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2015 (5) TMI 296 - GUJARAT HIGH COURT

2015 (5) TMI 296 - GUJARAT HIGH COURT - TMI - Provisional attachment of property - Excersice of power u/s 45 of the Gujarat Value Added Tax, 2003 - Garnishee order - Held that:- Against the estimated liability of the petitioners under the VAT Act of ₹ 4.5 crores, the immovable property worth ₹ 5 crores is already under attachment. Under the circumstances, the interest of the Government Revenue has been fully protected. Therefore, thereafter, there was no reason whatsoever for the res .....

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petitioner no.2. There is no formation of opinion by the Commissioner that for the purpose of protecting the interest of the Government Revenue, the impugned order of provisional attachment of the bank account of the petitioners including the personal bank account of the pet No.2 has been passed

Impugned order of provisional attachment of the bank accounts of the petitioner including the personal bank account of the petitioner No.2 and the impugned garnishee notice served upon the res .....

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Decided in favour of appellant. - SPECIAL CIVIL APPLICATION NO. 7210 of 2015 - Dated:- 29-4-2015 - MR. M.R. SHAH AND MR. S.H.VORA, JJ FOR THE PETITIONER : MR SN SOPARKAR SR.ADV. WITH MR UCHIT N SHETH, ADVOCATE FOR THE RESPONDENT : MR CHINTAN DAVE AGP JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. Rule. Shri Chintan Dave, learned A.G.P. waives service of notice of Rule on behalf of the respondents. 2. In the facts and circumstances of the case and with the consent of the learned advocates ap .....

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notice dated 15.04.2015 issued under Section 44 of the Gujarat Value Added Tax, 2003 (hereinafter referred to as the VAT Act ) for making the recovery from the bank account of the petitioners. 3.2. The petitioners have further prayed for an appropriate writ, order or direction for release of the personal bank accounts of the 1st petitioner which have not even been referred to in the provisional attachment order. 4. It is the case on behalf of the petitioners that the 1st petitioner is a propriet .....

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petitioners. 4.2. It is the case on behalf of the petitioners that no incriminating evidence or unaccounted cash was found during the course of the search proceedings. It is the case on behalf of the petitioners that upon inquiry, the petitioners informed that in the past, the 2nd petitioner was a partner in the partnership firm by the names of "Kapila Developers", "Kapila Infrastructure", "Vishwanath Developer" and "Vishwanath Infrastructure". According t .....

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ucture" was over in the year 2009-2010 but since there are some outstanding payments, the firm is yet to be dissolved. According to the petitioners, the petitioners thereafter, produced accounting records from the accounting year 2009-2010 till date. That, when the Assessing Officer required the petitioners to produce records for the years 2007- 2008 and 2008-2009, the petitioners informed the concerned officer that they have required to maintain books of accounts and records only for a per .....

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e property of ₹ 5 crores as security in order to avoid dispute till completion of the assessment proceedings on 15.04.2015. That, despite offering the immovable property of ₹ 5 crores as security against the alleged liability under the VAT Act of ₹ 4.5 crores, the impugned order dated 15.04.2015 came to be passed for provisionally attaching such immovable property. The notice was issued to the petitioners in Form 401 calling for information and records. The notice was also issu .....

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bank to make payment from the bank account of the 1st petitioner. That, by order dated 17.04.2015, the concerned respondent-authority had also attached the personal bank account of the petitioner No.2, though in the provisional attachment order, there is no reference to the personal bank account of the petitioner No.2. 4.4. Feeling aggrieved and dissatisfied with the impugned orders of provisional attachment under Section 45(1) of the VAT Act; attaching the bank accounts of the petitioner No.1; .....

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the bank accounts of the petitioners under Section 45(1) of the VAT Act. 5.1. It is submitted that, as such, during the pendency of the assessment proceedings, the petitioners offered immovable property of ₹ 5 crores as security in order to avoid dispute till completion of the assessment proceedings and in fact, the immovable property worth ₹ 5 crores is already attached by the Assessing Officer. It is submitted that even as per the calculation of the department, cumulative liabilit .....

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lutely illegal and most arbitrary. 5.2. Shri Soparkar, learned Senior Counsel appearing on behalf of the petitioners has vehemently submitted that in the present case, the liability of the petitioners under the VAT Act is yet to be adjudicated and/or crystallized and as on today, no order of assessment has been passed against the petitioners determining the liability of the petitioners. It is submitted that still, considering the fact that the cumulative liability might be ₹ 4.5 crores, th .....

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ndency of any proceedings of assessment or reassessment of turnover escaping assessment, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may by order in writing attach provisionally any property belonging to the dealer in such manner as may be prescribed. It is submitted that, therefore, only on formation of the opinion by the Commissioner that such a provisional attachment is necessary to protect the inte .....

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y due and payable and the interest of the Revenue is likely to be affected and/or defeated and in that case, on forming an opinion that it is necessary so to do, the Commissioner may by order in writing, attach provisionally any property belonging to the dealer in such manner as may be prescribed. It is submitted that however, for the aforesaid purpose, there must be a tangible material of objective facts with the Commissioner. 5.4. It is submitted by Shri Soparkar, learned Senior Counsel appear .....

