P.A. AZEEZ Versus THE STATE TAX OFFICER STATE GOODS AND SERVICE TAXES, PERUMBAVOOR, THE ASSISTANT COMMISSIONER OF STATE TAX, MUVATTUPUZHA, THE COMMISSIONER OF STATE TAX, THIRUVANANTHAPURAM, THE DEPUTY TAHSILDAR, MUVATTUPUZHA, THE VILLAGE OFFICER MULAVUR, MUVATTUPUZHA AND SRI. C.E. ALI, PERUMBAVOOR
VAT and Sales Tax
2018 (11) TMI 716 – KERALA HIGH COURT – TMI
KERALA HIGH COURT – HC
Dated:- 7-11-2018
WP (C).No. 29251 of 2018
CST, VAT & Sales Tax
MR DAMA SESHADRI NAIDU, J.
For The Petitioner : ADVS. AJI V.DEV SRI.ALAN PRIYADARSHI DEV SRI.M.G.SHAJI SMT.O.A.NURIYA
For The Respondent : ADV. GOVERNMENT PLEADER
JUDGMENT
The sixth respondent, C.E. Ali, is a dealer under the KVAT Act. For the tax dues he owed to the Department, he had to execute a bond with two sureties, under Section 17 of the Act read with Rule 19. Indeed, on 08.04.2011 Ali executed a bond with P.A. Azeez, the petitioner, and Kathiru Pilla, as the two sureties. Later, Kathiru Pilla wanted to withdra
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ds that the bond, as the proforma mandates, requires two sureties. If one surety withdraws, the bond becomes void. Here, Kathiru Pilla withdrew. In the alternative, he submits that the Department had a new bond executed by Ali with two other sureties. The Department, in fact, substituted that for the old one, in which Azeez alone remained a surety, if at all. Therefore, looked from either perspective, the Department's demand, Sri Dev concludes, cannot be sustained.
4. Dr. Thushara James, the learned Government Pleader, however, defends the Departmental action. First, she maintains that the bond the Department secured from Ali and two other sureties in 2014 was to answer the additional demand against Ali. She has, next, contended that Kathiru Pilla alone withdrew; and on his request, the dealer himself applied to the Department to discharge that surety from the liability, under Rule 19(4) of the Rules.
5. Dr. James accepts that Azeez, too, requested the authorities to discharge hi
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ility, by providing another bond.
8. In this context I may examine Rule 19, which reads:
“19. Security to be furnished by certain dealers:- (1) Where the registering authority decides to demand security or additional security under Section 17, it may direct the dealer, in writing, to furnish, within a period, which shall not be less than fifteen days, as may be fixed by the said authority, security for such amount as may be specified in the notice in Form No.6D. In making the estimate of turnover for the purpose of fixing the quantum of security, the said authority shall take into account the taxable turnover of the dealer, if any, during the preceding year, the trend of business at the time the estimate is made, the nature of the goods dealt in by him, and such other factors as may, in the opinion of the said authority, assist it in making a proper estimate. No security shall, however, be demanded from a dealer who applies for registration as a dealer under sub-section (5) of Secti
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ys furnish fresh security in any of the manner specified under sub-rule (2) for the amount of the bond and the withdrawal shall be operative from the date on which such fresh security is furnished. . . . ”
(italics supplied)
9. Rule 19(2)(d) mandates that the bond should be in Form No.6 and that two sureties should sign it. If only one surety withdraws, then the bond remains with a single surety, though the Rule mandates it should contain two sureties. As seen from sub-rule (4), it does not provide for substitution of sureties. It only provides for the substitution of the bond, as one of many alternatives. In other words, even a single surety's withdrawal renders the bond unenforceable. So the dealer must execute, if he wants the same arrangement to continue, a new bond with two sureties-one of them could be the one that has not opted out of the first bond, however.
10. In this case, the first bond has become unenforceable. If the Department's plea is to be accepted-that is,
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