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TMI Blog2022 (5) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents under the garb of Section 44 of the GVAT Act could be termed as without jurisdiction and arbitrary. It has been more than 7 years that various individual and personal assets of the writ-applicants have remained under attachment. Unfortunately, even the life insurance policies which matured over a period of time could not be encashed on account of the attachment. The respondents are directed to immediately lift the attachment over all the individual and personal assets of the writ-applicants and release them free from all encumbrances, except for the property referred to in the notice dated 13.10.2017 - application allowed. - R/SPECIAL CIVIL APPLICATION NO. 2242 of 2022 - - - Dated:- 7-4-2022 - HONOURABLE MR. JUSTICE J.B. PARDIWALA AND HONOURABLE MS. JUSTICE NISHA M. THAKORE Appearance: MR DIGANT M POPAT, ADVOCATE for the Petitioner(s) No. 1,2,3,4 MR KAMAL B. TRIVEDI, ADVOCATE GENERAL with MR VINAY BAIRAGRA, AGP for the Respondent(s) No. 1,2 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. By this writ-application under Article 226 of the Constitution of India, the writ-applicants have prayed for the following r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authority propose to attach and put the personal properties of the writ applicants to auction for the purpose of recovering the dues which are otherwise due and payable by the companies. [v] Who is the taxable entity under the Act, 2003 ? 2. Mr. Sharma shall assist this Court on the aforesaid issues on the next date of hearing. Notify this matter on 10th March 2022 on top of the Board. 4. The order dated 17th March 2022 reads thus : 1. We have heard Mr. Digant M. Popat, the learned counsel appearing for the writ applicants and Mr. Utkarsh Sharma, the learned AGP appearing for the respondents. 2. Mr. Dharmesh Goyani, Deputy Commissioner, Range 2, Ahmedabad, and Ms. Parvati Sharma, State Tax Officer, Unit 8, Ahmedabad, are also present in the Court pursuant to the directions issued by this Court vide order dated 24.02.2022. 3. We called upon Mr. Sharma, the learned AGP, to answer the four questions formulated by this Court vide order dated 24.02.2022. What we have been able to understand after hearing Mr. Sharma, the learned AGP and Ms. Sharma, the State Tax Officer, is that the case on hand is one of a large scale fraud and the kingpin of the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e four writ applicants herein could be said to be holding money for or on account of such dealer. When we talk about a taxable entity, it is the dealer registered under the Act, 2003, who could be said to be a taxable entity. At this stage, we should note of the argument of Mr. Sharma, the learned AGP that although, Sunil Shah might not be a dealer registered under the Act, 2003 yet, having regard to the fraud alleged to have been committed, he can be brought within the ambit of the definition of the term dealer . For the time being let us proceed on the footing that Sunil Sharma was a dealer within the Act, 2003 still the question that remains to be answered is in what manner his family members who are none else than his wife, son, married daughter and daughter-in-law, could be said to be holding money for or on account of such dealer i.e. Sunil Shah. This what Mr. Sharma has to explain on the next date of hearing. 7. We are informed that the writ applicant no.3 namely Ruchita Mukesh Kapadia got married to the writ applicant no. 1 Rohan Sunil Shah in 2014. Ruchita appears to be a native resident of Mumbai before her marriage. The department has gone to the extent of attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled written submissions for the purpose of opposing the present writapplication. The written submissions are as under : 1. The main challenge involved in the captioned writ petition is the notice dated 02.07.2021 issued by the Respondent Authorities to the Petitioners, inter-alia, invoking the provisions of Section 44 of the Gujarat Value Added Tax Act, 2003 ( the GVAT Act for short), seeking to recall the adjudicated tax dues payable by the four firms (two proprietorship firms and two partnership firms) and one Mr. Sunil Shah. 2. As regards, the applicability of the said Section 44 of the GVAT Act in the facts of the present case, it is submitted that on perusing the bank statements of those four firms, one of which i.e. Bank Statement of M.M.Traders is produced at Pg.106, it is discernible that there are monetary transactions between the firm on one hand and the present petitioners on the other hand. So are such transaction between other firms referred to above with one or the other petitioners. 3. In view of such monetary transactions between the parties, prima facie the said firms become the Creditors and the present Petitioners become Debtors , who are liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid judgment is distinguishable from the facts of the present case. 10. