2017 (12) TMI 1012 - HC - VAT and Sales Tax

Attachment of Bank accounts - dis-allowance of input tax credit on the purchases made from various vendors - clauses (a) and (b) of sub-section (1) of section 44 of the Act - Held that - A plain and simple reading of the aforesaid provisions will suggest that the power under the same is to be exercised when there is a person who has debtor-creditor relationship with the dealer and from whom his money is due or may become due to him or the person who holds or may subsequently hold money for or on account of such dealer - the bank and the assessee do not have debtor-creditor relationship - impugned notices of attachment of the bank accounts is to be set aside. Issuance of the impugned notices of attachment during pendency of the appeal and the stay application of the petitioner - Held that - it is expected of the authority to stay its hands till the stay application is decided, unless the same is not decided on account of default on the part of the petitioner or it is found that the petitioner is unnecessarily delaying the hearing of the stay application and in absence of any exceptional circumstances, there is no warrant for the respondent authorities to proceed to initiate coercive recovery in exercise of powers under section 44 of the Act by attaching the bank account of the petitioner. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Validity of notices issued under section 44 of the Gujarat Value Added Tax Act, 2003.
2. Timing of issuance of notices during the pendency of appeal and stay application.

Analysis:

Issue 1: Validity of notices under section 44 of the Act
The petitioner filed a writ petition to quash notices dated 13.11.2017 and 15.11.2017 issued under section 44 of the Act, attaching bank accounts. The petitioner argued that the notices did not meet the debtor-creditor relationship requirement under section 44. The petitioner cited a previous judgment supporting this argument. The respondent contended that the bank accounts had a debtor-creditor relationship with the petitioner, justifying the notices. The court analyzed section 44, emphasizing the need for a debtor-creditor relationship for such notices. Referring to a previous judgment, the court agreed that the bank and the petitioner did not have a debtor-creditor relationship, leading to the quashing of the notices.

Issue 2: Timing of notices during appeal and stay application
The petitioner approached the first appellate authority with a stay application after the dismissal of the writ petition. The appellate authority scheduled hearings, but was unavailable on the dates, leading to adjournments. Subsequently, the respondent issued notices to attach the bank accounts during the pendency of the appeal and stay application. The court noted that the authority should have waited for the stay application decision before resorting to coercive recovery. Citing a previous judgment, the court emphasized that unless there were exceptional circumstances, coercive recovery should not proceed before the stay application decision. As the stay application was adjourned due to the authority's unavailability, the court deemed the attachment of bank accounts unwarranted and quashed the notices.

In conclusion, the court quashed the impugned notices under section 44 of the Act, as they lacked a debtor-creditor relationship and were issued prematurely during the appeal and stay application process. The court emphasized the importance of adhering to legal procedures and refraining from coercive recovery actions before the completion of due processes.