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Mahabir Prasad & Sons Versus State of Gujarat & 3

Denial of Refund claim - Order of attachment - Seizure of bank accounts - on-line application for claiming provisional refund not filed - Held that:- With a view to ensure that no prejudice is caused to the case of either party by any observation made by this court at a stage when the assessment proceedings are pending before the competent authority, this court is not inclined to enter into any discussion on the merits of the case. Suffice it to state that having regard to the short duration tha .....

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ected to frame the assessment within a stipulated time frame. Under the circumstances, the court is not inclined to interfere with the provisional attachment made by the respondent at this stage. - Petition disposed of. - Special Civil Application No. 11268 of 2015 - Dated:- 21-9-2015 - Harsha Devani And A G Uraizee, JJ. For the Petitioner : Mr Tushar P Hemani, Adv. and Ms Vaibhavi K Parikh, Adv For the Respondent : Ms Manisha Lavkumar, Govt Pleader with Ms Maithili Mehta, Asstt Govt Pleader JUD .....

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ft the attachment and release the bank accounts of the petitioner. 2. The petitioner is a proprietary concern engaged in the business of cigarettes. The petitioner is registered as a dealer under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the GVAT Act") as well as the Central Sales Tax Act, 1956. It is the case of the petitioner that it was regularly filing its sales tax return. During the year 2013-14, that is, the first year of commencement of business, the pe .....

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is, for the period 1.10.2013 to 31.12.2013 there was no tax payable as per the return under the GVAT Act. According to the petitioner, it was entitled for provisional refund of ₹ 5,44,36,090/- for the above period as per the VAT return because of the difference in the rate of tax between the local and inter-state sales. As it was the first year and first quarter of business, the petitioner was not aware about the procedural aspect for claiming refund and, therefore, instead of filing an on .....

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ng time. The petitioner, therefore, after a lapse of four months made an application under the Right to Information Act, 2005 to provide a copy of the order in the appeal which was concluded on 14.8.2014. It appears that thereafter the officer who had heard the matter was transferred and the new incumbent restored the appeal and listed the same for fresh hearing. Since the appeal is not being heard, the petitioner has also prayed for the same to be expedited. Pending adjudication of the issue of .....

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year 2014-15, namely, for the period 1.4.2014 to 30.6.2014 amounting to ₹ 7,13,41,643/-. Pending adjudication of the above refund application, the petitioner filed an application for refund of ₹ 20,98,737/- for the second quarter, namely for the period 1.7.2014 to 30.9.2014. Since there was no response from the respondent No.3, the petitioner addressed letter dated 17.4.2015 to the third respondent for releasing the refund amount as claimed by the petitioner for the above referred p .....

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he GVAT Act for production of accounts, documents, etc. and notice in Form 301 under subrule (1) of rule 29 for provisional assessment under section 32 of the GVAT Act came to be issued. Notice under rule 9, namely for production of certificate of registration before the registering authority as well as notice under section 67(3)(4) read with rule 50, viz. for retention of books of accounts, register and documents seized from the petitioner came to be issued. It appears that the petitioner tende .....

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ent had raised demand of ₹ 3 crore from the petitioner. Since the petitioner was neither served with the order passed under section 32 read with sub-section (1) of section 42 of the GVAT Act raising demand of ₹ 3 crore nor an order in writing under section 45 of the GVAT Act read with rule 41 (1) of the GVAT Rules attaching the bank accounts, the petitioner addressed a letter dated 27.5.2015 to the third respondent requesting him to lift the attachment. However, there was no response .....

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disposing of the appeal filed by the petitioner against rejection of the refund application; secondly, that the refund applications filed by the petitioner are not being disposed of within the framework provided under the Act and the rules framed thereunder; and lastly, that the attachment of the bank accounts of the petitioner simultaneously with the issuance of notice of provisional attachment, is bad in law. It has been contended that no order in writing has been made forming the basis of su .....

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of his submission, the learned counsel placed reliance upon the decision of the Bombay High court in the case of Gandhi Trading v. Assistant Commissioner of Income Tax and others, (1999) 239 ITR 337, for the proposition that the power of attachment under section 281B of the Income Tax Act, 1961 is in the nature of attachment before judgment under the Code of Civil Procedure. It is a drastic power. It, should, therefore, be exercised with extreme care and caution. It should not be exercised unles .....

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ee. Attachment should be made as far as possible of immovable properties if that can protect the revenue. Attachment of bank accounts and trading assets should be resorted to only as a last resort. In any event, attachment under section 281B should not be equated with attachment in the course of recovery proceedings. It was submitted that the provisional attachment under section 45 of the GVAT Act would be governed by similar principles and that there should be sufficient material on record to j .....

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or the purpose of protecting the interest of Government revenue, it is necessary to do so. As per sub-section (2) of Section 45, 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). Few things emerge from these statutory provisions. Firstly, the power of provisional attachment is in the nature of an extra-ordinary measure available to the revenue authorities for the purpose of protecting inter .....