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the respondents could have proceeded to attach the individual and personal properties of the writ-applicants by invoking Section 44 of the GVAT Act. 11. The aforesaid question posed by us is no longer res integra in view of the recent pronouncement of this High Court by this very Bench in the case of Shri Shakti Cotton Pvt. Ltd. vs. The Commercial Tax Officer (Special Civil Application No.12788 of 2021, decided on 23rd March 2022), wherein this Court has taken the following view : 12. Section 44 of the GVAT Act reads thus : 44. (1) Notwithstanding anything contained in any law or contract 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 moniesis due, or may become due, to a dealer on whom notice has been served under sub-section (1), or (b) any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onies towards the outstanding amount of tax, interest and penalty payable by the dealer. 13. The aforesaid provisions of Section 44 of the GVAT Act are almost pari materia to Section 226(3) of the Income Tax Act, 1961 (for short, the Act, 1961 ). Section 226(3) reads thus: 226. Other modes of recovery: ... (3) (i) The Assessing Officer or Tax Recovery Officer may, at any time or from time to time, by notice in writing require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee, to pay to the Assessing Officer or Tax Recovery Officer either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the 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 purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ix) Any person discharging any liability to the assessee after receipt of a notice under this subsection shall be personally liable to the Assessing Officer or Tax Recovery Officer to the extent of his own liability to the assessee so discharged or to the extent of the assessee's liability for any sum due under this Act, whichever is less. (x) If the person to whom a notice under this subsection is sent fails to make payment in pursuance thereof to the Assessing Officer or Tax Recovery Officer, he shall be deemed to be an assessee in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear of tax due from him, in the manner provided in sections 222 to 225 and the notice shall have the same effect as an attachment 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 Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the writ-applicants nos.2 and 3 respectively do not have any debtor-creditor relationship. 18. The scope of Section 46 (5-A) of the old Income Tax Act which is Section 226(3) of the 1961 Act fell for the consideration of the Madras High Court in the case of Adam vs. Income Tax Officer, 1958 (33) ITR 26. In that case, an assessee was in arrears of tax He had an overdraft account with a banker. The limit of overdraft allowed by the banker was Rs.1,37,500/-, of which the assessee had drawn upto Rs.1,31,301/-. This latter amount was debited to the assessee in the banker's books of account. The Income-tax Officer served a notice on the banker to the effect that the banker should pay to the officer any amount due or becoming due from the banker to the assessee of any money which the banker may hold subsequently for or 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 2411-1955 that the notice will come into operation as and when the assessee m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f attachment, there must be in existence at the date when the attachment becomes operative something which the law recognises as a debt. So long as there is a debt in existence, it is not necessary that it should be immediately payable. Where any existing debt is payable by future instalments, the garnishee order may be made to become operative as and when each instalment becomes due. The debt must be one which the judgment-debtor could himself enforce for his own benefit. A debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation. (see Webb v. Stenton, (1883) 11 QBD 518) 20. We may also refer to a Division Bench decision of this High Court in the case of Green Berry Foils India Limited vs. State of Gujarat (Special Civil Application No.15644 of 2018, decided 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a future time. 22. There is one additional ground available to the writ-applicants on which the action on the part of the respondent no.1 in invoking Section 44 of the GVAT Act could be said to be without jurisdiction. As noted above, the proceedings under Section 44 of the GVAT Act are in the nature of garnishee proceedings, i.e. attachment of a debt by means of which judgment-creditor is enabled to reach the money due from the judgment-debtor, which is in the hands of a third person. Issuance of a notice in writing to the person from whom the money is due and may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay the same to the Assessing Officer is a sine qua non for initiating the proceedings under Section 44 of the GVAT Act. In the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in a plethora of judgements has referred to the aforesaid principles. In Commissioner of Sales Tax, Uttar Pradesh v. Modi Surgar Mills, 1961 (2) SCR 189 at 198, the Supreme Court held as under: In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The Court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency. 31. Thus, from the aforesaid, it can be said that in interpreting a taxing statute, the equitable considerations are entirely out of place. The reasons of morality and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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