2017 (10) TMI 605 - HC - VAT and Sales Tax

CFS - Validity of Form U notice issued under Rule 9(4) of the Tamil Nadu Value Added Tax Act, 2006 - whether petitioner could be teated as Garnishee or not? - Held that - Admittedly, the petitioner is not a garnishee as they are only CFS duly licensed by the Customs Department. The amount, which they have recovered by sale of the goods is the amount which is lawfully due to them and the sale proceeds of the steel did not cover the entire dues and it is stated that some more amount is recoverable from the third respondent. Thus, the petitioner is not required to pay any monies to the third respondent, but the case is vice versa. Identical issue arose for consideration before this Court in the case of Tvl.Sical Multimodal and Rail Transport Ltd., v. The Assistant Commissioner (CT), Cholavaram Assessment Circle and others 2015 (11) TMI 689 - MADRAS HIGH COURT , wherein the The correctness of such notice was challenged in the writ petition and the writ petition was allowed and a direction was issued to refund the amount, which was recovered by the Commercial Taxes Department by attaching the bank account of the petitioner. The petitioner cannot be treated as a garnishee of the third respondent and the impugned Form U notice is wholly without jurisdiction - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to Form U notice under Rule 9(4) of TNVAT Act for sales tax dues recovery.

Analysis:
The petitioner, a Container Freight Station (CFS) licensed by Customs Department, challenged the Form U notice under Rule 9(4) of TNVAT Act claiming ?1,25,34,480 from the third respondent for sales tax dues. The third respondent, who imported steel stored in petitioner's CFS, failed to clear goods, leading to the petitioner recovering dues through E-auction of goods. The petitioner retained part of the dues and sought the balance from the third respondent. The Commercial Taxes Department issued the impugned notice, but the petitioner, not a garnishee, rightfully retained recovered amounts. Similar issues were addressed in a previous case, where the court directed a refund of wrongfully attached amounts.

The court noted that the Commercial Taxes Department erroneously attached the petitioner's bank account without proper assessment. The petitioner had followed due process, issuing notices to the third respondent before E-auctioning the goods. The court found no irregularity in the petitioner's actions and set aside the impugned order, directing the refund of ?75,27,657 to the petitioner within two weeks. The court clarified that the first respondent could pursue recovery from the second respondent according to the law. The writ petition was allowed, with no costs imposed.

Consequently, the court ruled that the petitioner was not a garnishee of the third respondent, rendering the Form U notice invalid. Respondents 1 & 2 were directed to refund the entire amount of ?50,06,823 recovered from the petitioner's bank account within 15 days. The court closed the case, with no costs incurred.