Madras High Court
Hotel Blue Nile vs State Of Tamil Nadu And Others on 14 September, 1992
JUDGMENT Bakthavatsalam, J.
1. The writ petition is for the issue of a writ of mandamus directing the respondents 2 and 3 to refund the amount of Rs. 37,577 compulsorily collected by cheque No. 440192, dated September 3, 1992 drawn on Indian Bank, Teynampet Branch, and cash of Rs. 1,000 compulsorily collected towards compounding fee on September 3, 1992.
2. The petitioner, an assessee on the file of the Commercial Tax officer, Tambaram I Assessment Circle, has been assessed to sales tax under the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981, for the years 1988-89, 1989-90 and 1990-91. As per G.O.Ms. No. 111, dated March 6, 1982, the minimum turnover was fixed as Rs. 3,00,000 instead of Rs. 18,00,000 and 25 thousand per annum, for the purpose of taxation. It appears that the petitioner has submitted an application for classification as star hotel in 1989 and the same is pending with the respondents, In the meanwhile the petitioner had effected catering service ever since 1989, but the total and taxable turnover never reached the taxable minimum and hence the petitioner had not filed any return and paid any sales tax. The effecting of catering service in the petitioner-hotel, cannot be held to be sales in accordance with the provisions of section 2(n) of the Tamil Nadu General Sales Tax Act, 1959.
While so, the petitioner's hotel premises was inspected on September 3, 1992 by the 2nd respondent and held that the petitioner had committed an offence of failure to maintain true and complete accounts for the year 1992-93 and found that no accounts were maintained in the business premises and the petitioner had not submitted monthly returns and paid the sales tax due. On the basis of the inspection conducted by the 2nd respondent, a compounding notice dated September 3, 1992 and a compounding order dated September 3, 1992 were issued to the petitioner insisting on the payment of Rs. 37,577 by cheque and Rs. 1,000 by cash. According to the petitioner, no proper opportunity was given to the petitioner to put forth his case and the collection of Rs. 37,577 by the cheque and Rs. 1,000 by cash is without authority of law and against the principles of natural justice. As against the said demand and collection, the petitioner made a representation on September 4, 1992, to the higher authorities. When the matter stood thus, the petitioner has filed the above writ petition with the said prayer.
3. When the writ petition came up for admission, the learned Government Advocate, Mr. A. K. Gopinath, appeared for the State with instruction along with records. According to the learned Government Advocate, since the petitioner had violated the mandatory provisions of section 40(2)(a) as well as rule 18(1-B), a case was registered under section 45(2)(cc) of the Tamil nadu General Sales Tax Act, 1959 and a show cause notice was also issued to the person in-charge at the place of business, who gave his consent for compounding the offence departmentally and paid Rs. 1,000 by way of cash. It is not correct to state that the compounding fee was collected from the petitioner compulsorily. Though the inspection was made on September 3, 1992, the petitioner issued the cheque for Rs. 37,577 only on the next day, i.e., on September 4, 1992 and no spot collection was made as alleged by the petitioner.
4. The learned counsel for the petitioner strenuously contended that the compounding fee of Rs. 1,000 and a cheque for Rs. 37,577 were collected from the petitioner's business premises by the 2nd respondent compulsorily after getting signature from the person who was in-charge of the business premises at the time of inspection on September 3, 1992 and even if there is any violations of the Rules the authorities are expected to follow the procedure prescribed under the Act and it is not open to the 2nd respondent to waive the procedure especially when the petitioner was not present at the time of inspection. Per contra, the learned Government Advocate further contended that on the date of inspection on September 3, 1992, it was found that there was a total turnover of Rs. 3,00,000 for the month of June, 1992, itself and thereafter on the basis of the verification of records available at the premises, the person in-charge of the business has voluntarily accepted to pay the compounding fee of Rs. 1,000 and to issue a cheque for Rs. 37,577 and the cheque was issued only on the next day of the inspection, and therefore, there is nothing illegal or wrong committed by the 2nd respondent.
