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2018 DIGILAW 386 (GUJ)

CHAUDHARY TRADING CO. LTD. v. STATE OF GUJARAT

2018-02-02

A.S.SUPEHIA, HARSHA DEVANI

body2018
JUDGMENT : HARSHA DEVANI, J. 1. Rule. Mr. Chintan Dave, learned Assistant Government Pleader waives service of notice of rule on behalf of the respondents. 2. Having regard to the controversy involved in the present case, which lies in a very narrow compass and considering the urgency in the matter as the bank accounts of the petitioners have been attached, the matter was taken up for hearing today. 3. The facts stated briefly are that the petitioners are engaged in re-selling of timber locally within the State of Gujarat as well as in the course of inter-State trade and commerce. The petitioners are duly registered under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the GVAT Act") and under the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act"). 4. Search proceedings came to be conducted by the officers of the Commercial Tax Department from 1.9.2016 to 6.9.2016. At the end of the search proceedings, certain legal issues were raised because of which the authorities were of the opinion that there could be demand against the petitioners in assessment proceedings. The respondents initiated assessment proceedings for the years 2013-14 onwards by issuing statutory notices. The petitioners gave explanation regarding the issues raised by the respondents. However, the authorities proceeded to provisionally attach the stock of the petitioner as well as its bank accounts under section 45 of the GVAT Act by passing provisional attachment orders. Total value of the stock of the petitioners which have been attached is Rs.3,28,24,724/- which according to the petitioners, is almost equivalent to the total demand of tax, interest and penalty proposed to be made in the show cause notice. However, despite the aforesaid fact, the bank accounts of the petitioners have been attached by the respondent authorities. Being aggrieved, the petitioners have filed the present petition challenging the provisional attachment of bank guarantees under the GVAT Act as evidenced by communications received from ICICI Bank, Karur Vysya Bank and Oriental Bank of Commerce dated 1.9.2017, 5.9.2017 and 13.9.2017 as well as the order dated 17.10.2016 made by the Assistant Commissioner of Commercial Tax, (collectively annexed at Annexure "A"), Unit-9, Surat purportedly in exercise of powers under section 44 of the GVAT Act. 5. Mr. 5. Mr. Uchit Sheth, learned advocate for the petitioners, invited the attention of the court to the provisions of section 45 of the GVAT Act, which makes provision for provisional attachment, to submit that the same requires that if during the pendency of any proceedings of assessment or re-assessment of turnover escaping assessment, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may by an order in writing, attach provisionally any property belonging to the dealer in such a manner as may be prescribed. It was submitted that therefore, the provision requires the Commissioner to record satisfaction that for the purpose of protecting the interest of the Government revenue, it is necessary to attach provisionally the property belonging to the dealer, whereas, in the present case, no such satisfaction has been recorded by the respondent authorities. Reference was made to an unreported decision of this court in the case of Vishwanath Realtor and another v. State of Gujarat and others rendered on 29.4.2015 in Special Civil Application No.7210 of 2015, wherein the court held that before passing the order of provisional attachment, there must be an opinion formed by the Commissioner that for the purpose of protecting the interest of the Government Revenue during the pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the revenue in case any order is passed against the dealer under the GVAT Act and/or the dealer is likely to sell his properties and/or sell and/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the revenue may not be in a position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers under section 45 of the GVAT Act. It was urged that thus, definite guidelines have been laid down by this court as to the circumstances under which an order under section 45 of the GVAT Act can be passed. However, in the present case, without recording any satisfaction on such circumstances, the order of provisional attachment has been made. 5.1 The attention of the court was also invited to the order dated 17.10.2016, to point out that the Assistant Commissioner has invited the attention of the bank to the provisions of section 44 of the GVAT Act, which would be applicable at a stage when recovery of adjudicated dues is to be made and not during the pendency of proceedings. It was submitted that therefore, even the provision invoked by the respondents is incorrect. 5.2 It was further submitted that the respondents have already attached stock valued at Rs.3,28,24,724/- which is almost equivalent to the total demand of tax, interest and penalty proposed under the show cause notice, under the circumstances, once the interest of the revenue was secured, there was no necessity of attaching the bank accounts of the petitioner, and therefore, the action of the respondents is also vitiated by non-application of mind to the relevant factors. Reference was made to the order dated 31.8.2017 (Annexure "H" to the petition), to point out that after expiry of one year from the date of attachment, a fresh order has been made under section 45 of the GVAT Act, continuing the attachment on the stock as well as the bank accounts for a further period of one year till 6.9.2018. It was submitted that once the attachment on the stock is continued, there was no necessity for continuing the attachment of the bank accounts of the petitioner. It was, accordingly, urged that the petition deserves to be allowed by setting aside the provisional attachment of the bank accounts of the petitioner as well as the order dated 17.10.2016 to the extent the same extends the period of attachment of the bank accounts of the petitioner. 6. Mr. Chintan Dave, learned Assistant Government Pleader for the respondent, reiterated the averments made in the affidavit-in-reply filed on behalf of the respondents. 6. Mr. Chintan Dave, learned Assistant Government Pleader for the respondent, reiterated the averments made in the affidavit-in-reply filed on behalf of the respondents. It was submitted that having regard to the facts of the case, since the registration number of several parties with whom the petitioner had dealings have been cancelled ab initio, it is likely that huge dues be required to be recovered from the petitioner once the assessment proceedings culminate. It was submitted that the approximate VAT liability for the year under consideration together with penalty and interest comes to about Rs.3,28,24,724/- and hence, considering the huge amount which the petitioner would ultimately be liable to pay, the action taken by the respondents, is just, proper and legal and does not warrant any interference. 7. In the present case, the respondents have provisionally attached the bank accounts of the petitioners as evidenced by communications dated 1.9.2017, 5.9.2017 and 13.9.2017 respectively, received by the petitioners from ICICI Bank, Karur Vyasya Bank and Oriental Bank of Commerce. 8. The power exercised by the respondents is relatable to section 45 of the GVAT Act, which makes provision for provisional attachment and reads thus: “45. Provisional attachment. [1] Where during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may by order in writing attach provisionally any property belonging to the dealer in such a manner as may be prescribed. [2] Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).” 9. This section, came to be interpreted by this court in the case of Vishwanath Realter v. State of Gujarat (supra), wherein it was held thus : “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 necessary so to do. 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 necessary so to do. Therefore, before passing the order of provisional attachment, there must be an opinion formed by the Commissioner that for the purpose of protecting the interest of the Government Revenue during the pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally any property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale and/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the Revenue may not be in a position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers under Section 45 of the VAT Act.” 10. Therefore, for the purpose of invoking section 45 of the GVAT Act, the Commissioner is required to record satisfaction that for the purpose of protecting the interest of the Government revenue, it is necessary to provisionally attach any property belonging to the dealer. Such satisfaction has to be based upon objective facts and should fall within the circumstances enumerated in the above referred decision or circumstances which are akin to the circumstances enumerated therein. In the present case, no satisfaction whatsoever as envisaged under section 45 of the GVAT Act has been recorded by the Commissioner while ordering provisional attachment of the petitioners’ bank accounts. In the present case, no satisfaction whatsoever as envisaged under section 45 of the GVAT Act has been recorded by the Commissioner while ordering provisional attachment of the petitioners’ bank accounts. Moreover, from the facts as emerging from the record it is evident that the action taken by the respondents suffers from the vice of non-application of mind to the relevant facts, inasmuch as, the respondents have failed to take into consideration the fact that the stock belonging to the petitioner worth Rs.3,28,24,724/- had already been attached, which is almost equivalent to the total demand of tax, interest and penalty and therefore, there was no need for any further security towards the demand that may be likely to arise. 11. Moreover, a perusal of the order dated 17.10.2016 addressed to the Manager, Karur Vysya Bank shows that reference has been made therein to the provisions of section 44 of the GVAT Act, which provides for special mode of recovery of arrears of tax, penalty or interest under the Act. In other words, the same relates to dues which have crystallized in favour of the revenue, whereas in the facts of the present case, the assessment order has not yet been passed. Under the circumstances, it is evident that the action of attaching the bank accounts of the petitioners has been taken in a perfunctory and casual manner without application of mind to the relevant statutory provisions. 12. Besides, it may be noted that one year has already passed since the passing of the attachment order and hence, in view of the provisions of sub-section (2) of section 45 of the GVAT Act, such order would cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1). However, on behalf of the respondents, it has been contended that the provisional attachment stands extended in view of the order dated 31.08.2017 (Annexure “H”) made by the Commercial Tax Officer. The said order, in turn, has been made with reference to an order dated 6.9.2016 of the Assistant Commercial Tax Commissioner and extends the validity of the order for a further period of one year. The order further says that it shall be the responsibility of the dealer to maintain status quo in respect of the property and stock under attachment. The order further says that it shall be the responsibility of the dealer to maintain status quo in respect of the property and stock under attachment. On a plain reading of the said order, it does not appear to have been made with reference to the bank accounts that came to be attached. Be that as it may, having regard to the view the court is inclined to take in the matter, it is not necessary to dwell further on this aspect. 13. As discussed earlier, it is evident that no satisfaction as required under section 45 of the GVAT Act has been recorded by the Commissioner for the purpose of attaching the bank accounts of the petitioners. Moreover, having regard to the fact that the stock of value which would cover the demand that may arise in future has already been attached, there was no necessity of further attachment of the bank accounts of the petitioners. Under the circumstances, the action of the respondents of attaching the bank accounts of the petitioners’ stands vitiated by non-application of mind to the relevant factors and other infirmities as noticed hereinabove and cannot be sustained. 14. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The provisional attachment of the bank accounts of the petitioners as evidenced by the communications received by the petitioners from ICICI Bank, Karur Vysya Bank and Oriental Bank of Commerce dated 1.9.2017, 5.9.2017 and 13.9.2017 respectively, as well as the order dated 17.10.2016 (collectively annexed at Annexure “A” to the petition), are hereby quashed and set aside. The respondents are directed to forthwith release the bank accounts of the petitioners attached by the impugned orders. The order dated 31.8.2017 (Annexure “H” to the petition), to the extent the same is construed by the respondents to extend the period of attachment of the bank accounts of the petitioners, is also hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs.