IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM WEDNESDAY, THE 17TH FEBRUARY 2010 / 28TH MAGHA 1931 WP(C).No. 29220 of 2009(V) ---------------------------------------- PETITIONER(S): ----------------------- SITARAM MOTORS, TUDA ROAD, THIRUVAMPADY PO, THRISSUR-22. REPRESENTED BY ITS PARTNER T.S.SITARAM. BY ADV. MR.A.KUMAR RESPONDENT(S): ------------------------ 1. THE ASST.COMMISSIONER(ASSMT), SPECIAL CIRCLE, COMMERCIAL TAXES, THRISSUR. 2. THE INSPECTING ASST.COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, THRISSUR. 3. THE AXIS BANK LIMITED, ROUND WEST, CITY CENTRE, THRISSUR. R1 & R2 BY GOVERNMENT PLEADER MR.C.K. GOVINDAN. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 03/11/2009, THE COURT ON 17/02/2010 DELIVERED THE FOLLOWING: rs. C.K.ABDUL REHIM,J. -------------------------------------------- WP(C).29220 of 2009 --------------------------------------------- Dated this the 17th day of February, 2010. JUDGMENT Challenge in this writ petition is against demand made for levy of 'collection charges' at the rate of 7.5% on the arrears of sales tax due from the petitioner, which was sought to be recovered by recourse to proceedings under the Kerala Revenue Recovery Act 1968 (for short the Act). Through Ext.P2 notice issued under Section 7 of the said Act, the 2nd respondent initiated steps for recovery of an amount of Rs.48,97,128/- being arrears of sales tax due with respect to the assessment years 2008-09 and 2009-2010. In Ext.P2 demand notice it is specified that the amount shall be payable along with future interest @ 1% per month, notice charges at Rs.2/- and collection charges of 7.5%. According to the petitioner, the entire amount of arrears of sales tax demanded through Ext.P2 notice was paid by the petitioner directly to the assessing authority, the first respondent herein, through Demand Drafts drawn on different dates, as evidenced from Ext.P1 letter. Since the arrears of tax WPC.29220/2009 2 was paid directly to the first respondent, who is the requisitioning authority, the petitioner is not liable for payment of any 'collection charges', is the contention. It is stated that for recovery of 'collection charges' the 2nd respondent had attached the Bank Account of the petitioner and the petitioner was compelled to submit two Demand Drafts totalling to an amount of Rs.9,95,949/- towards payment of collection charges, in order to resume operation in the Bank Account. The petitioner inter alia seeks direction to the 2nd respondent not to encash those Demand Drafts. 2. This court by an interim order dated 16.10.2009 directed the respondents not to encash the demand drafts entrusted by the petitioner towards 'collection charges' and directed revocation of the attachment effected with respect to the Bank Account operations. The demand drafts in question are now kept in the custody of the 2nd respondent. 3. In a statement filed on behalf of respondents 1 and 2, it is contended that the petitioner had remitted arrears of sales tax only after issuing demand notice under the provisions of the said Act, as evidenced from Ext.P2 and other notices. It is further WPC.29220/2009 3 contended that those demand drafts were handed over to the 2nd respondent and the 2nd respondent only transferred those demand drafts to the requisitioning authority, i.e. first respondent herein. Therefore it is contended that remittances are made only under the Revenue Recovery Act, after receipt of the demand notices. Therefore the demand and levy of 'collection charges' is perfectly justified, is the contention. 4. The liability for payment of 'collection charges', 'service charges' and 'cost', with respect to the revenue recovery proceedings is by virtue of Rules 4 and 5 of the Kerala Revenue Recovery Rules 1968. In the decision in Bhaskaran vs. Sub Registrar (2005(3) KLT 150) a learned judge of this court observed that if amounts payable to the institutions are directly paid by the defaulter, there is no question of collection of arrears by resorting to revenue recovery proceedings. In such an event the defaulter is not liable to pay collection charges. Realisation of collection charges in such event would be not only unjust but also unrealistic. In the case of Pullangode Rubber and Products Company Limited vs. Inspecting Assistant Commissioner (2008(1) KLT 752) another learned Single Judge of this court WPC.29220/2009 4 observed that levy of collection charges under Rule 5 is available only in cases where amounts are sought to be recovered by recourse to the provisions of the Revenue Recovery Act on behalf of the institutions either notified under section 71 of the Revenue Recovery Act or otherwise enabled or empowered. When the provisions under the Kerala Revenue Recovery Act are invoked for the purpose of recovering amounts which are due to the Government by way of statutory levy, the recovery is not effected on behalf of any such institution and the collection charges contemplated under Rule 5 is not leviable. Recently a Division Bench of this court in Malabar Organics vs. State of Kerala (2009 (4) KLT 328) held that item (viii) in the table appended to Rule 4, which pertains to 'collection charges' and Rule 5(1) of the said rules enabling levy of 'collection charges', are unreasonable and discriminatory and ultravires to the parent Act and the Constitution of India. In the said decision it is further held that even service charges @ 1% leviable with respect to recovery of amounts due to institutions notified under section 71 of the Act is possible only in cases where process of recovery under the provisions of the Act is taken by recourse to coercive WPC.29220/2009 5 steps, and that such levy is not permissible in other cases. 5. On analysing facts and circumstances of the case at hand in view of the dictum laid down in the decisions cited above, it is evident that, amounts sought to be recovered from the petitioner was tax due to the Government and not an amount due to any other institutions which is notified under section 71 of the Act. Further it is evident that the arrears with respect to which the proceedings was initiated was paid by way of demand drafts drawn in favour of the assessing authority, i.e. the requisitioning authority. Therefore it is clear and evident that levy of 'collection charges' is totally unsustainable. 6. In view of the above findings I hold that the petitioner is not liable for payment of any 'collection charges' or 'service charges' apart from levy of cost if any incurred which are permissible under item (i) to (vii) of the table appended to Rule 4. Since the respondents have no case of having been incurred of any such costs, I am of the opinion that the two demand drafts furnished by the petitioner towards payment of collection charges are liable to be returned, without prejudice to realisation of costs as mentioned above, if any incurred. WPC.29220/2009 6 7. The respondents are directed to return the two Demand Drafts submitted by the petitioner towards payment of collection charges, within a period of two weeks from the date of receipt of a copy of this judgment. C.K.ABDUL REHIM, JUDGE Pmn/