2018 (10) TMI 1317 - HC - VAT and Sales Tax

Return of tax collected during search proceedings - refund the amount already recovered from the petitioner - quashing the statement of officer of petitioner-company - Held that - Pursuant to the search, statements have been recorded and documents collected. Assessment proceedings are initiated but not yet completed. Till utilization of tax liability, it would not be open for the department to recover the tax. This is not to suggest that the department cannot take other means to protect the interest of the Revenue, if so, otherwise found necessary. The petitioner's last request for refund of the amount already recovered, we are not inclined to grant. The petitioner having issued the cheque and in lieu thereof deposit such cheque having transferred the money through RTGS the question of coercive recovery may assume some significance. The respondents are prevented from depositing remaining cheques of the petitioner collected during the search operations for realization and may be returned to the petitioner. The petitioner's remaining prayers are not granted - petition disposed off.

Summary

Issues:
1. Recovery of tax collected during search proceedings
2. Refund of recovered amount
3. Legality of statement recorded during search

Analysis:

1. The petitioners sought three reliefs: a) directing the respondent to return the tax collected during search proceedings, b) refunding the amount already recovered, and c) quashing the statement recorded by the officer of the petitioner-company. The petitioner, a hospitality industry owning hotels in Surat, had post-dated cheques collected during a search operation by VAT authorities, with one cheque already replaced by an RTGS payment of ?40 lacs. The total amount of cheques collected exceeded ?2.5 crores, including the ?40 lacs already recovered.

2. The High Court observed that assessment proceedings were initiated but not yet completed, indicating that until the tax liability was determined, the department could not recover the tax. However, the department could utilize other means to protect revenue interests if necessary under the provisions of the VAT Act. The Court declined the petitioner's request to declare the statement recorded during the search as illegal, stating that such determinations could only be made during the assessment process. The Court also refused the petitioner's request for a refund of the amount already recovered, noting that the petitioner had issued a cheque and subsequently transferred the money through RTGS, suggesting that coercive recovery might be warranted.

3. The Court ultimately directed that the remaining cheques collected during the search operations should not be deposited for realization and should be returned to the petitioner. While the Court accepted the petitioner's limited request to prevent further recoveries, it did not grant the other prayers. The judgment made it clear that no opinion was expressed on the various contentions raised, especially those related to pending assessment issues. The petition was disposed of accordingly.