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TMI Blog2022 (4) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... g the remedies which are available to assessees for challenging the correctness of a demand. The sanctity of the rule of law must be preserved. The remedies which are legitimately open in law to an assessee to challenge a demand cannot be allowed to be foreclosed by a hasty recourse to coercive powers. Assessing Officers and appellate authorities perform quasi-judicial functions under the GVAT Act, 2003. The impugned notices are hereby quashed and set aside - application allowed. - R/Special Civil Application No. 11190 of 2021 - - - Dated:- 9-3-2022 - Honourable Mr. Justice J.B.Pardiwala And Honourable Ms. Justice Nisha M. Thakore For the Petitioner(s) : Mr Tushar Hemani Senior Counsel With Mr Kuntal A Parikh For the Respondent(s) : Mr Utkarsh Sharma, AGP ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 The draft amendment, as prayed for, is allowed. The necessary incorporation shall be carried out at the earliest. 2 By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs: (a) That this Honorable Court be pleased to issue a writ of certiorar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Central Sales Tax Act, 1956 (for short, the Central Act ) for the relevant period. 5 The writ applicant No.1 carries its business operations under the following divisions: (i) Infotech Division which include supply of information technology services and sale of hardware and software. (ii) Consumer Division which include sale of lightings, toiletries, etc and (iii) Solar Division which include supply of solar generation and supply of power. 6 The subject matter of challenge is the legality and validity of the notice issued by the State Tax Officer II, Unit 8, Ahmedabad dated 31st July 2021 to the Branch Manager, State Bank India, Ashram Road, Ahmedabad. The same reads thus: No.CTO-2/Unit-8/Recovery Branch/2021-22/OW- Office of the Asst. Commissioner of State Tax Unit-8, D-Block, 3rd Floor, M.S. Building, Lal Darwaja, Ahmedabad, Gujarat. Phone No.-079-25506351 Dt:31/07/2021 To, The Branch Manager, State Bank of India, Ashram Road, Ahmedabad. A/C. No.00000010503343023 any other deposits of said dealer This is to inform to you that Government of Gujarat ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remarks 2006-07 VAT 3,34,14,366 12,47,363 Pending but recovery made 12,47,363 2,50,000 Already recovered 2008-09 VAT 6,35,82,876 3,36,198 Settled but recovery made 3,36,198 68,000 Settled under Amnesty Scheme. 2011-12 VAT 14,54,77,638 8,53,10,401 Pending 8,53,10,401 8,53,10,401 First appeal filed under the Gujarat VAT Act is pending for final disposal. Stay has been extended from time to time on the basis of BG. CST 5,45,746 56,35,861 Pending 56,35,861 56,35,861 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 We have heard Mr. Tushar Hemani, the learned Senior Counsel assisted by Mr. Kuntal A. Parikh, the learned advocate appearing for the writ applicants and Mr. Utkarsh Sharma, the learned A.G.P. appearing for the State respondents. 9 Mr. Hemani made the following submissions: (i) Indisputably, the respondent No.3 has not invoked the power under Section 45 of the VAT Act to attach the bank accounts of the writ applicant No.1 during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. (ii) The respondent No.3 has failed to frame an opinion for the purpose of protecting the interest of the government revenue by attaching the bank accounts of the writ applicant no.1. (iii) Further, the respondent No.3 has not brought on record any tangible material on the basis of which he would have framed an opinion that the writ applicant No.1 is likely to defeat the demand and therefore attachment is necessary for protecting the interest of government revenue. (iv) The respondent No.3 has not served copy of order of attachment to the writ applicant No.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alization of an assessment or the raising of a demand. Conscious as the legislature was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, it conditioned the exercise of the power by employing specific statutory language which conditions the exercise of the power. The language of the statute indicates first, the necessity of the formation of opinion by the Commissioner; second, the formation of opinion before ordering a provisional attachment; third the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourth, the issuance of an order in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory pre-conditions by the Commissioner. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between the nature and extent of the attachment and the purpose which is sought to be served by ordering it. Moreover, the words embodied in sub-Section (1) of Section 83, as interpreted above, would leave no manner of doubt that while ordering a provisional attachment the Commissioner must in the formation of the opinion act on the basis of tangible material on the basis of which the formation of opinion is based in regard to the existence of the statutory requirement. While dealing with a similar provision contained in Section 4536 of the Gujarat Value Added Tax Act 2003 , one of us (Hon ble Mr Justice MR Shah) speaking for a Division Bench of the Gujarat High Court in Vishwanath Realtor v State of Gujarat observed: 8.3. Section 45 of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, the order of provisional attachment can be passed by the Commissioner when the Commissioner is of the opinion that for the purpose of protecting the interest of the Government Revenue, it is necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.06.2011 Not approached Stay granted before 1 st appellate authority till 30.03.2012. 30.09.2011 2 2008-09 06.11.2012 3,36,198 VAT 20.11.2012 Not approached Rejected on 19.03.2018 before 1 st appellate authority. Application made on 10.01.2020 under Vera Samadhan Yojna benefit availed. 