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TMI Blog2022 (5) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners; (iii) Pending admission, final hearing and disposal of this petition, Your Lordships may be pleased to stay the implementation of the notice dated 02.07.2021; (iv) Pending admission, final hearing and disposal of this petition, Your Lordships may be pleased to pass an order releasing all the properties except the properties mentioned in the notice dated 13.10.2017. (v) Pass any such other and/or further orders that Your Lordships deems appropriate, just and proper, in the facts and circumstances of the present case." 2. We need not delve much into the facts giving rise to this litigation, as not only the pivotal issue raised in the present litigation is now squarely covered by a decision of this High Court but the two orders dated 24th February 2022 and 17th March 2022 respectively would make the picture abundantly clear. 3. The order dated 24th February 2022 reads thus : "1. Mr. Utkarsh Sharma, the learned A.G.P. prays for some time as he has not been able to take proper instructions in the matter. There is no problem in granting time to Mr. Sharma, but on the returnable date, we want a responsible officer well conversant with the present litigation to personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cie, having regard to the materials on record, it appears to be a case of fraud. We are informed that criminal prosecution has also been instituted. Sunil Shah might have indulged in the acts constituting offence punishable under the Indian Penal Code. We are informed that the proprietors and the partners of the firms are also sought to be prosecuted. We are informed that the four writ applicants herein as family members of Sunil Shah, have also been arraigned as accused. Be that as it may, the short point for our consideration is whether for the purpose of recovering the amount as fixed towards the liability of the two proprietary firms and the two partnership firms, whether the personal assets of the four writ applicants herein could have been attached by invoking Section 44 of the Act. In other words, whether the personal assets of the writ applicants can be put to auction and the amount be recovered towards the discharge of the liability of the two proprietary firms and the two partnership firms. 5. Section 44 of the Act provides for a special mode of recovery. Section 44 starts with a non-obstante clause. Sub section (a) to section 44 is more in the nature of a garnishee pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary action on the part of the respondents. The respondents could not have invoked Section 44 of the GVAT Act for the purpose of attaching the individual assets of the writ-applicants on the ground that the writapplicants are all family members of one Shri Sunil Shah (since deceased) and late Sunil Shah indulged into a large scale fraud. 6. Mr.Popat submitted that Ruchita Shah is the daughter-inlaw of late Sunil Shah and wife of Shri Rohan Shah. She has neither withdrawn any cash from any account of late Sunil Shah nor is she named in any of the FIRs or in the assessment orders which were passed in 2017. Inspite of that, even her joint bank account with her parents at Mumbai has been attached. Few other properties belonging to her are also attached. 7. Mr.Popat vehemently submitted that late Sunil Shah nor any of his family members are the registered dealers. This fact is evident from the various assessment orders passed in the assessment of the firms, i.e. the two partnership firms and two proprietary firms. He would submit that the respondents have laid much stress on few cash withdrawals by the writ-applicants from the bank account of late Sunil Shah; however, on the basis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Petitioners, which is always subject to the inquiry conducted by the Commissioner, as contemplated under Section 44(5) of the GVAT Act. 6. Thus, in view of the typical facts and circumstances of the case, the action of the Respondent Authorities could not be considered to be without jurisdiction and/or arbitrary, and even otherwise, the impugned letter is merely a notice, which is subject to the full-fledged inquiry, as contemplated under Section 44(5) of the GVAT Act. 7. Alternatively, it is submitted that on perusing Section 49 of the GVAT Act, Mr.Sunil Shah could also be prima-facie considered as 'dealer' for the purpose of recovery of the tax dues of the four firms. Thus, while considering Mr.Sunil Shah as 'dealer' in terms of Section 44 of the GVAT Act, the monies due or held by the present petitioners for or on account of Sunil Shah, can also be prima-facie recovered by the Respondent Authorities. 8. Therefore, in view of the above, the captioned petition deserves to be dismissed. 9. As regards, the recent judgment dated 23.03.2022 rendered by this Hon'ble Court in the case of Shri Shakti Cotton Pvt. Ltd. vs. Commercial Tax Officer, it is submitted that in that case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a dealer by any person, shall be calculated by the Commissioner after deducting there from such claims, if any, lawfully subsisting, as may have fallen due for payment by such dealer to such person. (2) The Commissioner may amend or revoke any suchnotice or extended the time for making any payment in pursuance of the notice. (3) Any person making any payment in compliancewith 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 notice referred to in this section, shall be personally liable to the Commissioner to the extent of the liability discharged or to the extent of the liability of the dealer for tax, penalty and interest, whichever is less. (5) Where a person to whom a notice under this sectionis sent objects to it by a statement in writing that the sum demanded or any part thereof is not due or payable to the dealer or that he does not hold any monies for or account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. (v) Any claim respecting any property in relation to which a notice under this sub- section has been