2017 (5) TMI 24 - HC - VAT and Sales Tax

VAT liability - attachment of bank account - default in making repayments of tax and other financial facilities extended - case of petitioner is that Section 29(1) of the A.P. VAT Act, 2005 invoked by the 2nd respondent for attaching the current account of the petitioner, has no application to the facts on hand. The contention of the petitioner is that for invoking Section 29(1) of the A.P. VAT Act, 2005, the 2nd respondent should satisfy one pre-requisite condition, viz., that the petitioner is holding any money for or on account of the defaulter. The petitioner is not holding any money either for or on account of the defaulter. Held that - It is true that the petitioner was not a party to the writ petition filed by the A.P. State Finance Corporation. But it is on record that pursuant to the auction conducted by the writ petitioner, a sale deed was executed on 29.01.2004. This sale deed was jointly executed by the petitioner herein and the A.P. State Finance Corporation. Therefore today the petitioner cannot totally wash their hands off as though they had nothing to do with the writ petition filed by the A.P. State Financial Corporation. In any case, the sale proceeds have gone into the coffers of the petitioner as well as the A.P. State Financial Corporation. A person, who secured an interim order from a Court, should certainly honour its decision after the case is finally disposed of. Therefore, we do not think that the petitioner can escape the liability on this score. The petitioner is a Corporation, wholly owned and controlled by the State of Andhra Pradesh. The creator cannot fight with the creation. Assuming that the 2nd respondent recovers the tax due from the defaulting dealer together with interest and penalty, the same would only cause a dent in the financial status of the petitioner. Ultimately, it is the State Government, which has to go to the rescue of a Corporation created by it. Directing the petitioner to pay to the Commercial Taxes Department, a sum equivalent to ₹ 10,51,175/- together with interest at the rate of 6% p.a. from the date of the sale, viz., 29-1-2004 up to the date of payment, would meet the ends of justice - petition allowed - decided partly in favor of petitioner.

Summary

Issues Involved:
1. Validity of the attachment of the petitioner's bank account by the Commercial Tax Officer.
2. Applicability of Section 29(1) of the A.P. VAT Act, 2005.
3. Priority of the statutory charge under Section 16C of the A.P. GST Act, 1957.
4. Liability of the petitioner for the tax dues of the defaulting dealer.
5. Extent of recoverable amount by the Commercial Tax Officer.

Detailed Analysis:

1. Validity of the Attachment of the Petitioner's Bank Account by the Commercial Tax Officer:
The petitioner, Andhra Pradesh Industrial Development Corporation Limited, challenged the action of the Commercial Tax Officer in attaching its current account in the State Bank of India. The attachment was made to recover tax dues owed by a defaulting dealer, Amruth Starch (P) Ltd. The petitioner argued that the attachment was invalid as the money in its account did not belong to the defaulting dealer.

2. Applicability of Section 29(1) of the A.P. VAT Act, 2005:
The petitioner contended that Section 29(1) of the A.P. VAT Act, 2005, which allows the Commissioner to require any person holding money for a defaulter to pay the amount to the tax authorities, was not applicable. The petitioner argued that it did not hold any money for or on account of the defaulter, as the recovered amount from the sale of the defaulter's properties was appropriated towards the dues owed to the petitioner and the A.P. State Financial Corporation.

3. Priority of the Statutory Charge under Section 16C of the A.P. GST Act, 1957:
The court examined the statutory charge created under Section 16C of the A.P. GST Act, 1957, which came into effect on 06.04.1999. This section created a first charge on the property of a dealer for any tax, penalty, interest, and other sums payable, overriding any other law. The court upheld the validity of Section 16C, establishing that the Commercial Taxes Department had precedence over the claims of the petitioner and the A.P. State Financial Corporation.

4. Liability of the Petitioner for the Tax Dues of the Defaulting Dealer:
The court noted that the petitioner was not a party to the writ petition filed by the A.P. State Financial Corporation challenging Section 16C. However, the petitioner could not escape liability as the sale proceeds were jointly held by the petitioner and the A.P. State Financial Corporation. The court emphasized that the petitioner could not ignore the statutory charge created by Section 16C, which took precedence over the mortgage claims.

5. Extent of Recoverable Amount by the Commercial Tax Officer:
The court addressed the extent to which the Commercial Tax Officer could enforce the charge on the sale proceeds. Initially, the claim was for ?10,51,175/-, but it had increased to over ?40 lakhs due to accumulated interest. The court ruled that the Commercial Tax Officer was entitled to recover only the principal amount of ?10,51,175/- with interest at 6% per annum from the date of sale (29.01.2004) until payment. The court directed the petitioner to pay this amount within four weeks, after which the attachment on the petitioner's bank account would be removed.

Conclusion:
The court disposed of the writ petition by directing the petitioner to pay ?10,51,175/- with 6% interest per annum from 29.01.2004 to the Commercial Taxes Department. Upon payment, the charge on the sale proceeds would be removed, and the attachment on the petitioner's bank account would be lifted. The court emphasized that the statutory charge under Section 16C took precedence over the petitioner's claims, and the petitioner could not escape liability.