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TMI Blog2022 (4) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... be exercised when there is a person who has debtor-creditor relationship with the dealer and from whom his money is due or may become due to him or the person who holds or may subsequently hold money for or on account of such dealer. Indisputably, in the case on hand, the company and the writ-applicants nos.2 and 3 respectively do not have any debtor-creditor relationship. Under sub-section (5) of Section 44 of the GVAT Act, a person to whom a notice under this sub-section is sent has a right to object to the notice by a statement that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee and then nothing contained in this sub-section would require such person to pay any money or part thereof, as the case may be - In the case on hand, no notice was sent to the writ-applicants nos.2 and 3 respectively in the manner prescribed and straightway the respondent no.1 proceeded to attach the personal properties of the two writ-applicants. Had the notice been sent to the writ-applicants nos.2 and 3 respectively as contemplated under sub-section (5) of Section 44 of the GVAT Act, both would have had the libe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Petitioner; (d) Any other and further relief deemed just and proper be granted in the interest of justice; (e) To provide for the cost of this petition. 2. The writ-applicant no.1 is a company registered under the provisions of the Gujarat Value Added Tax, 2003 (for short, the GVAT Act ). The writ-applicant no.2 is the Director of the company and the writ-applicant no.3 happens to be the brother of the writ-applicant no.2. The writ-applicant no.3 has nothing to do with the company. 3. It appears from the materials on record that the company, as a taxable entity, has incurred liability towards the payment of tax under the provisions of the GVAT Act. The company incurred a liability of ₹ 56,05,146=00 sometime in the year 2013. The company preferred an application under the Vera Samadhan Yojana, 2019 . Such application was filed on 6th November 2019. In accordance with the said Scheme, the company was required to pay an amount of ₹ 56,05,146=00, and upon deposit of such amount, the interest to the tune of ₹ 60,53,560=00 would be waived. 4. It is the case of the company that it deposited the amount of ₹ 56,05,146=00 under the Scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication under Vera Samadhan Yojna for the year 2012-2013 and 2013-2014 and paid tax totaling to ₹ 56,05,160/- for which as per the Vera Samadhan Scheme the interest and penalty of ₹ 60,53,560/- for the said amount has already been waived. However the petitioners was liable to pay principle amount of tax amounting to ₹ 1,68,02,573/minus ₹ 56,05,160/- which now comes to ₹ 1,12,10,280/-. 8. I say and submit that by virtue of the Government Resolution dated 06.12.2019, the present petitioner is liable to pay total amount of tax to the tune of ₹ 1,12,10,280/-, for the year 2010 to 2015 as the petitioners had availed the deferment scheme, whereby the petitioner has already collected the said amount of tax. The said amount so collected was ₹ 1,68,02,573/which was initially used as working capital. The petitioner was supposed to make the payment of tax from 31.05.2010 in six equal installments of ₹ 28,02,573/but the present petitioner had only paid an amount of ₹ 56,05,146/- for Assessment Year 2012-13, 2013-14. The petitioner is liable to pay the remaining amount to the tune of ₹ 1,12,10,280/- for the year 2010-2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract to the contrary, the Commissioner may at any time or from time to time, by notice in writing, a copy of which shall be forwarded to the dealer at his last known address, require, - (a) any person from whom any amount of monies is due, or may become due, to a dealer on whom notice has been served under sub-section (1), or (b) any person who holds or may subsequently hold monies for or on account of such dealer, to pay the Commissioner, either forthwith upon the monies becoming due or being held or within the time specified in the notice (but not before the monies becomes due or is held as aforesaid) so much of the monies as is sufficient to pay the amount due by the dealer in respect of the arrears of tax, penalty or interest under this Act, or the whole of the money when it is equal to or less than that amount. Explanation .- For the purposes of this subsection, the amount of monies due to a dealer from, or monies held for or on account of a dealer by any person, shall be calculated by the Commissioner after deducting there from such claims, if any, lawfully subsisting, as may have fallen due for payment by such dealer to such person. (2) The Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub- section may be issued to any person who holds or may subsequently hold any money for or on account of the assessee jointly with any other person and for the purposes of this sub- section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the assessee at his last address known to the Assessing Officer or Tax Recovery Officer], and in the case of a joint account to all the joint holders at their last addresses known to the Assessing Officer or Tax Recovery Officer. (iv) Save as otherwise provided in this sub- section, every person to whom a notice is issued under this subsection, shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of a debt by the Tax Recovery Officer in exercise of his powers under section 222. 