Section 44 GVAT Act invalidly used to attach director and brother's assets without debtor-creditor relationship or required notice

HC quashed and set aside attachment orders against the company's director and his brother, holding Section 44 of the GVAT Act requires a debtor-creditor relationship and prescribed notice before garnishee action. The court found no debtor-creditor relationship with the director or brother, and no notice was served as mandated, so they were entitled to object. The attachments were held to be misuse of Section 44 and therefore invalid; the application was allowed.

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Issues Involved:
1. Validity of the impugned notice issued under the Gujarat Value Added Tax Act, 2003 for the payment of outstanding tax and attachment of personal properties.
2. Applicability and interpretation of Section 44 of the GVAT Act.
3. Jurisdiction and procedural correctness of the attachment proceedings.

Detailed Analysis:

1. Validity of the Impugned Notice and Attachment:
The writ-applicants challenged the notice dated 21.08.2021 issued under the GVAT Act for the payment of outstanding tax of Rs. 1,68,02,573/- and the consequent attachment of personal properties of the director and his brother. The company had previously incurred a tax liability of Rs. 56,05,146/- in 2013 and had applied under the 'Vera Samadhan Yojana, 2019', depositing the required amount. Despite this, a fresh levy was raised, leading to the attachment of personal properties.

2. Applicability and Interpretation of Section 44 of the GVAT Act:
Section 44 of the GVAT Act, similar to Section 226(3) of the Income Tax Act, 1961, allows the Commissioner to require any person from whom money is due to a dealer to pay the Commissioner for the dealer’s tax arrears. The court noted that the provisions are in the nature of garnishee proceedings, which require a debtor-creditor relationship. In this case, there was no such relationship between the company and the writ-applicants nos.2 and 3. The court emphasized that Section 44 is intended for situations where a third party owes money to the dealer, not for attaching personal properties of directors or their relatives without such a relationship.

3. Jurisdiction and Procedural Correctness:
The court found that the proceedings under Section 44 were initiated without jurisdiction and proper procedure. No notice was sent to the writ-applicants nos.2 and 3 as required under sub-section (5) of Section 44, which allows the recipient to object and requires an inquiry if objections are raised. The absence of such notice invalidated the attachment proceedings. The court also highlighted that the equitable considerations in interpreting taxing statutes are out of place, and the authorities cannot extend the statute’s application beyond its clear terms.

Conclusion:
The court concluded that the attachment of personal properties of the writ-applicants nos.2 and 3 was without jurisdiction and resulted in undue harassment. The order of attachment was quashed, and the attachment was removed. The authorities were directed to proceed further in accordance with law concerning the company’s liability.

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