2018 (2) TMI 1800 - HC - VAT and Sales Tax

Provisional Attachment of Bank Accounts of petitioners - GVAT Act - CST Act - section 45 of the GVAT Act - Held that - For the purpose of invoking section 45 of the GVAT Act the Commissioner is required to record satisfaction that for the purpose of protecting the interest of the Government revenue it is necessary to provisionally attach any property belonging to the dealer. Such satisfaction has to be based upon objective facts and should fall within the circumstances enumerated in the above referred decision or circumstances which are akin to the circumstances enumerated therein. In the present case no satisfaction whatsoever as envisaged under section 45 of the GVAT Act has been recorded by the Commissioner while ordering provisional attachment of the petitioners bank accounts. Also the assessment order has not yet been passed - it is evident that the action of attaching the bank accounts of the petitioners has been taken in a perfunctory and casual manner without application of mind to the relevant statutory provisions. The action of the respondents of attaching the bank accounts of the petitioners stands vitiated by non-application of mind to the relevant factors and other infirmities - petition allowed.

Summary

Issues Involved:
1. Legality of the provisional attachment of the petitioners' bank accounts under Section 45 of the GVAT Act.
2. Whether the satisfaction required under Section 45 of the GVAT Act was recorded by the Commissioner.
3. Appropriateness of invoking Section 44 of the GVAT Act for provisional attachment.
4. Necessity of attaching bank accounts when the stock value already covers the potential tax liability.

Detailed Analysis:

Legality of the Provisional Attachment of Bank Accounts:
The petitioners challenged the provisional attachment of their bank accounts under Section 45 of the GVAT Act. They argued that the attachment was unjustified, especially since their stock, valued at Rs. 3,28,24,724/-, had already been attached, which is nearly equivalent to the total tax, interest, and penalty proposed. The court noted that the respondents had attached the bank accounts without recording the necessary satisfaction required under Section 45.

Satisfaction Requirement Under Section 45 of the GVAT Act:
Section 45 of the GVAT Act allows the Commissioner to provisionally attach any property of the dealer if it is necessary to protect the interest of the Government revenue. The court referenced a previous decision (Vishwanath Realtor v. State of Gujarat) which held that the Commissioner must form an opinion based on tangible material and objective facts. In this case, the court found that the Commissioner did not record any such satisfaction, and the action was taken without considering the existing attachment of the petitioners' stock, which was sufficient to secure the revenue's interest.

Appropriateness of Invoking Section 44 of the GVAT Act:
The court observed that the Assistant Commissioner had referenced Section 44 of the GVAT Act in the order dated 17.10.2016, which pertains to the recovery of adjudicated dues. However, the assessment proceedings were still pending, and no dues had crystallized. Therefore, invoking Section 44 was inappropriate and indicated a lack of application of mind by the respondents.

Necessity of Attaching Bank Accounts:
The court emphasized that the stock valued at Rs. 3,28,24,724/- was already attached, which was almost equivalent to the potential tax liability. Therefore, there was no necessity to attach the bank accounts. The court noted that the respondents failed to consider this fact, leading to a non-application of mind.

Conclusion:
The court concluded that the provisional attachment of the petitioners' bank accounts was not justified due to the lack of recorded satisfaction under Section 45 of the GVAT Act and the inappropriate invocation of Section 44. Moreover, the attachment of the bank accounts was unnecessary given the existing attachment of the stock. Consequently, the court quashed the provisional attachment orders and directed the respondents to release the petitioners' bank accounts.

Order:
The petition was allowed, and the provisional attachment of the bank accounts, as evidenced by communications from ICICI Bank, Karur Vysya Bank, and Oriental Bank of Commerce, and the order dated 17.10.2016, were quashed. The respondents were directed to release the attached bank accounts, and the order dated 31.08.2017, to the extent it extended the attachment of the bank accounts, was also set aside. The rule was made absolute with no order as to costs.