High Court upholds attachment of bank accounts under Gujarat VAT Act citing non-disclosure of debts and tax evasion.

The High Court upheld the provisional attachment of the petitioner's bank accounts under Section 45 of the Gujarat Value Added Tax Act. The Court found that the petitioner's non-disclosure of substantial bank borrowings and ongoing recovery proceedings influenced the decision. The petitioner's significant debts and potential tax evasion allegations supported the attachment to secure government dues. Consequently, the petition was dismissed, and the interim relief was vacated, affirming the attachment to safeguard government revenue interests.

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Issues:
Challenging attachment of bank accounts under Section 45 of the Gujarat Value Added Tax Act, 2003.

Analysis:
1. The petitioner, a company engaged in trading and manufacturing, challenged the attachment of its bank accounts by the Assistant Commissioner of Commercial Tax under Section 45 of the VAT Act based on communications dated 3.11.2015. The petitioner argued that the attachment was premature as VAT liability was yet to be ascertained through assessment, and such assessments would be subject to appeal and revisions, making the attachment harsh and detrimental to business operations.

2. The respondent authorities defended the attachment by stating that there were prima facie materials suggesting a tax demand of Rs. 29.74 Crores for certain assessment years. They highlighted that the petitioner had mortgaged properties with nationalized banks for substantial credit facilities, including properties in Mumbai and Gota. The authorities justified the attachment of bank accounts to secure government dues, especially considering the petitioner's substantial debts and potential tax evasion.

3. The High Court examined the provisions of Section 45 of the VAT Act, which grants the Commissioner the power of provisional attachment to protect government revenue during assessment proceedings. The Court noted that when there are substantial arrears of tax dues, the Commissioner is justified in exercising such powers. The Court previously granted interim relief by lifting the attachment of bank accounts based on the petitioner's assertion regarding the value of the attached property in Mumbai, but subsequent revelations of substantial bank borrowings and non-disclosure of critical information led to the dismissal of the petition.

4. The Court found that the petitioner's deliberate non-disclosure of significant facts, such as extensive bank borrowings and ongoing recovery proceedings by nationalized banks, influenced the previous interim order. The petitioner's substantial debts to nationalized banks and potential tax evasion allegations supported the Commissioner's decision to attach bank accounts under Section 45 of the Act. Consequently, the petition was dismissed, and the interim relief was vacated, upholding the provisional attachment of the petitioner's bank accounts to safeguard government revenue interests.

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