5. Heard the learned counsel for the petitioner and the learned Government Advocate (Taxes) and perused the instructions placed by the learned Government Advocate. Admittedly the 2nd respondent made an inspection on September 3, 1992, in the business premises of the petitioner and a statement was obtained from the person who was in-charge of the business on the date of inspection. It is seen from the affidavit that the person in-charge on the date of inspection informed the 2nd respondent that the account books were with the accountant who was not available and therefore the same could not be made available to the 2nd respondent. It is also further seen that the sales turnover for the first five months during the assessment year 1992-93 was Rs. 6,26,273, i.e., from April to August 1992. Though it is contended by the learned Government Advocate (Taxes) that the petitioner's representative one Mr. Ravikumar paid the compounding fee of Rs. 1,000 voluntarily and a cheque for Rs. 37,577 also on the next days, the letters dated September 4, 1992, September 5, 1992 and September 7, 1992 by the petitioner to the respondents would clearly show that there was some protest by the petitioner in paying the compounding fee of Rs. 1,000 and in issuing the cheque for Rs. 37,577, and no show cause notice had been issued to the petitioner as to the alleged violation of the provisions of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981, before collecting the compounding fee of Rs. 1,000 and before collecting the cheque for Rs. 37,577 on the date of inspection. Therefore, it cannot be said that the petitioner made the payment of compounding fee of Rs. 1,000 and issued the cheque for Rs. 37,577 voluntarily. Even assuming that the petitioner paid the compounding fee voluntarily, it is not open to the respondents to collect the same without issuing any show cause notice and without holding proper enquiry into the whole issue. It is not as if the proprietor of the petitioner-hotel was present at the time of inspection and he volunteered to pay the compounding fee. The whole inspection and collection of compounding fee had been done in the absence of the proprietor of the petitioner-hotel and that too without issuing any show cause notice for the alleged violation of the provisions of the Act.
6. From a perusal of the relevant Rules framed under the Tamil Nadu Tax to Luxuries in Hotels and Lodging Houses Act, 1981 and under the Tamil Nadu General Sales Tax Act, 1959, I do not see any authority vested with the 2nd respondent or any officers of the respondents to collect the tax on the spot without holding proper enquiry and without issuing any show cause notice, even assuming that there is any violation of non-filing of the returns. It may be that the petitioner had not filed its returns in time and there may be liability on the part of the petitioner to pay sales tax. But that does not mean that the 2nd respondent can enter into the premises of the petitioner, that too in the absence of the proprietor of the petitioner-hotel and collect the compounding fee without issuing any show cause notice for any violation of the Act by recording a statement from the person who was just present in the business premises of the petitioner. Therefore it is not open to the respondents to waive the procedure contemplated under the Act in such matters. In my view, the collection of the compounding fee of Rs. 1,000 by cash and tax of Rs. 37,577 by way of cheque form the person in-charge of the petitioner's business premises, is without any authority of law. Nowadays every assessee is aware of his rights under the Tamil Nadu General Sales Tax Act. Even assuming that the petitioner had not filed his returns in time, though his taxable turnover exceeded the minimum level, such a spot collection of compounding fee and tax has to be condemned and the department cannot resort to such practice, even though there is any violation of the provisions of the Act. It is not as if the petitioner alone is avoiding to pay tax and there are many number of assessees still, who are not filing their returns in time, even though their turnover exceeds the minimum, making them liable to pay tax. In all such matters, the authorities are expected to follow the procedure contemplated under the Act and the Rules framed thereunder.
7. In this case, the tax liability of the petitioner has not yet been decided at all. With regard to the tax liability on the sale of food and drinks in restaurants, the matter is still pending in the Apex Court. In such circumstances, the action of the 2nd respondent has to be condemned and it seems the attitude on the part of the 2nd respondent in this case is over-enthusiastic and to reach the target fixed by the department. This sort of attitude should be condemned and the Commissioner of Commercial Taxes should see that his subordinate officers are not indulging in such practice under the guise of collecting sales tax. Therefore I direct the respondents to refund the sum of Rs. 1,000 collected from the petitioner as compounding fee and Rs. 37,577 by way of cheque towards tax, on production of a copy of this order forthwith. It is open to them to take any proceeding according to law. I do hope that the officers of the respondents will behave better at least in future and therefore I am not awarding any costs in this case. The writ petition is ordered accordingly. No costs.
8. Writ petition allowed.