2017 (10) TMI 695 - HC - VAT and Sales Tax

Continuation of attachment order - Attachment of stock, bank accounts and fixed assets - section 45 of the VAT Act - By orders dated 07.09.2016 and 08.09.2016, attachment orders were passed - Held that - Sub-section (2) of section 45 of the Act, in plain terms, ensures that the life of a provisional attachment order does not extend beyond a period of one year. Therefore, unless the order of provisional attachment is withdrawn, recalled, set aside or merges into some final order earlier, the same would cease to have effect at the end of a period of one year - This would ensure that the authority would examine the current position and would take a fresh decision that to protect the interest of Government revenue, it is necessary to pass fresh order of provisional attachment and that the earlier order of attachment would not mechanically continue indefinitely. The impugned orders of attachment were passed on 07.09.2016 and 08.09.2016. In terms of sub-section (2) of section 45, therefore they would become ineffective - petition allowed - decided in favor of petitioner.

Summary

Issues: Provisional attachment under section 45 of the VAT Act

In this judgment by the Gujarat High Court, the petitioner, a registered timber dealer, had their assets provisionally attached by the respondent authorities under section 45 of the VAT Act due to alleged involvement in bogus billing activities. The authorities estimated the petitioner's tax liabilities to be around ?3.33 crores. The court analyzed section 45 of the VAT Act, which allows provisional attachment during assessment proceedings to protect government revenue. Subsection (1) empowers the competent authority to attach property if necessary, while subsection (2) specifies that such attachment ceases after one year. The court emphasized that provisional attachment cannot be indefinite, and unless withdrawn or set aside, it automatically expires after a year. The statute does not prohibit issuing fresh attachment orders, but each new order requires a fresh decision based on the current circumstances to protect government revenue effectively.

The court noted that the attachment orders in this case were issued in September 2016, making them ineffective as per subsection (2) of section 45. Consequently, the court declared the orders void, disposing of the petition in favor of the petitioner.