2022 (2) TMI 892 - HC - VAT and Sales Tax

Tax authorities lack jurisdiction to create charge on family member's property for dealer's dues. Recovery limited to dealer's assets.

Hajabhai Jivabhai Jiladia & 1 other (s) Versus State Of Gujarat & 3 other (s)

The court held that the tax authorities acted without jurisdiction in creating a charge over the agricultural land owned by the father of the registered ... Recovery of the alleged outstanding dues - Creation of charge over the land of the petitioners - calling for the papers and proceedings leading to the issuing the application dated March, 2013 issued by respondent No.2 - deletion of entry if any made in revenue records pursuant to the application - direction to respondents to forthwith refrain from initiating any steps against the petitioners or other properties for the recovery of the outstanding dues of respondent No.4 - HELD THAT:- It is by now well settled that the department can proceed only against the registered dealer. If it wants to recover the dues due and payable by the dealer, the department cannot proceed to attach any property of any individual or any of the family members of the dealer for the purpose of recovering the dues of the dealer. Having regard to the principles enunciated in KAPURCHAND SHRIMAL VERSUS TAX RECOVERY OFFICER, HYDERABAD, AND OTHERS [1968 (8) TMI 16 - SUPREME COURT], it is well settled that the property of any member of the family of a registered dealer cannot be touched in any manner under any of the provisions of the Act, 2003. The very action on the part of the department in creating a charge over the agricultural land owned by the writ applicant herein being the father of the dealer is without jurisdiction. If any charge has been created in the revenue record with respect to the survey No.80, the same shall stand cancelled. It shall be open for the department to proceed against the dealer. If the registered dealer has any immovable property of his ownership, it is always open for the department to attach such property and recover its dues - Application disposed off. Issues Involved:1. Legality of creating a charge over the petitioner's land for the recovery of dues from a third party.2. Jurisdiction of the tax authorities to proceed against the property owned by the father of the registered dealer.3. Applicability of Section 48, Section 46, and Section 44 of the Gujarat Value Added Tax Act, 2003.4. Interpretation of the terms 'dealer,' 'person,' and 'registered dealer' under the Gujarat Value Added Tax Act, 2003.Detailed Analysis:Issue 1: Legality of creating a charge over the petitioner's land for the recovery of dues from a third party.The writ applicant, an agriculturist, challenged the action of the tax authorities in creating a charge over his agricultural land for the recovery of outstanding dues from his son's proprietary concern, Mahavir Motors. The court noted that the liability to pay tax was determined against Mahavir Motors, which did not challenge the assessment order. The department sought to recover the dues by attaching the property owned by the writ applicant. The court emphasized that the department can only proceed against the registered dealer and not against any property owned by a family member of the dealer.Issue 2: Jurisdiction of the tax authorities to proceed against the property owned by the father of the registered dealer.The court highlighted that the tax authorities' action in creating a charge over the property owned by the father of the registered dealer was without jurisdiction. The court questioned the basis on which the department proceeded against the property owned by the father, as there was no provision in the Gujarat Value Added Tax Act, 2003, that empowered the department to do so. The court referenced Section 48 of the Act, which states that the tax shall be the first charge on the property of the dealer liable to pay the tax, interest, or penalty.Issue 3: Applicability of Section 48, Section 46, and Section 44 of the Gujarat Value Added Tax Act, 2003.- Section 48: The court noted that this section provides that any amount payable by a dealer on account of tax, interest, or penalty shall be a first charge on the property of such dealer. The court clarified that this provision applies only to the property of the dealer and not to any family member's property.- Section 46: This section confers special powers on tax authorities to recover tax as arrears of land revenue. The court reiterated that the recovery can only be effected against the dealer's property.- Section 44: This section provides a special mode of recovery akin to a garnishee order. The court pointed out that it was not applicable in this case as the writ applicant did not hold any monies for or on account of the registered dealer.Issue 4: Interpretation of the terms 'dealer,' 'person,' and 'registered dealer' under the Gujarat Value Added Tax Act, 2003.- 'Dealer' is defined as any person engaged in the business of buying, selling, manufacturing, or distributing goods.- 'Person' includes individuals, joint families, companies, firms, associations, societies, clubs, local authorities, and governments.- 'Registered dealer' means a dealer registered under the Act who holds a certificate of registration.The court referred to the Supreme Court decision in the case of Kapurchand Shrimal vs. Tax Recovery Officer, Hyderabad, which established that the department can proceed only against the registered dealer and not against any family member's property.Conclusion:The court concluded that the action of the tax authorities in creating a charge over the agricultural land owned by the writ applicant (the father of the dealer) was without jurisdiction. The court ordered that any charge created in the revenue record with respect to the land shall stand canceled. The department was directed to proceed against the registered dealer's property, if any, for the recovery of dues. The writ application was disposed of accordingly.