2017 (9) TMI 495 - HC - VAT and Sales Tax

Attachment of goods and Bank Accounts - bogus billing activities - Inter-state sales - registrations of five dealers to whom the petitioner had sold the goods claiming it to be interstate sale and paying reduced tax were cancelled abinitio - Held that - The petitioner s case that even in case of the dealers whose registrations were cancelled, the petitioner s goods were subjected to interstate sale and therefore correctly taxed at reduced rate would shortly be tested during such assessment - at this stage it would not be correct to allow the authorities to attach the bank accounts for a possibility of total recovery of ₹ 2.81 crores which would include not only the basic tax but also the interest and penalty at the maximum imposable rate - by allowing the attachment of the goods to continue, the orders attaching the petitioner s bank accounts are set aside - decided partly in favor of petitioner.

Summary

Issues:
Challenge to provisional attachment of bank accounts by Assistant Commissioner of Commercial Tax.

Analysis:
The petitioner, a timber company with VAT and Sales Tax registrations, challenged the provisional attachment of bank accounts by the Assistant Commissioner of Commercial Tax to secure a possible tax demand of &8377; 2.81 crores. The department alleged that the petitioner claimed reduced tax on interstate sales with cancelled dealers, resulting in a potential tax demand of &8377; 1.01 crores and penalty. The petitioner contended that no bogus billing occurred, providing documents to support actual goods transportation and reduced duty claims based on C forms. The authorities had also attached goods worth &8377; 1.31 crores. The Assistant Government Pleader argued that there was prima facie evidence of tax evasion through bogus billing.

The High Court noted that the assessment for the petitioner was pending, and the claim of correct taxation on interstate sales would be assessed later. However, the court found it premature for the authorities to attach bank accounts for a potential recovery of &8377; 2.81 crores, including tax, interest, and penalty, especially when goods worth &8377; 1.31 crores were already under attachment. The court held that the goods' attachment adequately protected the revenue's interest. Consequently, the orders attaching the petitioner's bank accounts were set aside, and the petition was disposed of accordingly.