2016 (10) TMI 603 - HC - VAT and Sales Tax

Provisional attachment of bank account - section 45(1) of the GVAT Act, 2005 - entry tax - whether the Entry Tax Act, 2004 vest power of provisional attachment on the respondents? - Held that - The Entry Tax Act does not contain any provision for provisional attachment. Section 45(1) of the VAT Act, of course, authorizes the competent authority to exercise the power of provisional attachment pending the proceedings for assessment or reassessment of turnover escaping assessment to protect the interest of Revenue. Such power obviously cannot be imported for the purpose of the Entry Tax Act. The petitioner has already deposited a sum of ₹ 11 lakhs towards the initial estimated tax penalty and interest liability of ₹ 20 lakhs, which in any case, includes substantial portion of disputed entry tax - the authorities not permitted to provisionally attach the petitioner s bank account - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenging provisional attachment of bank account under VAT Act for possible tax liability including entry tax; Authority's power of provisional attachment under Entry Tax Act; Disputed tax liability mainly comprising entry tax; Competence to provisionally attach bank account for unpaid entry tax dues before assessment completion.

Analysis:
The petitioner contested the provisional attachment of their bank account by the Assistant Commissioner of Commercial Tax under the Gujarat Value Added Tax Act, 2005, for a potential tax, interest, and penalty demand of ?20 lakhs, which included entry tax liability. The petitioner argued that the Entry Tax Act does not grant the authority the power of provisional attachment. They had already paid ?11 lakhs under protest towards basic duty liability. The petitioner's counsel emphasized that canceling the petitioner's dealer registration retrospectively would have minimal impact on tax liability due to the absence of input tax credit for imported goods.

The Assistant Government Pleader opposed the petition, claiming the petitioner lacked a permanent establishment in the state, and if registration were canceled retrospectively, the liability could reach ?40 lakhs. However, the AGP failed to identify any provision in the Entry Tax Act allowing provisional attachment for unpaid entry tax dues before completing assessment. The court noted that the disputed tax liability, primarily entry tax, was not finalized, and the amount quoted in the order mainly consisted of the disputed entry tax.

The court highlighted that the Entry Tax Act did not provide for provisional attachment, unlike the VAT Act, which allows provisional attachment to safeguard revenue interests during assessment or reassessment proceedings. Given that the petitioner had already paid a significant amount towards the estimated tax, penalty, and interest liability, which included a substantial portion of the disputed entry tax, the court did not permit the provisional attachment of the bank account. Consequently, the court set aside the order dated 05.08.2016, allowing the petition to that extent and disposing of the matter.