TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 1813
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....rted exercise of powers vested under Section 47 of the Bihar Value Added Tax Act, 2005 (herein after referred to as 'the Act') in directing the Bank concerned to remit the amount mentioned in the notice in the Government treasury. To be specific, the petitioner in C.W.J.C. No.5569 of 2019 prays for quashing one such notice dated 28.2.2019 directing the Branch Manager, Central Bank of India, Danapur, to remit a sum of Rs. 94,29,798/-, a copy of which is impugned at Annexure-3 to the writ petition. The petitioner in C.W.J.C. No. 3321 of 2019 has similarly questioned the notice bearing Memo No.1610 dated 11.02.2019 directing the Branch Manager, IDBI Bank to remit the amount of Rs. 25,22,345.38 by way of VAT and amount of Rs. 23,750/- towards Central Sales Tax which is impugned at Annexure-5 to the writ petition. The petitioner in C.W.J.C. No. 6123 of 2019 prays for quashing of the notice bearing No. 998 dated 12.03.2019 directing the State Bank of India, Main Branch, Gaya to remit an amount of Rs. 48,75,717/- being the cumulative demand towards Central Sales Tax for the financial year 2014-15 and 2013-14 which notice is impugned at Annexure-1 to the writ petition. It is foll....
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....is within his jurisdiction to take recourse to the action under Section 47 of 'the Act', he can attach a Cash Credit Account of the assessee." It is allowing the parties to file their respective affidavits that the matters have been heard and when learned counsel for the petitioners have argued at length in criticism of the purported action by the Assessing authorities in the Commercial Taxes Department in resorting to the special mode of recovery provided under Section 47 of 'the Act' even when statutory appeals/proceedings on the disputed amount of tax, was pending disposal. Learned counsel in reference to several judicial pronouncements of different courts which we shall be dealing hereinafter, have submitted that it is by passing the normal course of recovery provided under Section 39 of 'the Act' and even while the statutory appeals were pending for final adjudication that a special mode of recovery has been resorted to by the assessing authority and in the process they have attached Cash Credit Account of the petitioners which is beyond the scope of the proceeding under Section 47 of 'the Act' because of two reasons namely: (i) No money lies in the ....
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....but except for the petitioner in C.W.J.C. No.3321 of 2019 (M/s. Digican Solution), none of the other petitioners have impleaded their bank as a party respondent. However, in so far as the petitioner in C.W.J.C. No.3321 of 2019 is concerned, the Industrial Development Bank of India (IDBI) and the State Bank of India, Anandpuri Branch, Patna have been arraigned as a party and are represented through their respective counsel Mr. Shivendra Kumar Roy and Dr. Anand Kumar respectively. Mr. Roy, learned counsel of the IDBI has in reference to the statement present at paragraph 12 of the counter affidavit submitted that a Cash Credit Account is actually a loan account and has no deposit which can be transferred to the Commercial Taxes Department. He submits that on receiving the notice from the Commercial Taxes Department, the bank has frozen withdrawal from the Cash Credit Account however, deposits towards the credit already obtained by the account holder has been permitted. The counter affidavit filed on behalf of the State Bank of India as espoused through their counsel, suggests that the money lying in the Commercial Taxes Department in the Current Account of the petitioner has been ....
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....ion to the normal course of recovery, the legislature has vested the prescribed authority with powers to resort to special mode of recovery of tax and other liabilities under Section 47 of 'the Act' in which case, a notice is issued to any person from whom any money is due or may become due to be paid to the dealer and/ or to any other person who holds or may hold any money for or on account of the dealer to pay into the Government treasury, the amount mentioned in the notice within the time specified in the notice. We are persuaded to reproduce the relevant extract of Section 47(1) of 'the Act' for ready reference. "47. Special mode of recovery of tax and other liabilities under this Act.- (1) Notwithstanding anything contained in section 39 or any law or contract to the contrary, the prescribed authority may, at any time or from time to time, by notice in writing (a copy of which shall be forwarded to the dealer at his last address known to the said authority) direct- (a) any person from whom any money is due or may become due to a dealer who has failed to comply with a notice of demand served under section39; or (b) any person who holds or may subsequent....
