2019 (1) TMI 1025 - HC - VAT and Sales Tax

Attachment of Bank Accounts including cash credit account - section 45(7) of the Gujarat Value Added Tax Act, 2003 - Held that - The court has considered the request only qua the cash credit account bearing No.918030020580275 maintained by the petitioner with the Axis Bank. This court in Kaneria Granito Ltd. v. Assistant Commissioner of Income Tax 2016 (7) TMI 65 - GUJARAT HIGH COURT has categorically held that a cash credit account would be in the nature of borrowing by the assessee from the bank, and that the bank and the assessee, therefore, do not have the debtor-creditor relationship. Under the circumstances, when no amount lying in the cash credit account belongs to the petitioner, the question of attaching such account under section 45(7) of the Gujarat Value Added Tax Act, 2003 does not appear to be justified. By way of interim relief, the respondents are directed to forthwith release the cash credit account maintained by the petitioner with the Axis Bank, Navagam Branch - Direct Service is permitted today.

Summary

Issues: Challenge to attachment of bank accounts under section 45(7) of the Gujarat Value Added Tax Act, 2003.

Analysis:
1. The petitioner challenged the attachment of all bank accounts, including a cash credit account, by the respondent under section 45(7) of the Gujarat Value Added Tax Act, 2003. The petitioner argued that the nature of the accounts was for borrowing money from the bank, establishing a debtor-creditor relationship between the bank and the assessee. Citing the decision in Kaneria Granito Ltd. v. Assistant Commissioner of Income Tax, the court observed that the bank and the assessee did not have a debtor-creditor relationship in the case of a cash credit account. The court set aside the impugned notice of attachment, concluding that the attachment of the cash credit account was not justified.

2. The respondent contended that the petitioner, to avail the cash credit facility, must have provided security to the bank. It was argued that any amount withdrawn from the cash credit account would be recovered by the bank from the security furnished, which could be attached by the authorities. However, the court emphasized that since the cash credit account was in the nature of borrowing by the assessee from the bank, there was no direct debtor-creditor relationship between them. Therefore, the attachment of the cash credit account under section 45(7) of the Act was deemed unjustified.

3. The court, considering the interim relief, specifically addressed the issue of the cash credit account maintained by the petitioner with Axis Bank. Relying on the decision in Kaneria Granito Ltd. case, the court reiterated that the cash credit account represented borrowing by the assessee from the bank, precluding a debtor-creditor relationship between them. Consequently, the court directed the respondents to release the cash credit account maintained by the petitioner with Axis Bank, Navagam Branch, Account No. 918030020580275 as interim relief, pending further proceedings scheduled for a later date.