2018 (1) TMI 36 - HC - VAT and Sales Tax

Recovery proceedings - section 44(1)(B) of the GVAT Act, 2003 - attachment of petitioner s stock - Held that - no hearing is yet granted by the first appellate authority on the appeal and stay application though the same were filed on 16.11.2017. Thus, the impugned notice is issued on 22.11.2017 after a week despite the fact that the appeal and stay application were pending for hearing. It is not the case of the respondents that the same are not heard because of any fault attributed to the petitioner-Company - The respondent authorities should have restrained themselves from directing the Bank to deposit an amount of ₹ 15,72,74,830/- from the account held by the petitioner-Company towards recovery of the demand based on the assessment order dated 18.08.2017 till the hearing of the appeal and stay application of the petitioner - petition allowed.

Summary

Issues:
Challenge to recovery action under Gujarat Value Added Tax Act, 2003 based on assessment orders dated 18.08.2017.

Analysis:

1. The petitioner challenged the recovery action initiated by respondent No.2 under section 44(1)(B) of the Act through a petition under Article 226 of the Constitution of India. The petitioner, a trading company, adjusted its tax liability due to the alteration in the sale price as permitted under section 8 of the Act. The officers of the Commercial Tax Department observed that the petitioner erred in reducing VAT liability by issuing credit notes for discounts passed on to buyers. The department assumed a total demand of &8377; 15,72,74,829/-, including penal liability and interest.

2. The Assistant Commissioner of Commercial Tax ordered seizure of records and attached the petitioner's bank account and existing stock. The petitioner filed Special Civil Application challenging the order. The High Court disposed of the petition on 22.09.2017, lifting the bank account attachment and allowing the petitioner to deal with attached stock under certain conditions.

3. The petitioner filed an appeal against the assessment order dated 18.08.2017 within the prescribed period. Despite the pending appeal and stay application, respondent No.2 issued a notice on 22.11.2017 directing the bank to deposit the demanded amount. The petitioner contended that the recovery action was premature as the appeal was pending.

4. The High Court noted that the respondent authorities were aware of the pending appeal and should have deferred recovery action as per the earlier court order. Referring to a previous judgment, the court emphasized that executive powers under section 44 of the Act should be exercised responsibly and not arbitrarily. The court found the recovery notice premature and overreaching the legal process.

5. Consequently, the High Court quashed and set aside the impugned notice dated 22.11.2017, ruling in favor of the petitioner. The court held that the recovery action was premature and allowed the petition, making the rule absolute.