2016 (8) TMI 921 - HC - VAT and Sales Tax

Quash of Order of Attachment bank account residential bungalow offices and commercial establishments stock of goods lying in godowns cars and other personal belongings section 45 of Gujarat Value Added Tax, 2003 demand of tax, interest and penalty - possession of unaccounted stock of goods in undeclared godowns - investigation Held that - The department, undoubtedly, has powers under section 45 of the VAT Act to pass an order of provisional attachment to protect the interest of revenue during the pendency of any proceedings of assessment or reassessment of turnover, escaping the assessment, if the Commissioner is of the opinion that in order to do so, it is necessary to attach any property belonging to the dealer. However, being an order in the nature of attachment before judgment, which undoubtedly would have harsh consequences on a dealer, the powers have to be exercised sparingly and with due care. The court has already given relief to petitioners. Interim directions confirmed contained in order dated 6.5.2016 and made absolute subject to minor modifications and safeguards petition disposed off decided against petitioners subject to some modifications.

Summary

Issues:
Challenge to order of attachment under Gujarat Value Added Tax Act, 2003.

Analysis:
The petitioners challenged the attachment order passed by the Commercial Tax Department under section 45 of the Gujarat Value Added Tax Act, 2003. The department alleged that the petitioners were in possession of unaccounted stock of goods in undeclared godowns, estimating tax and penalty liabilities. The department sought to attach various movable and immovable properties of the petitioners based on joint and several liability. The petitioners challenged these attachment orders.

The Division Bench of the Court, after considering the preliminary investigation, found that the estimated tax and penalty liabilities on the petitioners were around ?5.10 crores. The court noted that the larger liability primarily rested on another entity, M/s. Dharampal Satyapal Limited, and questioned how the petitioners were being made liable for such a significant amount without clear justification. The court emphasized the need for the department to exercise its powers of attachment sparingly and with care due to the severe consequences it could have on a dealer.

An interim order had already granted relief to the petitioners by lifting the attachment on their bank accounts and suspending the condition for maintaining minimum stock. The court confirmed these directions and made them absolute with minor modifications and safeguards. The immovable properties were to remain attached, while the attachment on movable properties was set aside with the condition that they could not be sold without prior intimation to the department. The petitioners were required to file affidavits confirming the clear title of certain properties and allowing their use for any unpaid tax, interest, or penalty dues under the VAT Act.

In conclusion, the petition challenging the attachment orders under the Gujarat Value Added Tax Act, 2003 was disposed of with the court confirming the relief granted to the petitioners, subject to specified conditions and undertakings to safeguard the interests of all parties involved.