15.12.2013 30.06.2013 31.08.2013 15.11.2013 3 2011-12 31.03.2016 8,53,10.401/- 03.05.2016 Not approached Stay granted before 1 st appellate authority till 30.09.2019 30.06.2017 30.09.2019 4 2012-13 27.03.2017 1,85,80,473/- VAT Total dues 1,43,47,973/- Remaining dues 11,497,892/- CST 26.05.2017 16.07.2021 Stay till 31.10.2021 under VAT dues Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Gujarat Value Added Tax Act, 2003 would have applicability. It is further submitted that the respondent authorities have exercised the powers under Section 44 of the Gujarat Value Added Tax Act, 2003 whereby, the respondent department had addressed a letter/notice to State bank of India and HSBC Bank wherein, both the Banks were directed to handover an amount of ₹ 49,80,05,122/- along with interest, the powers of section 44 which have been exercised by the authorities qua the bank accounts of the petitioner are those account which have been mentioned by the petitioner in its registration form, it is no toward that in the memo of the petition the petitioner has mentioned SBI bank of Ashram road where as the authorities have issued notice on State bank of India (SBI), Bangalore branch. The said notices dated 31.07.2017 which was received by the banks on 02.08.2021 did not specify attachment of the said bank accounts, as the provisions of Section 44 has been exercised which pertains to special mode of recovery. The bank accounts of the petitioner bearing account no. 051754687001 in HSBC bank and account no. 10503343023 in SBI Bank are defreeze on 06.08.2021. (Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 44 of GVAT Act.) It is further required to be noted that as there was no stay granted recovery of the said amount was done by the respondent authorities. I say and submit at this juncture as stay was granted for assessment year 2011-12 the authorities has not initiated recovery proceedings and as on date the recoverable amount is ₹ 51,20,90,494/-which is with interest. 14 As against the aforesaid, the writ applicants have filed rejoinder stating as under: 7 The contents of paragraph no.8 are denied. It is submitted that in the said reply, the assertion made by respondent no.3, that he had sent the impugned recovery notice dated 31.07.2021 to SBI Branch located in Bangalore, since it is the bank which petitioner no.1 has mentioned in its Registration Form is false for the following reasons: 7.1 Firstly, it is submitted that the Registration Form of petitioner no.1 as attached in R-2 (Colly.)', in the said Reply, does not mention the bank account details corresponding to SBI Bank's branch in Bangalore wherein the Respondent no.3 has alleged to have sent the impugned notice of recovery. 7.2 Secondly, the impugned notice dated 31.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned notices to Petitioners' banks and therefore it is submitted that prerequisite conditions of section 45 of the GVAT Act have not been complied with by the Respondents for attaching bank accounts of the Petitioners. 7.7 In the above premises it is submitted that the Respondent no.3 has issued the impugned notices under section 44 and 45 of the GVAT Act without complying with the pre-requisite conditions mentioned therein. Therefore, the impugned notices are illegal and manifestly arbitrary, hence, consequential actions of the Respondents are also liable to be quashed and set aside. 8. The contents in Paragraph no. 9 are denied to the extent it is stated that the notices dated 31.07.2021 were forwarded to Petitioner no.1. It is submitted that the Respondent no.3 has failed to show any documentary evidences proving its assertion that notices was duly sent to the petitioners and also failed to show that they were returned back. It is submitted that the respondent no.3 has not acted in compliance with the mandatory pre-condition of serving copies of the impugned notices to petitioner no.1 at its last known address as required under section 44(1), before issuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provisional Registration Certificate of petitioner No.1 was issued in Form GST Reg-06 whereby the registration of the petitioner was migrated from VAT to GST. Venus Atlantis Q 5 30.08.2017 Letter from petitioners to the respondents Venus Atlantis R 6 11.09.2018 Letter from petitioners to the respondents Venus Atlantis S 7 05.10.2018 Letter from petitioners to the respondents Venus Atlantis T 8 15.07.2019 Letter from petitioners to the respondents Venus Atlantis U 9 05.11.2020 Registration Certificate issued in Form GST REG-06 (GST Registration number being 24AAACW0387RIZT) Chakravarti V 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 Commissioner may amend or revoke any such notice or extended the time for making any payment in pursuance of the notice. (3) Any person making any payment in compliance with a notice under this section shall be deemed to have made the payment under the authority of the dealer, and the receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. (v) Any claim respecting any property in relation to which a notice under this sub- section has been issued arising after the date of the notice shall be void ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponding 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 subsection 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 is deemed to have been acting under the authority of the taxpayer and is indemnified in respect of the payment (sub-section 4), whilst any person failing to comply with such a notice is guilty of an offence (subsection 2). For a case in which Section 218 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 mean any person who, for the purpose of or consequential to his engagement in or, in connection with or incidental to or in the course of business buys, sells, manufactures, makes supplies or distributes goods directly or otherwise, whether for cash or deferred payment, or for commission, remuneration or otherwise and includes the categories of persons enumerated thereunder. In the present case, it is not the case of the first respondent that the bank was holding any monies on account of the dealer, viz. the third respondent herein. Therefore, the impugned order dated 26.9.2018 directing the second respondent bank to deposit a sum of ₹ 17,67,45,934/- along with interest at the rate of 18% per annum, does not meet with the requirements of section 44 of the GVAT Act. 17 Thus, in the absence of any debtor creditor relationship, the department could not have asked the bank to debit the accounts of the writ applicant company and credit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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