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2020 (3) TMI 520 - HC - VAT and Sales TaxRecovery of dues from the petitioner's bank - provisional attachment of the goods which was secured with the petitioner-Bank - Section 44 of the VAT Act - HELD THAT - It is not in dispute that the petitioner had advanced a loan of ₹ 40,00,000/- on hypothecation of 200 cotton bales to the respondent No.3. It also emerges from the record that the respondent No.1 passed an order of provisional attachment, under Section 45 of the VAT Act after the petitioner advanced a loan to the respondent No.3. On perusal of the aforesaid provisions of the VAT Act, it is clear that the petitioner is not holding any money of the respondent No.3, who is a borrower of the petitioner and therefore, the respondent No.1 could not have issued the notice by invoking the provisions of Section 44(1)(b) of the VAT Act - the provision of Section 48 of the VAT Act would not come into play and therefore, the respondent No.1 could not have issued provisional attachment order under Section 45 of the VAT Act, nor notice could have been issued under Section 44 of the VAT Act to the petitioner. The learned Assistant Government Pleader stated that after expiry of the provisional attachment order on completion of one year, it was extended only for a period of one year and thereafter, the same was not extended. Therefore, as on today, provisional attachment order is not in existence, as per Sub-section (2) of Section 45 of the VAT Act. The impugned notices dated 07.05.2012 and 11.05.2012, issued under Section 44 of the VAT Act, are hereby quashed and set aside - Petition allowed.
Issues Involved:
1. Validity of notices issued under Section 44 of the VAT Act. 2. Priority of claims under Section 48 of the Gujarat Co-operative Societies Act, 1961 versus the VAT Act. 3. Legality of the provisional attachment under Section 45 of the VAT Act. 4. Disbursement of auction proceeds. Detailed Analysis: 1. Validity of Notices Issued under Section 44 of the VAT Act: The petitioner challenged the notices dated 07.05.2012 and 11.05.2012 issued under Section 44 of the VAT Act, which directed the petitioner to pay the dues of the respondent No.3. The court examined Sections 44, 45, and 48 of the VAT Act and concluded that the petitioner was not holding any money of the respondent No.3, who was a borrower. Therefore, the respondent No.1 could not have issued the notice by invoking the provisions of Section 44(1)(b) of the VAT Act. Consequently, the impugned notices were quashed and set aside. 2. Priority of Claims under Section 48 of the Gujarat Co-operative Societies Act, 1961 versus the VAT Act: The petitioner argued that it had a prior charge over the hypothecated cotton bales under Section 48 of the Gujarat Co-operative Societies Act, 1961. The respondent No.1 contended that the government had a prior charge under Section 48 of the VAT Act. The court referred to the case of Kalupur Commercial Co-operative Bank Ltd. Vs. State of Gujarat and concluded that Section 48 of the VAT Act would only come into play once the liability is finally assessed and the amount becomes due and payable. Since no final assessment order was passed, no tax dues were crystallized, and therefore, there could not be any prior charge over the property by virtue of Section 48 of the VAT Act read with Section 48 of the Gujarat Co-operative Societies Act. 3. Legality of the Provisional Attachment under Section 45 of the VAT Act: The respondent No.1 had issued a provisional attachment order under Section 45 of the VAT Act. The court noted that the provisional attachment order had expired after one year and was not extended. Therefore, as per Sub-section (2) of Section 45 of the VAT Act, the provisional attachment order was not in existence. The court also found that the respondent No.1 could not have issued the provisional attachment order as the tax dues were not crystallized. 4. Disbursement of Auction Proceeds: In compliance with the court's order dated 28th March 2013, 200 cotton bales were auctioned, and an amount of ?36,53,323/- was received. After deducting ?1,08,342/- paid to respondent No.2 as rent, the remaining amount of ?35,44,981/- was deposited with the Registry of the Court. The court directed the Registry to pay ?16,854/- to respondent No.2 towards the cost of obtaining the valuation report and the remaining amount of ?35,28,127/- to the petitioner along with any accrued interest. Conclusion: The petition was allowed, and the rule was made absolute to the extent that the impugned notices under Section 44 of the VAT Act were quashed. The court directed the disbursement of the auction proceeds as specified. No order as to costs was made.
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