14. The above referred Section 226(3) of the Act, 1961 is modelled upon the provision of the Australian Act, Section 218. It is need less to reproduce the corresponding provision in the Australian Act. At page 1099 of Income-tax Law and Practice (Commonwealth) by Challener and Greenwood, second edition, it is observed as follows in discussing the scope of the Australian enact merit: The purpose of Section 218 is to enable the Commissioner to collect unpaid taxes from persons owing money to the tax-payer without having to proceed to judgment and issue execution. Thus, sub-section (1) authorises the Commissioner to give notice to any person mentioned in (a), (b), (c) on (d) of the sub-section to pay to the Commissioner either forthwith or at or within a time specified in the notice, not being a time before the money becomes due or is held, such amount as is sufficient to pay the tax due and any financial costs. or the whole of the money if it is not greater than (he amount due. A copy of the notice is to be forwarded to the tax-payer. Any person making payment pursuant to such a notice i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of the assesses, upto the amount of arrears. The banker then informed the officer that there was no amount which was payable to the assessee and that the assessee had pledged his goods and executed a mortgage of certain properties. The Income-tax Officer replied by letter dated 24-11-1955 that the notice will come into operation as and when the assessee make future payments. The Banker refused to pay the assessee any further sum on his overdraft account and the assessee filed a petition under Article 226 of the Constitution questioning the validity of the notice and the letter. The High Court held that an unutilised overdraft account does not render the banker a debtor in any sense and the banker is, therefore, not a person from whom money is due to the customer. It further held that the banker in such a case is not a person from whom money became due . Accordingly a writ was issued. Rajagopala Aiyangar, J., as he then was, referring to the provision of Section 46(5-A), in 1958-33 ITR 26 (AIR 1958 Mad 181) observed thus at page 31. Unless the bank were a debtor there could be no attachment and an unutilised overdraft account does not render the bank a debtor in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided on 17th October 2019), more particularly, paragraphs 18 and 19 respectively : 18. On a plain reading of the provisions of section 44 of the GVAT Act, it is clear that the same are in the nature of garnishee proceedings and can be invoked against any person from whom any amount is due, or may become due, to a dealer. Such dealer should be a person to whom notice has been served under sub-section (1) of section 44 of the GVAT Act. The third respondent in the affidavit-in-reply filed by it has not made reference to any such notice having been issued to it nor has any averment to that effect been made in the affidavit-in-reply filed on behalf of the first respondent. Therefore, the basic requirement for invoking the provisions of section 44 of the GVAT Act, viz. service of notice to the dealer under sub-section (1) thereof, has not been satisfied. 19. Another aspect of the matter is that a condition precedent for issuing notice under section 44 of the GVAT Act to the second respondent bank is that the said bank should be holding or may subsequently hold monies on account of such dealer. The expression dealer has been defined under section 2(10) of the GVAT Act to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of the notice to the concerned person, there is no valid initiation of the garnishee proceedings. 23. Under sub-section (5) of Section 44 of the GVAT Act, a person to whom a notice under this sub-section is sent has a right to object to the notice by a statement that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee and then nothing contained in this sub-section would require such person to pay any money or part thereof, as the case may be. 24. After the person concerned objects by filing a statement that the sum demanded or any part thereof is not due from him to the assessee, then recovery cannot be effected from him unless the Assessing Officer or the Tax Recovery Officer holds an inquiry in which the concerned person is associated. In the inquiry, such person or dealer shall have to be given an opportunity of being heard. 25. In the case on hand, no notice was sent to the writ-applicants nos.2 and 3 respectively in the manner prescribed and straightway the respondent no.1 proceeded to attach the personal properties of the two writ-applicants. 26. Had the notice been sent to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fairness can have no application to bring a citizen who is not within the four corners of the taxing statute within its fold so as to make him liable to payment of tax. The entire approach of the department that as it is not in a position to recover anything from the company, it can run after the Director of the company and attach his personal properties. The writ applicant No.3 has even otherwise no legal connection with the company. He just happens to be the brother of the writ applicant No.2 before us. 32. Over a period of time, we have noticed that Section 44 of the GVAT Act is being misused to the maximum. Either the authorities concerned have no idea about the scope and true purport of Section 44 of the GVAT Act or they just pretend to be ignorant of the correct interpretation of Section 44 of the GVAT Act. 33. In the result, this writ-application succeeds. The order of attachment in the case of both, the writ-applicant no.2 and the writ-applicant no.3, is hereby quashed and set-aside. The attachment stands removed. 34. So far as the liability of the company is concerned, it shall be open for the authorities to proceed further in accordance with law. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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