2014 (8) TMI 189 - HC - VAT and Sales Tax

Seizure of bank accounts - Non filing of returns - Deduction of cost of the land from the turnover of sale - Held that - respondents have also attached as many as 33 flats, which the counsel for the petitioner stated on instructions, are fully constructed. He further stated that such flats are neither sold, nor assigned or booked by any customer. Such properties are also otherwise free from any encumbrance. No bank loan or any other borrowing is made against such flats. In other words, these flats have a clear marketable title, which vests in the petitioner. 17 of these flats have constructed area of 575 sq. mtrs, 16 of these flats have constructed area of 790 sq. mtrs. If we adopt an average price of these flats at ₹ 12 lakhs each, the total value of such flats comes of ₹ 3.96 crores (to be rounded of to ₹ 4 crores). According to the respondents, possible tax and penalty liability could be ₹ 4.58 crores. Bank accounts to be released conditionally - Decided partly in favour of assessee.

Summary

Issues:
1. Provisional attachment of bank accounts under Section 44 of the Gujarat Value Added Tax Act, 2003.
2. Dispute regarding deduction of land cost from the turnover of sale.

Issue 1: Provisional Attachment of Bank Accounts
The petitioner challenged an order where their bank accounts were frozen by the Commercial Tax Officer under Section 44 of the Gujarat Value Added Tax Act, 2003. The respondent ordered the attachment to protect the Government revenue due to the petitioner's failure to file returns or pay approximately Rs. 50 lakhs in taxes. The Court noted that such provisional attachments must be used reasonably and sparingly. The petitioner was directed to deposit the tax amount before seeking relief from the Court.

Issue 2: Dispute Regarding Deduction of Land Cost
The main dispute revolved around the deduction of land cost from the turnover of sale to determine the taxable turnover. The revenue deducted Rs. 2.14 crores as the land cost, while the petitioner argued that the land price component was Rs. 17.68 crores. The Court refrained from resolving this dispute but noted that 33 fully constructed flats owned by the petitioner were attached. These flats were unencumbered and had a clear marketable title. The total value of these flats was approximately Rs. 4 crores. The possible tax and penalty liability were estimated at Rs. 4.58 crores. The Court ordered the lifting of the bank account attachment subject to various conditions, including the deposit of Rs. 50 lakhs with the Government authority and the filing of undertakings regarding the status and non-transaction of the flats.

The judgment concluded by instructing the respondents to expedite the assessment process and clarified that the bank accounts would be released upon compliance with the conditions outlined. The petition was disposed of accordingly, with direct service permitted.