2019 (7) TMI 319 - HC - VAT and Sales Tax

Attachment of property of related company - some common director - Default/dues on the part of another Company (dealer) - whether the immovable property of the ownership of the writ applicant could have been attached for the purpose of recovering the dues payable by the respondent No.3 under the Act, 2003 (Company)? - petiioner given property on lease to another Company (dealer) HELD THAT - Section 48 clarifies that any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer or as the case may be, such person - It appears from the materials on record that the impugned order passed by the respondent No.1 dated 23.1.2018 is one of provisional attachment as provided under Section 45 of the Act, 2003. Section 45 makes it very abundantly clear that during the pendency of any proceedings of assessment or reassessment and turnover, escaping assessment, the Commissioner, with a view to protect the interest of the Government Revenue, may by order in writing, attach provisionally any property belonging to the dealer. The property of the ownership of the defaulting dealer can only be provisionally attached. The language of the statute is very clear. Section 45 provides that he may by order in writing attach provisionally any property belonging to the dealer . In such circumstances, in the first instance, the property which is of the ownership of the writ applicant could not have been attached for the purpose of recovery of the amount of tax, penalty or interest due and payable by the respondent No.3. It is not the case of the department that the writ applicant has defaulted, in any manner, with regard to payment of the tax under the Act, 2003. The writ applicant is the lawful owner of the attached land. The property, which has been attached, might have been given on lease to the respondent No.3, but by virtue of the same, it cannot be said that the property is of the ownership of the respondent No.3. The relationship is just of a lessor and lessee. The land, as on date, belongs to the writ applicant-Company. The impugned orders dated 23.01.2018 passed by the Commercial Tax Officer, Annexure-A as well as the order dated 14.05.2018 passed by the respondent No.2-Mamlatdar, mutating the entry in the revenue records, is hereby quashed and set aside - application allowed.

Issues Involved:
1. Legality of the attachment of the petitioner's property under Sections 46, 47, and 48 of the Gujarat Value Added Tax Act (GVAT Act).
2. Distinction between the petitioner company and respondent no.3 company as separate legal entities.
3. Consideration of the petitioner's objections by respondent no.2.
4. Validity of the attachment order as a non-speaking order.

Issue-wise Detailed Analysis:

1. Legality of the attachment of the petitioner's property under Sections 46, 47, and 48 of the GVAT Act:
The petitioner challenged the attachment orders dated 23.01.2018 and 14.05.2018, arguing that the property of the petitioner company was attached for the tax dues of respondent no.3 company. The court noted that the petitioner company is the lawful owner of the property in question and had entered into a lease deed with respondent no.3 company. The court emphasized that under Section 45 of the GVAT Act, provisional attachment can only be made of the property belonging to the defaulting dealer. The court concluded that the property of the petitioner company, which is not the defaulting dealer, could not have been attached for the tax dues of respondent no.3.

2. Distinction between the petitioner company and respondent no.3 company as separate legal entities:
The petitioner argued that the petitioner company and respondent no.3 company are separate legal entities, and therefore, the property of the petitioner company could not be attached for the dues of respondent no.3 company. The court agreed with this argument, stating that the petitioner company is a separate legal entity and the property in question belongs to the petitioner company. The court rejected the argument that the attachment was justified because the directors of the petitioner company were also directors of respondent no.3 company.

3. Consideration of the petitioner's objections by respondent no.2:
The petitioner contended that their objections were not considered by respondent no.2, and the impugned order was a non-speaking order. The court observed that the objections of the petitioner were indeed not considered, and the order passed by respondent no.2 was a non-speaking order. The court held that the failure to consider the objections and the issuance of a non-speaking order were contrary to the principles of natural justice.

4. Validity of the attachment order as a non-speaking order:
The petitioner argued that the attachment order was a non-speaking order, which did not provide any reasons for the attachment. The court agreed with this argument, noting that the order did not provide any reasons for the attachment and was therefore arbitrary and illegal. The court emphasized that any order affecting the rights of a party must be a speaking order, providing reasons for the decision.

Conclusion:
The court allowed the writ application, quashing and setting aside the impugned orders dated 23.01.2018 and 14.05.2018. The court held that the property of the petitioner company could not be attached for the tax dues of respondent no.3 company, as the petitioner company and respondent no.3 company are separate legal entities. The court also held that the failure to consider the petitioner's objections and the issuance of a non-speaking order were contrary to the principles of natural justice. The court clarified that the plant and machinery belonging to respondent no.3 could be attached, but not the land belonging to the petitioner company.

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