2022 (5) TMI 385 - HC - VAT and Sales Tax

Attachment of Bank Accounts - whether the State Tax Officer could have proceeded to instruct the I.D.B.I. Bank not to permit the writ-applicant to operate its current bank account on the ground that the writ-applicant Company has incurred a liability under the Act, 2003? - HELD THAT - While the Second Appeal is pending before the Tribunal, and the Tribunal has yet to look into even the interim application filed by the writ-applicant in the Second Appeal seeking appropriate relief, the State Tax Officer could not have proceeded to direct the bank not to allow the writ-applicant to operate its current account. In the case on hand, indisputably there has been no notice of demand as contemplated under Section-42 of the Act. It is within the knowledge of the authority that the writ-applicant is before the Tribunal in a Second Appeal. The Tribunal for the purpose of entertaining the second appeal may put the writ-applicant to some conditions like pre-deposit etc. The Second Appeal is yet to be heard on merits - pending the Second Appeal before the Tribunal, the impugned action on the part of the State Tax Officer is not sustainable in law. It could be said that the impugned action is essentially in exercise of powers under Section-45 of the Act. Section-45 only talks about provisional attachment. Provisional attachment is permissible only during the pendency of the proceedings of assessment or reassessment. In the case on hand, the writ-applicant has traveled much beyond the proceedings of assessment. The impugned order dated 04.01.2022 at Annexure-A to this writ-application purported to have been passed under Section-44 of the Act 2003 is hereby quashed and set aside - Applicartion allowed.

Summary

Issues:
1. Whether the State Tax Officer had the authority to instruct the bank to freeze the petitioner's current account.
2. Whether the impugned action of the State Tax Officer is legally sustainable during the pendency of the Second Appeal before the Tribunal.

Issue 1:
The petitioner challenged a notice under Section 44 of The Gujarat Value Added Tax Act, 2003, issued by the State Tax Officer, directing the bank to freeze the petitioner's current account due to outstanding tax liabilities. The court deliberated on whether the State Tax Officer had the power to take such action while a Second Appeal was pending before the Tribunal. The court noted that the law prescribed specific procedures for recovery, including issuance of a notice of demand under Section 42, which was not done in this case. The court emphasized that the impugned action was akin to provisional attachment under Section 45, permissible only during assessment or reassessment proceedings, not during an appeal. The court held that the State Tax Officer's action was not legally sustainable, especially considering the ongoing Second Appeal.

Issue 2:
The court analyzed the statutory provisions under The Gujarat Value Added Tax Act, 2003, related to recovery mechanisms. It highlighted the importance of a notice of demand under Section 42, failure of which deems the dealer in default. The court explained the provisions of Sections 43 to 46, detailing special modes of recovery, provisional attachment, and special powers for recovery as arrears of land revenue. The court emphasized that the impugned action by the State Tax Officer did not align with the statutory requirements, particularly since the petitioner was engaged in a Second Appeal before the Tribunal. The court concluded that the State Tax Officer's directive to freeze the current account was premature and not in accordance with the law.

In conclusion, the High Court of Gujarat found in favor of the petitioner, quashing the impugned order directing the bank to freeze the current account. The court directed the Tribunal to expedite the hearing of the Second Appeal and decide the matter lawfully. The judgment underscored the importance of following statutory procedures and refraining from premature actions, especially during ongoing appeal proceedings.