TMI Blog2017 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... hares in a company - both KVAT and KTEG Acts authorize recovery officers to demand money from "any person" and authorize recovery by attachment and sale of share in Companies. Hence, by natural corollary a tax recovery authority can lay its hands on the money in deposit in a bank account situated beyond its territory if the same is accessible online. Therefore applying "effects doctrine", the recovery proceedings initiated by the first respondent under the provisions of the KVAT Act and KTEG Act are pre-eminently tenable. Whether first respondent could have issued notices whilst writ petitions filed by the petitioner and I. A.s for stay are pending consideration? - Held that: - A careful perusal of the authority relied upon by the petitioner in the case of M. L. Narasimha Gupta shows that there is a classic difference between the two cases. In the said case, this court was concerned with an I. A. for stay to be considered by an appellate authority in a statutory appeal. In contrast, the case on hand is a writ petition wherein, the petitioner has challenged the "vires" of the Act and incidentally challenged the tax liability. Therefore, the immunity from recovery argued by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere exists no tax liability pursuant to order of remand passed by the KAT; (b) That notice for the year 2006-07 under the KVAT Act is not sustainable in law as the said issue is pending consideration in W. P. No. 107587 of 2014; (c) That notice for the year 2006-07 under KTEG Act is also not sustainable in law as the said issue is subject-matter of W. P. No. 104387 of 2016; (d) As per sub-section (2) of section 1, both KVAT Act and KTEG Act are applicable and enforceable only within the territorial jurisdiction of State of Karnataka. The petitioner maintains its account with Khairtabad (Hyderabad) branch of Bank of Baroda, which is beyond the territorial limits of State of Karnataka. Hence the first respondent could not have exercised his authority and issued any notice to its banker; (e) As the impugned notices have been issued without authority of law, the second respondent ought not to have complied with the directions contained therein; (f) The first respondent could not have initiated recovery proceedings whilst the interim prayer made in Writ Petition No. 107587 of 2014 challenging the validity of the amendment to the KVAT Act is pending consideration before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt: 1. Whether first respondent could issue recovery notices to the branch manager of the petitioner's bank situated beyond the State of Karnataka under the provisions of the KVAT Act and KTEG Act ? 2. Whether first respondent could have issued notices whilst writ petitions filed by the petitioner and I. A.s for stay are pending consideration ? 10. Re: Point No: 1 The subtle issue involved in this point is exercise of power and authority by a tax recovery officer while issuing a notice emanating from his office situated within the State of Karnataka and its fructification at a geographical location beyond the State of Karnataka. 11. Law enacted by the Parliament or State Legislature empowers the executive to exercise powers flowing from and under a statute. Analysis of facts in this case shows that the tax recovery officer has exercised his power flowing from the KVAT and KTEG Acts and issued notices to the petitioner's banker; whereas, the grievance of the petitioner is that the branch of its banker is situated beyond the State of Karnataka and therefore, the first respondent could not invoke his jurisdiction under the said Acts beyond State's T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y person who holds or may subsequently hold money for or on behalf of the dealer. In the instant case, according to the petitioner, the first respondent-authority has called upon its banker to pay the arrears of tax and penalty from the petitioner's account. 16. It may be profitable to note that the issue with regard to proceeding against any person fell for consideration before the honourable Supreme Court in the case of Securities and Exchange Board of India v. Pan Asia Advisors Ltd. [2015] 191 Comp Cas 410 (SC); [2015] 14 SCC 71 wherein, the apex court was examining the principles of effects doctrine in cases involving exercise of extra territorial jurisdiction and held that to protect the interests of investors, effects doctrine could be applied. Two relevant passages from the said judgment read as follows (paras 96 and 102, pages 463 and 467 in 191 Comp Cas): 106 . A reading of the above judgment makes it clear that a law enacted by Parliament if shows that for proceeding against in exercise of any extra-territorial aspect, which has got a cause and something in India or related to India and Indians in terms of impact, effect or consequence would be a mixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irresistible inference that a tax recovery officer could exercise his power to issue a notice emanating from his office to any person holding money on behalf of an assessee. 18. Rule 59 of the KVAT Rules, 2005 prescribes mode of recovery which includes attachment and sale of both movable and immovable property. It is no more res integra that a deposit in bank account is property . (see State of Maharashtra v. Tapas D. Neogy [1999] 98 Comp Cas 626 (SC); [1999] 7 SCC 685). 19. The KVAT Act has come into force with its publication in the Gazette on December 23, 2004. By then the Information Technology Act, 2000 (Act 21/ 2000 with effect from June 9, 2000) was in full force. It was enacted by the Parliament to give effect to the resolution of 30th January, 1997 passed by the General Assembly of the United Nations adopting Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law. The Preamble to the said Act reads thus: Preamble: An Act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as 'electronic commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pictures by wire or radio. In the west such mode of transmission came to wide use even way back in the late 1930s. By 1954 the International News Service began to use facsimile quite extensively. Technological advancement like facsimile, internet, e-mail, etc., were on swift progress even before the Bill for the Amendment Act was discussed by Parliament. So when Parliament contemplated notice in writing to be given we cannot overlook the fact that Parliament was aware of the modern devices and equipment already in vogue. 16. Francis Bennion in statutory interpretation has stressed the need to interpret a statute by giving 'allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters' . 17. For the need to update legislations, the courts have the duty to use interpretative process to the fullest extent permissible by the enactment. The following passage at page 167 of the above book has been quoted with approval by a three-Judge Bench of this court in State v. S. J. Choudhary [1996] 2 SCC 428, 433; [1996] SCC (Cri) 336: 'It is presumed that Parliament inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund Transfer (NEFT) and other contemporary banking facilities. 23. Validation of online registration, e-filing and e-payment are in consonance with the I. T. Act, 2000. So also the validation of net banking. 24. Attachment of a net enabled bank account stands precisely on the same footing as that of attachment and sale of shares in a company. 25. To paraphrase above discussion, both KVAT and KTEG Acts authorize recovery officers to demand money from any person and authorize recovery by attachment and sale of share in Companies. Hence, by natural corollary a tax recovery authority can lay its hands on the money in deposit in a bank account situated beyond its territory if the same is accessible online. Therefore applying effects doctrine , the recovery proceedings initiated by the first respondent under the provisions of the KVAT Act and KTEG Act are pre-eminently tenable. 26. Re: Point No. 2. A careful perusal of the authority relied upon by the petitioner (M. L. Narasimha Gupta [1989] 75 STC 154 (Karn); [1989] 2 Kar. L.J. 353) shows that there is a classic difference between the two cases. In the said case, this court was concerned with an I. A. for stay t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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