2019 (6) TMI 894 - HC - VAT and Sales Tax

Deletion/withdrawal of the charge - Recovery of dues - Gujarat Value Added Tax Act 2003 - whether the respondents are justified in creating a charge over the subject property for recovering the dues of M/s. Umiya Oil Industries of which the petitioner s husband was the Proprietor which according to the petitioner is property purchased by her from her stridhan ? HELD THAT - In the facts of the present case it is not disputed that the business carried on by the petitioner s husband was discontinued after his death. Therefore clause (a) of subsection (1) of section 57 of the GVAT Act will not apply and hence the legal representative would not be liable to pay the tax interest or penalty due from such dealer under the Act or in earlier years. Insofar as clause (b) of subsection (1) of section 57 is concerned the same would be applicable in the facts of the present case as the same provides that where a person who has been a dealer liable to pay tax under the Act dies and if the business carried out by such dealer is discontinued whether before or after his death then his legal representative shall be liable to pay the dues out of the estate of the deceased to the extent to which the estate is capable of meeting the charge the tax interest or penalty due from such dealer under that Act or any earlier law. Thus under clause (b) of subsection (1) of section 57 of the GVAT Act the legal representative is liable to pay the dues out of the estate of the deceased to the extent to which the estate is capable of meeting the charge the tax interest or penalty due from the dealer. In the facts of the present case the respondents do not seek to recover the dues from the dealer or from any estate of the deceased but seek to recover the same from the property of the petitioner. Evidently therefore the provisions of clause (b) of subsection (1) of section 57 of the GVAT Act would not apply - Insofar as subsection (2) of section 57 of the GVAT Act is concerned the same would not in any manner be applicable to the present case since it relates to property being partitioned amongst the members of a Hindu undivided family. In the absence of any power vested in the respondents to recover the dues of the deceased husband of the petitioner from the property of the petitioner the charge created over the subject property of the petitioner is without any authority of law. In the opinion of this court merely because the petitioner has challenged the assessment orders and has prosecuted the matter before the appellate authority would not amount to continuance of business as contemplated under clause (a) of subsection (1) of section 57 of the Act - The respondents are therefore not justified in seeking to recover the dues of the petitioner s deceased husband from property belonging to the petitioner which renders the charge entered under the GVAT Act on the subject property unsustainable. The respondents are directed to delete/withdraw the charge entered over the subject property belonging to the petitioner located at Survey No.71 Gambhirpura Taluka Idar District Sabarkantha for the tax dues of M/s. Umiya Oil Industries - petition allowed.

Summary

Issues Involved:
1. Legality of the charge under the Gujarat Value Added Tax Act, 2003 (GVAT Act) on the petitioner’s property for the tax dues of M/s. Umiya Oil Industries.
2. Applicability of section 57(1)(b) and section 57(2) of the GVAT Act to the petitioner’s case.
3. Validity of the attachment and auction proceedings initiated by the respondent authorities.

Issue-wise Detailed Analysis:

1. Legality of the charge under the GVAT Act on the petitioner’s property:
The petitioner, a widow and housewife, purchased the property in question from M/s. Kailash Oil Industries through a registered sale deed dated 15th December 2008. The property was later used by her husband for his business, M/s. Umiya Oil Industries. Following her husband's death, tax dues amounting to approximately ?1.60 crores were raised against M/s. Umiya Oil Industries for the years 2006-07, 2007-08, and 2008-09. The authorities initiated coercive recovery proceedings, including auctioning the petitioner’s property. Despite the petitioner’s continuous efforts and representations, the authorities refused to lift the attachment. The petitioner argued that the property was purchased using her stridhan and thus should not be liable for her husband’s business dues.

2. Applicability of section 57(1)(b) and section 57(2) of the GVAT Act:
The petitioner contended that section 57(1)(b) of the GVAT Act, which deals with the liability of a legal representative to pay tax dues out of the deceased's estate, did not apply to her case. She argued that the property was her own, purchased with her funds, and not part of her deceased husband's estate. Additionally, section 57(2), which pertains to the partition of a Hindu Undivided Family’s property, was also deemed inapplicable as the property was not partitioned among family members but was solely owned by the petitioner. The court concurred, stating that the provisions of section 57(1)(b) and section 57(2) did not justify the respondents’ actions to recover dues from the petitioner’s property.

3. Validity of the attachment and auction proceedings:
The court examined the respondents' reliance on section 57(1)(b) and found it misplaced. The court noted that the property was purchased by the petitioner through a registered sale deed and stood in her name. No evidence was presented to show that the petitioner’s husband had any interest in the property. The court emphasized that the respondents could not recover the tax dues from the petitioner’s property as it was not part of the estate of the deceased. Consequently, the charge created over the petitioner’s property was deemed without authority of law. The court also dismissed the argument that the petitioner’s actions in challenging the assessment orders amounted to a continuation of her husband’s business.

Conclusion:
The court concluded that the respondents were not justified in creating a charge over the petitioner’s property for the tax dues of M/s. Umiya Oil Industries. The attachment and auction proceedings were found to be unsustainable. The petition was allowed, and the respondents were directed to delete/withdraw the charge on the petitioner’s property. Rule was made absolute with no order as to costs.