2016 (7) TMI 482 - HC - VAT and Sales Tax

Attachment of immovable property and stock of the petitioner and other family members. - Denial of input tax credit - dealers had not shown such sales in favour of the petitioner nor paid tax to the Government on such transactions. - Held that - At the stage where the petitioner s assessment is yet to be completed, we would not permit the department to recover any further possible tax or penalty. However, the order of attachment which has been passed to protect the interest of Revenue with minor modification, needs to be preserved. It is not in dispute that the department under Section 45(1) of the Gujarat Value Added Tax Act, 2003 has sufficiently wide powers to order attachment of dealer s properties in order to safeguard the interest of Revenue. When it is pointed out, as is done in the affidavit in reply dated 07.10.2015, that the purchases made by the petitioner from various dealers were never shown by them in their returns nor obviously tax on such transactions paid, immediately question would arise whether the petitioner itself was also involved in bogus billing activities? Under the circumstances the request of the petitioner for unconditional lifting of the order of attachment cannot be granted. - Further recovery proceedings stayed - Decided partly in favor of petitioner.

Issues:
1. Validity of the order of attachment passed by the respondent-authorities.
2. Recovery of tax and penalty amount before completion of assessment.
3. Treatment of the sum of ?17 lacs recovered from the petitioner.
4. Allowance of petitioner to operate regular business by removing the attachment on stock of goods.
5. Direction regarding the petitioner's grievances and the order of attachment.

Issue 1: Validity of the order of attachment:
The petitioner, a registered dealer under the Gujarat Value Added Tax Act dealing in chemicals, challenged the order of attachment passed by the respondent-authorities on the basis of alleged discrepancies in input tax credit claims. The petitioner contended that the attachment was unjustified as the tax had been paid to the selling dealers. The Court acknowledged the wide powers of the department to order attachment under Section 45(1) of the Act to safeguard revenue interests. The Court found prima facie evidence of the petitioner's involvement in bogus billing activities, leading to the order of attachment being preserved with minor modifications.

Issue 2: Recovery of tax and penalty amount before completion of assessment:
The Court held that the department could not recover any further tax or penalty until the assessment was completed. The petitioner's grievance regarding the recovery of ?17 lacs was accepted. The Court directed that this amount, already recovered from the petitioner, should remain as a deposit with the department to be adjusted towards the petitioner's final tax, interest, or penalty liabilities. Any credit given to defaulting dealers based on this amount was to be reversed.

Issue 3: Treatment of the sum of ?17 lacs recovered from the petitioner:
The Court emphasized that the recovered amount of ?17 lacs should remain as a deposit with the department and be utilized for adjusting the petitioner's tax liabilities upon completion of assessment. The Court clarified that this sum could not be credited to defaulting dealers and must be solely used for the petitioner's liabilities.

Issue 4: Allowance of petitioner to operate regular business:
The Court allowed the petitioner to operate their regular business by removing the attachment on stock of goods worth ?2.25 crores. However, a condition was imposed that the petitioner must maintain a minimum stock of ?1.15 crores until the assessment process was concluded.

Issue 5: Direction regarding the petitioner's grievances and the order of attachment:
The petition was disposed of with specific directions. The petitioner was permitted to lift the stock of goods from the godown at Surat under the condition of maintaining a minimum stock value. The attachment of immovable properties was to remain in place. Additionally, the recovered sum of ?17 lacs was to be retained as a deposit by the petitioner for adjusting future tax liabilities, and any credit given to others based on this amount was to be reversed.

In conclusion, the Court addressed the various issues raised by the petitioner regarding the order of attachment, recovery of tax amounts, treatment of the recovered sum, allowance to operate regular business, and provided specific directions to safeguard the interests of both the petitioner and the revenue department.

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