and surety as laid down under rule 45(7A)(v) of the Andhra Pradesh General Sales Tax Rules for the tax involved in the lost way bills. The petitioner did not furnish the same."

He further adds that in spite of oral instructions on November 21, 1995 to furnish security by way of indemnity bond, the petitioner did not comply with the said instructions and that "unless some deterrent action is taken in such cases, it will be very difficult to control the clandestine activity of the traders in using the way bills."

On behalf of the petitioner, the proprietor gave reply affidavit dated December 20, 1995. He states that after he reported the loss of 40 way bills on January 31, 1995 to the Commercial Tax Officer, Jadcherla, the latter issued a fresh book containing 50 way bills on January 31, 1995, itself and that he made use of the same. Obviously, thereafter, an application was once again made for the issuance of 100 way bills on April 3, 1995. He also states that on November 21, 1995, the first respondent never asked him to furnish any indemnity or any security. He further states that the lost way bills were valid for use only till March 31, 1995 and that it is not the case of the respondents that there had been any abuse of the lost way bills.

The proprietor, on behalf of the petitioner, also filed W.P.M.P. No. 35906 of 1995 for impleading the Deputy Commissioner (C.T.), Nalgonda Division as the second respondent, in view of the reliance placed by the first respondent on the letter dated June 15, 1995, said to have been addressed by her to the first respondent. On February 1, 1996, we allowed that W.P.M.P. and admitted the writ petition and granted time for counter-affidavit of the second respondent at the request of the learned Government Pleader for Taxes. In the counter-affidavit dated March 1, 1996, the second respondent states that generally there is evasion and avoidance of tax in Mahabubnagar district in commodities like paddy and rice, groundnuts and other oil seeds, etc., and that instructions are issued periodically in various review meetings conducted by the Commissioner of Commercial Taxes, to control and check the evasion of tax. She further states that in Mahabubnagar district itself four cases of misuse of way bills and loss of way bills came to her knowledge and in view of that she ordered inspection of rice mills. She then states as follows :

"To protect the Government revenue in this case, tax on the turnover of lost way bills is collected on the basis of previous way bills used by the petitioner. There is no mala fide intention by the inspecting staff in this regard, except to check and to curb the practice of loss of statutory forms like way bills.

Further I submit that in the instant case, the petitioner has lost the way bills and he has issued a cheque to the inspecting staff. The collection of tax is a bona fide action of the inspecting staff which is a normal practice prevailing in the State.

It is submitted that the action of the department is to safeguard and to protect the Government revenue. If such evasion is not checked and controlled in time, it is going to become a regular practice in trade. As it is 4 such cases in Mahabubnagar district are identified. Hence the collection of tax is a remedial action to safeguard and to protect the Revenue."

The learned Special Government Pleader for Taxes produced the record of the second respondent. It contains a note bearing Rc. No. 1 of 1995-96, dated June 15, 1995, addressed to the first respondent which reads as follows :

"The Commercial Tax Officer, Jadcherla, is hereby requested to collect the tax and penalty on the lost way bills by estimating turnover as per the records from M/s. Sri Murali Krishna Binny Modern Rice Mill, Shadnagar within (15) days from the date of receipt of this note and report the same."

The only question that arises is whether the respondents were justified in not issuing way bills on the ground that the sum of Rs. 64,000 demanded "towards the tax at the rate of Rs. 40,000 turnover for each way bill" was not paid by the petitioner by stopping the cheque said to have been voluntarily issued by the petitioner.

