2019 (10) TMI 1302 - HC - VAT and Sales Tax

Attachment of Overdraft Bank Accounts - section 45 of the Karnataka Value Added tax Act, 2003 - case of petitioner is that the credit facility extended by the bank by way of overdraft or otherwise cannot be considered to be authorising the Department to realise the amount for which the Bank has agreed to give loan - HELD THAT - It is not in dispute that the attachment of the bank account of the petitioner is in respect of overdraft facility. If the account of the defaulter runs in debit and there being no credit in his account, the same should not be considered as the money belonging to the defaulter. The bank is under no obligation to make payment to the Department. The bank does not owe the money to the defaulter. Hence, the attachment of the overdraft account of the petitioner by issuance of bank attachment notice impugned cannot be held to be sustainable. The Department is at liberty to initiate the recovery proceedings in any other mode in accordance with law - Petition disposed off.

Summary

Issues:
Challenge to bank attachment notices issued under section 45 of the Karnataka Value Added Tax Act, 2003 for overdraft bank account attachment relating to assessment years 2014-15, 2015-16, and 2016-17.

Analysis:
The petitioner, a partnership-firm under the KVAT Act, challenged bank attachment notices for overdraft account attachment. The petitioner sought rectification of assessment orders for the relevant years, which were pending. The petitioner argued that bank overdrafts do not authorize the Department to realize loan amounts, citing a previous court order. The Revenue contended that the bank could not remit due amounts due to non-payment of VAT, as the petitioner had availed overdraft facilities.

The court noted that the attachment was in relation to an overdraft facility. Referring to a previous judgment, the court emphasized that money in a defaulter's account with no credit should not be considered belonging to the defaulter. The bank is not obligated to pay the Department, as overdraft facilities do not imply ownership of the borrowed money. Therefore, the attachment of the petitioner's overdraft account was deemed unsustainable.

Consequently, the court quashed the bank attachment notices and allowed the Department to pursue recovery through lawful means. The writ petition was disposed of accordingly.