2018 (4) TMI 281 - HC - VAT and Sales Tax

Input tax credit credit - registration of various dealers canceled - Held that - the principal tax dues estimated by the authorities if the transactions of the petitioner with the tainted dealers are found to be nongenuine, would cross ₹ 1 crore. This could be added by interest and penalty which can go upto 150% of the basic tax amount. What we also have on record is that in addition to pointing out to the petitioner that the purchases were made from those dealers whose registrations were cancelled on the ground that they were indulging in bogus billing activities, the petitioner was also given an opportunity to establish, primafacie, the actual movement of goods. There is primafacie material suggesting the petitioner s engagement in bogus billing activities, which if ultimately established, would result into sizeable tax demands - petition dismissed.

Issues:
1. Challenge to the attachment of bank account and immovable property under section 45 of the Gujarat Value Added Tax Act, 2003.
2. Validity of denying tax credit to the petitioner due to cancellation of registration of dealers from whom purchases were made.
3. Harshness of attaching bank account, property, and stock worth approximately ?15 lakhs during pending assessment.
4. Authority's exercise of powers under section 45 of the VAT Act for provisional attachment.
5. Scrutiny of grounds for exercising powers of provisional attachment and modification of terms as necessary.
6. Failure of the petitioner to provide evidence of movement of goods or payments through banking channels.
7. Consideration of providing bank guarantee or maintaining stock as alternatives to attachment of property.
8. Decision on granting relief in the petition.

Analysis:
1. The petitioner challenged the attachment of their bank account and immovable property under section 45 of the Gujarat Value Added Tax Act, 2003. The respondent authorities conducted a raid on the petitioner's business premises and found evidence of bogus billing activities, resulting in an estimated loss to revenue of over ?1 crore. The petitioner's registration was canceled for not filing monthly returns, leading to the attachment of their assets to safeguard the government revenue.

2. The petitioner argued that the denial of tax credit due to the retrospective cancellation of dealers' registrations was unjust. The petitioner contended that final assessment was pending, and the attachment of assets worth ?15 lakhs was excessive, preventing them from operating their business. The petitioner sought relief based on previous court orders in similar cases.

3. The authority justified the attachment based on the lack of movement of goods from dealers engaged in bogus billing activities, estimating the petitioner's liability at close to ?4 crores. The authority exercised powers under section 45 of the VAT Act for provisional attachment to protect government revenue.

4. Section 45 of the VAT Act allows provisional attachment of property during assessment proceedings to safeguard government revenue. The courts scrutinize the grounds for such attachments, considering the inconvenience to the dealer. The provisional attachment ceases after one year, and each case is evaluated based on its unique circumstances.

5. The petitioner failed to provide evidence of genuine transactions with canceled dealers, leading to doubts about the legitimacy of purchases. Despite opportunities to establish the movement of goods and payments through banking channels, the petitioner did not provide satisfactory assistance.

6. The court considered alternatives such as providing a bank guarantee or maintaining stock as suggested by the petitioner's counsel. However, given the substantial tax demands resulting from the petitioner's questionable purchases, no relief was granted in the petition. The court dismissed the petition based on the facts presented and the failure to substantiate genuine transactions.

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