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....orted to, in a routine manner as has been done in the present set of cases. We say so because in the present set of cases assessment order has been passed, the assessees have deposited the admitted amount of tax and have moved under the statute to appeal against the disputed amount of tax after depositing the statutory fee which is 20% of the disputed amount and it is while the appeals are pending for final adjudication that the prescribed authority bypassing the normal recourse available under Section 39 of 'the Act', has resorted to the special mode of recovery provided under Section 47 of 'the Act' and the reasons are not given for such extreme action. In our considered opinion, where the legislature provides for a scheme of recovery of tax, interest and penalty under Section 39 of 'the Act' and alongside vests the prescribed authority a power to resort to a special mode of recovery in the manner provided under Section 47 of 'the Act' then unless there are reasons available with the prescribed authority for resorting to a special mode of recovery under Section 47 of 'the Act', it cannot be resorted to in a routine manner merely because it....
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....r' was received by the respective banks in the form of notice under Section 47 of 'the Act', it did not preclude the banks to inform the prescribed authority as to the nature of account held by the dealer in tune with the statutory prescriptions underlying Section 47(5) which runs under: "5) Where a person on whom a notice is served under sub-section (1) proves to the satisfaction of the authority which issued the notice that the money demanded or any part thereof was not due to the dealer or that he did not hold any money for or on account of the dealer, at the time the notice was served on him, nor is the money demanded or any part thereof, likely to become due to the dealer or be held for or on account of the dealer, nothing contained in this section shall be deemed to require such person to pay into the Government Treasury any such money or part thereof, as the case may be." Here we are persuaded to reproduce one paragraph of the counter affidavit filed on behalf of the IDBI in C.W.J.C. No.3321 of 2019 which would explain the position: "12. That however, as has been stated earlier, the account balance is in negative and the total amount which is due towards the....
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....ting to the provisions of Section 47 of 'the Act' by getting the Cash Credit Account of these petitioners attached but it also explains the mechanical obedience by the bank who have illegally attached the Cash Credit Account of the petitioners even when the language of Section 47(5) permits them not to resort to such measures in case, money is not held by them. In such situation where no money was held by the banks, for, or on account of the dealer rather the account was a loan facility made available for the dealer and was in the nature of the loan account, it certainly could not have been attached and no sooner the respondent department realized this position, they should have recalled the impugned notices rather than to contest the same on a defenceless act. Chapter 30 of the Tannan's Banker's Manual contains discussions on interference by third parties - injunctions, garnishee or an attachment order etc and while explaining a 'garnishee order' of the kind as issued in purported exercise of jurisdiction by the prescribed authority under Section 47 of 'the Act', it explains that such order is an attachment by a judgment creditor of the money belon....
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.... relationship. 7. Somewhat similar situation arose before the learned Single Judge of Madras High Court in case of K.M.Adam vs. Income Tax Officer, II Additional II Circle, Madra reported in 33 ITR 26. The Assessing Officer desired to invoke powers analogous to Section 226(3) of the Act for recovery of the tax dues of the assessee from the overdraft account that the assessee maintained with its bank. In such background, referring to similar provisions contained in Section 46 of the Income Tax Act, 1922, it was observed as under: "It will be seen that this provision is analogous to an attachment of a debt or what is commonly terms a garnishee summons. The classes of persons to whom such notice could be served are two: (i) any person from whom money is due or may become due to the assessee; and (2) any person who holds or may subsequently hold money for or on account of the assessee. The question which arises for consideration in the present case is, as to whether a bank, which has afforded overdraft facilities to its customer, holds the amount, specified as that up to which the customer may draw as either "a debtor" of the customer or holds that money on behalf of or on accou....