2017 (5) TMI 25 - HC - VAT and Sales Tax

Attachment of Bank account - Section 45 of the GVAT Act, 2003 - case of petitioner is that unless and until there is a satisfaction recorded on the part of the authority that the dealer is likely to dispose of the properties/withdraw the amount from the bank; as the case may be, with a view to avoid the liability to pay tax under the Act, the authority cannot pass an appropriate order u/s 45 of the Act - principles of natural justice - Held that - it may so happen that having satisfied that the immediate steps are required to be taken or that the Dealer is likely to dispose of the properties and/or withdraws amount from the bank with a view to defeat the claim of the Revenue, in that case, the authority may pass an order of provisional attachment. However, that does not mean that thereafter, while passing the final order under Section 45 of the Act, the petitioner-Dealer is not required to be given any opportunity of being heard. Under the circumstances, the impugned order can be said to be against the principles of natural justice - It is ultimately for the appropriate authority to pass appropriate order in accordance with law and on merits; more particularly, considering Section 45 of the Act. Rule is made absolute to the aforestated extent - appeal allowed by way of remand.

Summary

Issues:
Challenge to impugned order attaching bank account under Section 45 of the VAT Act based on breach of natural justice and non-reasoned order.

Analysis:
The petitioner challenged the impugned order dated 9th January 2017, attaching their bank account under Section 45 of the Gujarat Value Added Tax Act, 2003, citing a breach of natural justice. The petitioner argued that the order was issued without waiting for their reply to the show cause notice, and it lacked a reasoned basis for invoking powers under Section 45. The petitioner contended that the authority must record satisfaction that the dealer might dispose of properties or withdraw funds to avoid tax liability before passing such an order. The petitioner relied on a previous court decision to support their case.

The respondent defended the impugned order, highlighting the petitioner's conduct of withdrawing a substantial amount from the bank account after a search on 4th January 2017. The respondent argued that the withdrawals, especially over ?60 lakhs, indicated an intention to evade tax liability, necessitating immediate action to prevent further revenue loss. The respondent justified the order as a measure to protect the revenue's interest and prevent the dealer from avoiding tax obligations.

Upon hearing arguments from both parties, the court noted that the impugned order was issued on the same day as the show cause notice, raising concerns about the lack of opportunity for the petitioner to be heard. The court also observed that the order was non-speaking and non-reasoned, failing to justify the attachment of the bank account under Section 45. Consequently, the court quashed and set aside the impugned order but directed that it be treated as a provisional attachment pending a final order after affording the petitioner a reasonable opportunity to be heard.

The court instructed the petitioner to appear before the appropriate authority to make submissions regarding the proposed order of attachment by a specified date. The authority was directed to pass a reasoned order in accordance with the law and on merits, ensuring a fair process for both parties. The court emphasized that its ruling did not favor either party on the merits of the attachment order, leaving the final decision to the appropriate authority. No costs were awarded in the case, considering the circumstances.