JAGANNATH DUDADHAR Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) In this writ petition under Article 226 of the Constitution of India, 1950 (in . short "the Constitution") prayer is for quashing the proceedings initiated as per show cause notices dated 9/07/1999 and 5/11/1999, issued by the Sales Tax Officer-Respondent No. 2 and Sales Tax Officer (Enforcement)-Respondent No. 3 and penalty notice dated 12/11/1999 purported to have been issued under Section 56 of the Delhi Sales Tax Act, 1975 (in short the Act).

(2.) Factual position which is almost undisputed presents 'some novel features, Petitioner is a dealer registered under the Act. Its business premises were surveyed by the Officials of Enforcement Branch on 14/05/1999. Investigating officers were of the prima facie view that sales have been shown to alleged registered dealers who were non-existent. Sales in respect of one M/s. Pratham International of Ward No. 73 were subjected to further scrutiny and it was noticed that the registration certificate of the said concern had been cancelled earlier. But in the return filed for the quarter ending 30/06/1999, claim for sales to the registered dealers as made by petitioner included purported sales amounting to Rs.5,58,42,267.00 made to the aforesaid Pratham International, in respect of which one ST-35 form bearing No:05AA-556655 was obtained. As investigation revealed that petitioner had claimed sales to a concern which had already surrendered the registration certificate for cancellation; and which in fact . had been cancelled with effect from 1/09/1997, the ST-35 form was tampered with. The form according to the authorities was issued on 1/04/1998 for utilisation against purchases for the year 1995-96. An FIR was lodged with the police alleging commission of the offence of cheating by filing incorrect particulars in the return. Initially notice under Section 56 was issued on 12/11/1999 and the petitioner submitted its reply on 15/11/1999 pointing out that proceedings under Section 56 were misconceived in the absence of any proceedings for assessment. Subsequently, on 22/11/1999 after the FIR was registered, an application is stated to have been filed by the petitioner accepting to pay tax of Rs.61,42,650.00 on the turnover with the aforesaid Pratham International. While the petitioner makes a grievance that the application was obtained on a threat of prosecution, according to Revenue this was voluntarily submitted and prayer, inter alia, in the application was for grant of instalments, after making deposit of first amount, for the remaining part of the aforesaid amount. After the petitioner made first payment and gave post dated cheques for the remaining amounts. Sales Tax Officer made a request to the Deputy Commissioner of Police to keep the FIR in hold until further advice. At this stage petitioner came before this Court. By order dated 19th January, 2000 it was directed in CM No. 14280/99 that respondents will not encash any further cheques out of the cheques which were issued by the petitioner on 24/11/1999 and which were still lying un-encashed. Nevertheless some cheques have been encashed. Learned counsel for the petitioner submitted that the entire action is mala fide, vitiated and in any event not sanctioned by any provisions of law. Learned counsel for the Revenue on the other hand submitted that looking at the conduct of the petitioner, the authorities rather took a liberal view in keeping the FIR in hold and in fact part payment was made on the amount of tax relatable to the ST-35 form obtained from M/s. Pratham International, after petitioner voluntarily made an offer to pay on becoming aware of the fact that the fraud and manipulation done have been discovered.

(3.) We shall first deal with the question whether action under Section 56 which was initiated could be so taken. The aforesaid provision reads as under: