2015 (11) TMI 1016 - HC - VAT and Sales Tax

Court quashes premature tax attachment orders, emphasizes procedural fairness

Automark Industries (I) Ltd. Versus State of Gujarat & 3

The court quashed the attachment orders issued under Section 44 of the Gujarat Value Added Tax Act, 2003, finding them premature and arbitrary. It ... Recovery proceedings where appeal is pending before the appellant authority - Attachment of bank accounts - section 44 of the Gujarat Value Added Tax Act, 2003 - Held that:- While it is true that under rule 27 of the rules, the respondent is empowered to call upon the petitioner to pay the amount assessed within a period of thirty days from the date of service of such notice, however, when the petitioner has preferred an appeal together with the stay application within the prescribed period of limitation, the respondents are required to act in a reasonable manner in connection with the notice issued under section 27 of the Act. The fourth respondent is required to keep in mind the fact that the petitioner has preferred appeals before the first appellate authority and that the stay applications are pending. That if the stay applications are allowed or partly allowed, the petitioner would be required to deposit only a part of the demand covered under the notice or may be even granted complete unconditional stay. Under the circumstances, it is expected of the fourth respondent to stay his hands till the stay application of the petitioner is decided, unless the stay application is not decided on account of default on the part of the petitioner or it is found that the petitioner is unnecessarily delaying the hearing of the stay application. However, in the absence of any exceptional circumstances, there is no warrant for the respondent authorities to proceed to initiate coercive recovery in exercise of powers under section 44 of the Act by attaching the bank accounts of the petitioner. When the petitioner had already preferred an appeal with a stay application, the least that was expected of the fourth respondent was to wait for the outcome of the stay application before resorting to coercive measures as has been done in the present case. Besides, the orders under section 44 of the Act also suffer from the vice of non-application of mind, inasmuch as, in the notices issued to each of the banks, the fourth respondent has sought to recover the entire demand covered under the notice from each of the banks. - The impugned orders dated 17.7.2015, 9.6.2015 and 17.7.2015 (Annexure-E collectively to the petition) as well as the impugned orders dated 11.9.2015 Annexure-R-III Collectively, to the affidavit in reply of the respondent cannot be sustained. - Decided in favour of assessee. Issues Involved:1. Legality of attachment orders under Section 44 of the Gujarat Value Added Tax Act, 2003.2. Procedural fairness in handling stay applications and appeals.3. Impact of coercive measures on the petitioner's right to conduct business.Detailed Analysis:1. Legality of Attachment Orders under Section 44 of the Gujarat Value Added Tax Act, 2003:The petitioner challenged the orders dated 21.7.2015, 22.7.2015, 10.8.2015, and 11.9.2015 issued by the respondents under Section 44 of the Gujarat Value Added Tax Act, 2003, which attached the bank accounts of the petitioner. The petitioner argued that these orders were issued without waiting for the statutory period to elapse and without considering the pending stay applications and appeals. The court observed that the fourth respondent had issued notices to the banks to recover the entire demand from each bank account, which could have resulted in triple recovery of the same amount. This indicated non-application of mind and arbitrary exercise of power by the fourth respondent.2. Procedural Fairness in Handling Stay Applications and Appeals:The petitioner had filed appeals and stay applications within the prescribed period of limitation against the assessment orders. Despite this, the fourth respondent proceeded with the attachment of the bank accounts without waiting for the outcome of the stay applications. The court highlighted that the first appellate authority had not taken any decision on the stay applications, and the fourth respondent's actions were premature and unreasonable. The court emphasized that the respondents should act reasonably and wait for the decision on the stay applications before resorting to coercive measures.3. Impact of Coercive Measures on the Petitioner's Right to Conduct Business:The court noted that the attachment of the bank accounts seriously affected the petitioner's right to carry on business and harmed its reputation in the business community. The court referred to the Supreme Court's decision in Rash Lal Yadav v. State of Bihar, which emphasized that drastic powers must be exercised fairly and reasonably. The court found that the fourth respondent's actions were not warranted and were taken without proper consideration of the pending appeals and stay applications.Conclusion:The court quashed and set aside the impugned orders dated 17.7.2015, 9.6.2015, and 11.9.2015, and directed the third respondent Deputy Commissioner of Commercial Tax (Appeals) to decide the stay applications filed by the petitioner within fifteen days. The court ruled that the respondents' actions were arbitrary and not in accordance with the principles of natural justice, thereby allowing the petition with no order as to costs.