2015 (5) TMI 296 - HC - VAT and Sales Tax

Provisional attachment of property - Excersice of power u/s 45 of the Gujarat Value Added Tax, 2003 - Garnishee order - Held that - Against the estimated liability of the petitioners under the VAT Act of ₹ 4.5 crores, the immovable property worth ₹ 5 crores is already under attachment. Under the circumstances, the interest of the Government Revenue has been fully protected. Therefore, thereafter, there was no reason whatsoever for the respondent No.2 to pass the order under Section 45 of the VAT Act of provisional attachment of the bank accounts of the petitioners including the personal bank account of the petitioner No.2. Such an exercise of powers is absolutely illegal and most arbitrary which cannot be sustained. There is no justification pointed out to exercise powers under Section 45 of the VAT Act and passing the order of provisional attachment of the bank accounts of the petitioners including personal bank account of the petitioner no.2. There is no formation of opinion by the Commissioner that for the purpose of protecting the interest of the Government Revenue, the impugned order of provisional attachment of the bank account of the petitioners including the personal bank account of the pet No.2 has been passed Impugned order of provisional attachment of the bank accounts of the petitioner including the personal bank account of the petitioner No.2 and the impugned garnishee notice served upon the respondent No.3-Punjab National Bank and the banker of the petitioners are absolutely illegal and most arbitrary. In the present case, the exercise of powers by the respondent No.2 under Sections 45 and 44 of the VAT Act is nothing but an abuse of powers by the respondent No.2 and undue harassment to the petitioners. Under the circumstances, this is a fit case to impose exemplary cost upon the respondent No.2 while allowing the present petition and quashing and setting aside the impugned orders. - Decided in favour of appellant.

Summary

Issues Involved:
1. Provisional attachment of bank accounts under Section 45(1) of the VAT Act.
2. Issuance of garnishee notice under Section 44 of the VAT Act.
3. Legality of attaching personal bank accounts not mentioned in the provisional attachment order.

Detailed Analysis:

Provisional Attachment of Bank Accounts under Section 45(1) of the VAT Act:
The petitioners challenged the provisional attachment of their bank accounts, arguing that they had already offered immovable property worth Rs. 5 crores as security against an estimated liability of Rs. 4.5 crores under the VAT Act. The court noted that the assessment proceedings were still pending, and the liability of the petitioners had not been adjudicated or crystallized. The court emphasized that the purpose of Section 45(1) is to protect the interest of the Government revenue during the pendency of assessment proceedings. However, since the immovable property worth Rs. 5 crores was already attached, the interest of the Revenue was fully protected. Therefore, the court found the provisional attachment of the bank accounts to be unnecessary, illegal, and arbitrary.

Issuance of Garnishee Notice under Section 44 of the VAT Act:
The petitioners also contested the garnishee notice issued to their bank, requiring payment from their bank accounts. The court examined Section 44 of the VAT Act, which allows the Commissioner to issue a garnishee notice for the recovery of arrears of tax, penalty, or interest. Since the assessment proceedings were still ongoing and no final order had been passed determining the petitioners' liability, the court found that the garnishee notice was premature and unjustified. The court ruled that the garnishee notice was illegal and arbitrary, as it was issued without any established arrears of tax, penalty, or interest.

Legality of Attaching Personal Bank Accounts Not Mentioned in the Provisional Attachment Order:
The petitioners argued that the personal bank account of the second petitioner was attached without any reference in the provisional attachment order. The court found that the attachment of the personal bank account was not justified, as it was not mentioned in the original provisional attachment order. The court ruled that this action was illegal and arbitrary.

Conclusion:
The court concluded that the provisional attachment of the petitioners' bank accounts and the issuance of the garnishee notice were illegal and arbitrary. The interest of the Revenue was already secured by the attachment of immovable property worth Rs. 5 crores. The court quashed the provisional attachment orders and the garnishee notice. Additionally, the court imposed a token exemplary cost of Rs. 5,000 on the respondent authority for undue harassment of the petitioners. The provisional attachment of the immovable property was allowed to continue, and the petitioners were directed to abide by their undertaking not to transfer or encumber the property during the pendency of the assessment proceedings.