The learned counsel for the petitioner submits that the said demand has no authority of law and that the Act or any rule made thereunder does not provide for any such imposition. The learned Special Government Pleader for Taxes is unable to place before us any provision of law authorising the respondents to make the impugned demand. The respondents were given an opportunity and in their counter-affidavit they did not mention any provision in the Act or in the Rules made thereunder which enable them to make the demand. The power to tax is no doubt a facet of a sovereign power, but our Constitution imposes a salutary check on the executive by safeguarding under article 265 that "no tax shall be levied or collected except by authority of law". There can be no other way of levy or collection of tax. Protection of revenue by checking evasion is the solemn duty of the authorities under the Act but that has to be as provided under or sanctioned by law and not by methods conflicting with the law and cannot be by unauthorised impositions. Not centuries ago, rajahs, nawabs and zamindars used to fill their coffers by extortionate exactions from the people to meet their extravagant expenses. Our history is replete with instances of these. That cannot be now. The State can meet its expenses only by demands in accordance with law.

We, therefore, have to hold that the letter of the second respondent dated June 15, 1995, addressed to the first respondent is wholly misconceived and the imposition advised thereunder, i.e., "tax and penalty on the lost way bills" has no authority of law. It is wholly arbitrary, unauthorised and high-handed. This illegal act of unauthorised imposition is further compounded by the presentation of the cheque of Rs. 64,000 for collection and by issuance of notice dated October 10, 1995, by the first respondent to the petitioner. It is not the case of the respondents that anything has been found against the petitioner as regards evasion of tax so far as the lost way bills are concerned.

The learned Special Government Pleader refers to rule 45(4)(v) of the A.P. General Sales Tax Rules, 1957, which provides as follows :

"Where a way bill either blank or duly filled in is lost, the person who obtained the way bill forms printed under the authority of the Government or containing the signature and official seal of the assessing or registering authority as the case may be shall forthwith notify the loss in writing to the issuing authority and shall also by way of an indemnity bond furnish such reasonable security as may be demanded by such authority for each way bill lost."

Under this rule, the authorities concerned can only demand reasonable security by way of an indemnity bond for way bills lost. We may also state here that there is no rule like rule 45(7A)(v) referred to by the first respondent in his counter-affidavit. In the present case, it is not in dispute that the petitioner informed the first respondent immediately after the loss of 40 way bills. It is not the case of the first respondent that he demanded security by way of indemnity bond from the petitioner upon reporting of the loss by the petitioner. On the other hand, the proprietor of the petitioner states in the reply affidavit dated December 20, 1995, that after the loss of 40 way bills was reported, he was issued a fresh book containing 50 way bills on January 31, 1995, itself and that he made use of the same. It is also an admitted fact that even thereafter, on an application made by the petitioner on April 3, 1995, for the issuance of 100 way bills, the first respondent issued to the petitioner a book containing 50 way bills. It is not the case of the first respondent that at that time any demand of security by way of indemnity bond was made. We fail to understand how the respondents can make an oral demand for furnishing of security long afterwards when nothing has been found against the petitioner as regards any abuse or misuse of any way bill. It would have been a different matter if any such was found. We also notice that under rule 45(4)(vi) "any dealer giving an incorrect and untrue declaration shall be deemed to have committed an offence under clause (c) of sub-section (3) of section 30 of the Act" and prosecution can be initiated thereunder.

It is stated that after notice before admission in this writ petition the petitioner has been issued a fresh book of 50 way bills on December 24, 1995. The petitioner exhausted by November 18, 1995 the way bills issued to it earlier. In the circumstances, no further orders are necessary in the present writ petition for issuance of way bills.

However, in view of the stand taken by the respondents in vehemently seeking to justify their action in making the demand of Rs. 64,000 towards the estimated "tax and penalty on the lost way bills" we are impelled to impose costs while disposing of this writ petition. We direct both the respondents to pay Rs. 500 each to the petitioner within three weeks from today. The learned Special Government Pleader for Taxes shall inform the respondents of this direction.

The writ petition is accordingly disposed of with costs as above.

The Commissioner of Commercial Taxes, Andhra Pradesh, is directed to circulate copies of this order to all the Deputy Commissioners (Commercial Taxes) in all divisions in the State and also to all the Commercial Tax Officers working under them.