issued arising after the date of the notice shall be void as against any demand contained in the notice. (vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Assessing Officer or Tax Recovery Officer to the extent of his own liability to the assessee on the date of the notice or to the extent of the assessee's liability for any sum due under this Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not greater than (he amount due. A copy of the notice is to be forwarded to the tax-payer. Any person making payment pursuant to such a notice is deemed to have been acting under the authority of the taxpayer and is indemnified in respect of the payment (sub-section 4), whilst any person failing to comply with such a notice is guilty of an offence (subsection 2). For a case in which Section 218 was considered, Re, Whiting 1951 VLR 205 has been referred to. We have not been able to get at this report and we do not know the decision therein." 15. The plain reading of Section 44 of the GVAT Act would indicate that it provides a machinery for the VAT department to collect tax arrears from the debtors of the assessees (dealers). It is in substance the familiar garnishee proceedings under the Civil Procedure Code. The basic foundation would appear to be the substance of a relationship of a debtor and creditor, between the garnishee and the assessee. 16. Under clauses (a) and (b) of sub-section (1) of Section 44 of the GVAT Act, the Commissioner is empowered to issue notice requiring any person from whom any amount of money is due or may become due or who subsequently holds mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank were a debtor there could be no attachment and an unutilised overdraft account does not render the bank a debtor in any sense, and, therefore, the bank is not a person from whom money is due to the customer. Nor does the bank in such a case fall within the expression 'person from whom money may become due." Again, at page 32, he observes : "Section 46(5-A) of the Act cannot on any construction be intended as a credit-freeze, with this feature superadded, that if there was any thawing, the resultant credit released became immediately payable to the department. Of course, if at any stage the account of the customer is in credit, Section 46(5-A) would come into play and the sum so standing to the credit of the assessee might be directed to be paid over. The present is not such a case and this undoubted right of the department is not what is now sought to be asserted. What the impugned order of the Income-tax Officer directs is virtually that the bank should pay over to the department the difference between the limit of the overdraft allowed to the petitioner and the amount drawn by him upto the date of the notice under Section 46(5-A) This in my judgment is not within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch dealer. The expression "dealer" has been defined under section 2(10) of the GVAT Act to mean any person who, for the purpose of or consequential to his engagement in or, in connection with or incidental to or in the course of business buys, sells, manufactures, makes supplies or distributes goods directly or otherwise, whether for cash or deferred payment, or for commission, remuneration or otherwise and includes the categories of persons enumerated thereunder. In the present case, it is not the case of the first respondent that the bank was holding any monies on account of the dealer, viz. the third respondent herein. Therefore, the impugned order dated 26.9.2018 directing the second respondent bank to deposit a sum of Rs.17,67,45,934/- along with interest at the rate of 18% per annum, does not meet with the requirements of section 44 of the GVAT Act." 21. The debate before us has very largely centered upon the proper interpretation of the words "any person from whom money is due or may become due to the assessee." The most important word in the context is "due". The Concise Oxford Dictionary gives the following meaning to it: "owing, payable, as a debt or obligation (fall, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal properties of the two writ-applicants. 26. Had the notice been sent to the writ-applicants nos.2 and 3 respectively as contemplated under sub-section (5) of Section 44 of the GVAT Act, both would have had the liberty to file their objections denying their liability to pay the amount as they did not owe the money to the assessee in default. 27. The entire proceedings, being without any jurisdiction, have resulted in undue harassment to the writ-applicants nos.2 and 3 respectively as the recovery was sought to be made without issuing notice to the writ-applicants. 28. In Partington v. A. G., (1869) LR 4 HL 100 at 122, Lord Cairns stated : "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action on the part of the respondents under the garb of Section 44 of the GVAT Act could be termed as without jurisdiction and arbitrary. It has been more than 7 years that various individual and personal assets of the writ-applicants have remained under attachment. Unfortunately, even the life insurance policies which matured over a period of time could not be encashed on account of the attachment. 14. We inquired from Mr.Popat with regard to his prayer sought for in para-9(iv). Mr.Popat submitted that the writ-applicants intend to challenge the action of the respondents qua the properties mentioned in the notice dated 13.10.2017 by way of filing a separate application before the competent forum. In view of the aforesaid stand of the writ-applicants, liberty is reserved in their favour to avail an appropriate remedy before the appropriate forum in accordance with law qua the property referred to in the notice dated 13.10.2017. 15. In the result, this writ-application succeeds and is hereby allowed. The respondents are directed to immediately lift the attachment over all the individual and personal assets of the writ-applicants and release them free from all encumbrances, except ..... X X X X Extracts X X X X X X X X Extracts X X X X
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