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erefore, the impugned order of provisional attachment of the bank accounts of the petitioners including the personal bank account of the petitioner No.2, is/are absolutely illegal, most arbitrary and perverse. 5.6. It is submitted that accordingly even the garnishee notice served upon the bank for recovery of the amount lying in the bank accounts of the petitioners issued under Section 44 of the VAT Act, also cannot be sustained as the same is arbitrary and perverse and consequently, the same al .....

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rest and penalty under the VAT Act. It is submitted that, therefore, the petitioners cannot be said to be in arrears of tax, penalty or interest under the VAT Act. It is submitted that, therefore, so long as the petitioners cannot be said to be in arrears of tax, penalty or interest under the VAT Act, there is no question of any garnishee notice/order under Section 44 of the VAT Act. It is submitted that, therefore, also the impugned garnishee notice calling upon the concerned banks to pay the a .....

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hall neither be transferred nor will any encumbrances be created on the property during the pendency of the assessment proceedings under the VAT Act initiated by the notice dated 14.04.2015. The undertaking is directed to be taken on record. 5.9. Making the above submissions, it is requested to allow the present petition and quash and set aside the impugned order of provisional attachment of the bank accounts of the petitioners and garnishee notice and consequently allow the present petition wit .....

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ners including the personal bank account of the petitioner No.2 and even the impugned garnishee notice are not warranted and not justified. He has fairly conceded that as such, by provisional attachment of the immovable property worth ₹ 5 crores which, as such, was as security by the petitioners, the interest of the Revenue has been fully secured/protected as the liability of the petitioners under the VAT Act would be approximately ₹ 4.5. crores. Therefore, as such, Shri Dave, learne .....

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tion of India, the petitioners have prayed for an appropriate writ, order or direction to quash and set aside the impugned orders of provisional attachment of the bank accounts of the petitioners as well as the personal bank account of the petitioner No.2 and also to quash and set aside the impugned garnishee notice with respect to bank accounts of the petitioners. 8.1. At the outset, it is required to be noted that as such, the assessment proceedings are yet pending. Therefore, the liability of .....

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101, 101, Vishwanath, Opp.Sammundar-2, Azad Society, Ambavadi, Ahmedabad is ordered to be provisionally attached. The said order of provisional attachment of the immovable property is passed under Section 45 of the VAT Act which is not under challenge. Therefore, as such, the interest of the Revenue is fully protected by the provisional attachment of the immovable property worth ₹ 5 crores against the liability under the VAT Act of the petitioners of approximately ₹ 4.5 crores. Despi .....

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e, it is required to be noted that the garnishee notice is issued under Section 44 of the VAT Act. Therefore, when by order of provisional attachment of the immovable property worth ₹ 5 crores during the pendency of the assessment proceedings has already been passed, the interest of the Revenue has been already fully protected. Therefore, as such, there was no reason at all for the respondent No.2 to pass the impugned provisional attachment orders to attach the bank accounts of the petitio .....

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ly any property belonging to the dealer in such manner as may be prescribed. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1)." 8.3. Section 45 of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. Ho .....

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ch provisionally any property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale and/or dispose of the properties and in cas .....

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the immovable property worth ₹ 5 crores is already under attachment. Under the circumstances, the interest of the Government Revenue has been fully protected. Therefore, thereafter, there was no reason whatsoever for the respondent No.2 to pass the order under Section 45 of the VAT Act of provisional attachment of the bank accounts of the petitioners including the personal bank account of the petitioner No.2. Such an exercise of powers is absolutely illegal and most arbitrary which cannot .....

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e pet No.2 has been passed. 8.5. Under the circumstances, the impugned order of provisional attachment of the bank accounts of the petitioners including the personal bank account of the petitioner No.2 cannot be sustained and the same deserves to be quashed and set aside. 9. Now, so far as the challenge to the impugned garnishee notice served upon the respondent No.3-Punjab National Bank with respect to the bank account of the petitioners is concerned, the same is also absolutely illegal and mos .....

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from whom any amount of monies is due, or may become due, to a dealer on whom notice has been served under sub-section (1), or (b) any person who holds or may subsequently hold monies for or on account of such dealer, to pay to the Commissioner, either forthwith upon the monies becoming due or being held or within the time specified in the notice (but not before the monies becomes due or is held as aforesaid) so much of the monies as is sufficient to pay the amount due by the dealer in respect .....

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any such notice or extended the time for making any payment in pursuance of the notice. (3) Any person making any payment in compliance with a notice under this section shall be deemed to have made the payment under the authority of the dealer, and the receipt thereof by the Commissioner shall continue a good and sufficient discharge of the liability of such person to the extent of the amount specified in the receipt. (4) Any person discharging any liability to the dealer after receipt of the no .....

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n inquiry and after giving to such person or dealer a reasonable opportunity of being heard, make such order as he thinks fit. (6) Any amount of monies which the aforesaid person is required to pay to the Commissioner, or for which he is personally liable to the Commissioner under this section shall, if it remains unpaid, be recoverable as an arrears of land revenue. (7) The Commissioner may apply to the court in whose custody there is monies belonging to the dealer for payment of the amount of .....

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y amount due by which, the dealer is in arrears of tax, penalty or interest under the VAT Act. Under the circumstances, the impugned garnishee notice is absolutely illegal and most arbitrary which deserves to be quashed and set aside. 11. In view of the above and for the reasons stated above, the impugned order of provisional attachment of the bank accounts of the petitioner including the personal bank account of the petitioner No.2 and the impugned garnishee notice served upon the respondent No .....

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