2011 (9) TMI 773 - HC - VAT and Sales Tax

U.P. VAT Act - Recovery proceedings - Attachment of bank account - refund the amount of Rs. 2,14,53,892/- recovered from the bank account - held that - The manner in which the authorities have proceeded to recover the amount itself speaks about the arbitrary action of the authorities and would shake the confidence of the law abiding dealers and would adversely affect the development and industrial growth of this State. It warrants immediate remedial measures to be undertaken. Direction given to the Commissioner, Commercial Tax, U.P. to issue the circular dated 9th September, 2011 and ensure that it is followed both in letter and spirit by the officers of the Commercial Tax Department.

Summary

Issues:
Challenge to order of attachment of bank account and recovery of amount by Commercial Tax Department.

Analysis:
The petitioner, a Wakf Board engaged in manufacturing Unani medicines and Sharbat Rooh Afza, challenged the order of attachment of its bank account by the Assistant Collector (Recovery), Commercial Tax Department, seeking a writ of certiorari and mandamus for quashing the order and refunding the amount of Rs. 2,14,53,892. The petitioner received a show cause notice under the U.P. VAT Act proposing an assessment at 12.5%, which was disputed by the petitioner. Despite appeals and partial stays granted during the appeal process, the Assistant Collector issued a recovery order on 28th August, 2010, which was executed by attaching the bank account on 30th August, 2010, before the petitioner was served with the order of dismissal of the appeal.

The High Court noted the misuse of power by the authorities in recovering the tax dues, highlighting the arbitrary actions of the Commercial Tax Department in proceeding with recovery before serving the appeal order. The Court emphasized the need to check such highhanded attitude to maintain confidence among law-abiding dealers and promote industrial growth. Consequently, the Court directed a responsible officer of the Commercial Tax Department to appear before the Court to suggest measures to prevent such arbitrary actions.

In compliance with the Court's order, the Additional Commissioner (Vidhi), Commercial Tax appeared and informed the Court about the State Government's consideration of the issue. A draft circular was presented but found unsatisfactory initially. However, a revised circular proposed by the Commercial Tax Department, directing a 10-day period after appeal dismissal for taking further legal steps and obtaining stay, was approved by the State Government pending Court approval. The Court reviewed the circular and directed the Commissioner, Commercial Tax, U.P. to issue and ensure compliance with the circular dated 9th September, 2011 to prevent premature recovery actions.

Regarding the refund sought by the petitioner, the Court noted that since the first appeal had been dismissed, the remedy of a second appeal before the Tribunal must be pursued before any refund can be considered. With these observations and directions, the Court disposed of the writ petition, emphasizing the importance of following the circular to uphold justice and fair procedures in tax recovery matters.