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year, it further amplifies that the same is in the nature of a drastic measure for a temporary period. The authority exercising such powers, therefore, must have a strong prima facie case to show that upon ultimate conclusion of the assessment, there is every likelihood of tax, interest and/or liability being attached on a dealer, and further that pending such consideration, it is necessary in the interest of Government revenue to pass order of provisional attachment. Such powers cannot be exer .....

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re the VAT Tribunal and the High Court. At all such appellate stages there are powers for granting stay or waiving requirement of pre-deposit if statute so provides. Therefore, to contend that mere pendency of assessment or re-assessment proceedings would clothe the authority to pass order of provisional attachment would be wrong. Pendency of such proceedings would be a prerequirement for exercising such powers. But the additional requirement would be that it is necessary to do so to protect the .....

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etitioner at that stage could not be countenanced and directed the respondents to return the cheques collected from the petitioner. 4.4 Reliance was placed upon an unreported decision of this court in Kumar Motors v. State of Gujarat rendered on 10.10.2014 in Special Civil Application No.12444 of 2014 wherein the court held that the competent authority can take certain measures to protect the interest of revenue, even before liability has been crystallized by way of the assessment order. However .....

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e Code of Civil Procedure is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the rules. The purpose of Order 38 rule 5 is not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilise the provisions of Order 38 rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. It was, accordingly, urged that the respon .....

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for the sale of cigarettes. Reference was made to the contents of the affidavits filed on behalf of the respondents from time to time, to point out that upon investigation being carried out by the flying squad at Delhi with the dealers with whom the petitioner has entered into transactions as per the documents submitted by it, it has been revealed that the dealers who purchased the cigarettes from the petitioner do not exist at the place of business. Besides, a comparison of the GVAT returns fi .....

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nt to inquire into the genuineness and existence of the said dealer. Moreover, 'C' forms of five of the dealers have been cancelled which show that the transactions with the petitioner herein are not genuine in nature as a result whereof, the petitioner is not entitled to the benefits of two per cent tax against 'C' forms as claimed by it. 5.1 As regards recording of subjective satisfaction prior to issuance of order of provisional attachment, the attention of the court was invit .....

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State since a long time and that he has commenced business only in the year 2014; besides the proprietor of the petitioner firm is basically a resident of Haryana and does not have any immovable property in Gujarat. It was contended that the petitioner is a fly by night operator and hence it is necessary to secure the interest of the Government revenue warranting attachment of the bank accounts of the petitioner as there is no immovable property which could be attached. 6. As noted hereinabove, .....

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n the file of the Joint Commissioner. Thereafter due to re-division of Joint Commissioner in the State of Gujarat, the file came to be transferred to Gandhinagar Division-3 in the month of October, 2014. It appears that subsequently by a letter dated 29.1.2015 the petitioner was called for re-hearing of the appeal to which the petitioner objected. In this regard, while at the relevant time, it was the stand of the respondent that the appeal was required to be reheard, subsequently in view of the .....

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e the court, namely, that the refund applications filed by the petitioner are not being disposed of within the statutory time limit, the learned Government Pleader has stated before the court that such applications shall be processed and decided within a period of four weeks from the date of receipt of a copy of this order. Under the circumstances, the second grievance also no longer survives. 8. Insofar as the provisional attachment which has been made by the respondent authority, on behalf of .....

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of assessment proceedings, during which huge tax liability is likely to arise which needs to be protected. Therefore, the said attachment notice cannot be vitiated on account of non-fulfillment of section 45 of the GVAT Act. It was submitted that thus, while on 3.9.2015, it was the stand of the respondent that non-fulfillment of requirement of section 45 would not vitiate the attachment notice, subsequently in the further affidavit filed by the respondent No.3 it has been stated that the satisfa .....

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the Delhi firms were duly registered and that the petitioner had carried out transactions with dealers who were duly registered and are still shown to be registered on the concerned website. 10. Since the attachment is made under section 45 of the Act it may be pertinent to refer to the same. Section 45 of the GVAT Act makes provision for provisional assessment and enacts that where during the pendency of proceedings of assessment or re-assessment of turnover escaping assessment, the Commission .....

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of an extra-ordinary measure available to the revenue authorities for the purpose of protecting interest of Government revenue. Even before any assessment is made, such powers can be exercised if the Commissioner is of the opinion that for the purpose of protecting the interest of Government revenue, it is necessary to do so. The power thus, is of drastic nature. Any such power, therefore, is coupled with the duty to exercise such power with due care and in appropriate cases. Sub-section (2) of .....

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the interest of Government revenue to pass order of provisional attachment. Such powers cannot be exercised in a routine manner in every case of reopening of assessment de hors the consideration noted above and in any case not merely because some assessment proceedings are pending. Pendency of such proceedings would be a pre-requirement for exercising such powers. But the additional requirement would be that it is necessary to do so to protect the interest of revenue. The court, accordingly, did .....

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rt would not ordinarily interfere with such orders. However, when the nature of power is drastic, the court's scrutiny in the sufficiency of reasons would necessarily be more incisive. 12. Having regard to the overall facts of the case, with a view to ensure that no prejudice is caused to the case of either party by any observation made by this court at a stage when the assessment proceedings are pending before the competent authority, this court is not inclined to enter into any discussion .....

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