2018 (4) TMI 1292 – GUJARAT HIGH COURT – 2018 (12) G. S. T. L. 481 (Guj.) – Supply of branded as well as unbranded goods – non-payment of tax – the departmental authorities collected three cheques for a total amount of ₹ 19,74,886/- under co-ercion – whether this act of Department to collect post-dated cheques during raid permissible? – Held that: – the action of the department cannot be countenanced. It has been held by this Court and other High Courts of the country that the practice of collecting post-dated cheques under coercion during raid is not permissible means of collection of revenue particularly, when no tax demand has been confirmed or crystallized – In the present case, there does not appear to be any justification of the departmental authorities to collect and the petitioners to voluntarily give cheques for the said amount – Department is directed to return the cheques.
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Validity of second SCN – second impugned SCN also pertains to the same period and same dem
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erest of government revenue, it is necessary so to do. Such provisional attachment could be of any property including the bank account of the taxable person – In the present case, nothing is demonstrated by the department either in the orders of attachment or in the affidavit filed before us. The reason why exercise of such drastic power of attachment of bank accounts was necessary – attachments are set aside, in the absence of reasons for attachment.
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Petition allowed. – Special Civil Application No. 4835 of 2018 Dated:- 19-4-2018 – MR. AKIL KURESHI AND MR. B. N. KARIA, JJ. For The Petitioner : B.N. Soparkar, Sr. Adv. and Kuntal A. Parikh For The Respondent : Chintan Dave, AGP JUDGMENT Akil Kureshi, J. – Petitioners have challenged three separate actions of the departmental authorities, though all of them arise out of one integrated set of facts. 2. Briefly stated the facts are as under: Petitioner No.1 is a company registered under the Companies Act. Petitioner No.2 is one of i
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rievance of the petitioners of the departmental authorities having forcibly collected cheques even before the petitioners' tax liability was ascertained. 5. On 27.02.2018, the department did two things (i) A show-cause notice was issued calling upon the petitioners why CGST and SGST totalling to ₹ 36,88,706/- not be recovered for the period between July 2017 and 20.02.2018; (ii) Simultaneously, on the same date, the department wrote to the petitioners' banks-Union Bank of India, Nizampura Branch, Baroda and IDBI Bank, Alkapuri Branch, Baroda provisionally attaching the petitioners' said bank accounts and instructed the banks not to allow the petitioners to operate the accounts without the prior permission of the department. The petitioners have challenged this provisional attachment orders of the departmental authorities. 6. On 19.03.2018, the adjudicating authority issued fresh notice under the purported exercise of powers under section 74(3) of the Central Goods and
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arat and anr in Special Civil Application No. 959 of 2015. This is not to suggest that in a given case if the assessee voluntarily gives such cheques in order to avoid harsher measures of provisional attachment of premises, stock or bank accounts, the action of the authorities must fail in such a case also. However, in our experience such instances are few and far between. 8. In the present case, there does not appear to be any justification of the departmental authorities to collect and the petitioners to voluntarily give cheques for the said amount. We would therefore, direct the department to return such cheques. 9. We now take the petitioners' second challenge for consideration viz. to the second show-cause notice dated 19.03.2018. We may recall, the Adjudicating authority had already issued a show-cause notice on 27.02.2018 asking the petitioner to show cause why for the period between July 2017 and 20.02.2018 unpaid CGST and SGST of ₹ 30,88,706/-not be recovered. The se
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illful misstatement or suppression of facts, relevant portion of which reads as under: 74. Determination of tax unpaid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts: (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice. (2) The proper officer shall issue th
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ax etc. on account of fraud, willful misstatement or suppression of facts why the amount specified in the notice should not be recovered with interest and penalty. Sub-section (2) of section 74 provides for the time limit for issuance of such notice. Sub section (3) of section 74 on the other hand, would authorize the proper officer to serve a statement containing the details of tax unpaid, shortly paid or erroneously refunded for a period other than i.e. covered under sub-section (1) where a notice has been issued for any period. Under sub-section (1) of section 74. In clear terms thus, powers under sub-section (3) of section 74 would be available where notice has already been issued against the person chargeable with tax under sub section (1) and the statement referred to in sub-section (3) of section 74 would be containing the details of tax unpaid, short paid etc. for purpose other than those covered under sub section (1). In other words, powers under sub-section (3) of section 74
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rviving question of attachment of bank accounts, broad facts may be recapitulated thus. As per the notice dated 27.02.2018, as per the departmental authorities, the petitioners had not paid GSTs on branded goods. The tax liability would be ₹ 36,88,706/-. There could be possible interest and penalty liability on such tax amount. It prima facie appears that the department had issued second show-cause notice dated 19.03.2017 (which we propose to quash) including even the unbranded goods for recovery of GSTs. Having perused the relevant literature, we even otherwise find that GSTs on unbranded goods has been specifically exempted. As of now, thus, only notice for recovery of tax that survives is one seeking to recover GSTs of ₹ 30 lacs approximately with interest and penalty. At the same time, we must also realize that if the petitioners are not correct in contending that no service tax can be levied on branded goods because the brand belongs to the directors of the company, su
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the opinion that for the purpose of protecting the interest of government revenue, it is necessary so to do. Such provisional attachment could be of any property including the bank account of the taxable person. Sub-section (2) of section 83 however, provided that every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of which such order has been made. Similar provisions contained in the VAT Act concerning provisional attachment came up for consideration before Division Bench of this Court in case of Automark Industries (I) Ltd v. State of Gujarat reported in 2014 SCC Online Gujarat 14217. The Court made following observations: 8. Section 45 of the VAT Act empowers the Commissioner during pendency of any proceedings of assessment or reassessment of turnover escaping assessment, to attach provisionally any property belonging to any dealer, if he is of the opinion that for the purpose of protecting the interest of Government re
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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 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. At that stage, it is merely a prima facie, exparte opinion of the assessing authority that a certain tax demand is likely to arise. This would be subject to biparte assessment proceedings. Even after the assessment is done, it is subject to further appeals, typically first before the Commissioner and thereafter before the VAT Tribunal and the High Court. At all such appellate s
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e of power is drastic, the Court's scrutiny in the sufficiency of reasons would necessarily be more incisive. 13. The respondents have raised three fold objections, such objections are yet to be gone into. The petitioner's opposition to the points raised by the Department would require a detailed scrutiny and examination of materials not fully before us. In any case, we do not intend to bypass the assessment proceedings. Suffice it to say that at this stage to pass an order of provisional attachment would neither be permissible nor be proper. To reiterate, when the petitioner's classification on the basis of which the tax has so far been collected, cannot be stated to be without any basis nor can it be stated that the petitioner has no prima facie case, and when the assessment proceedings are yet to be completed, resorting to such extreme power of attachment without anything further to suggest that the liability if ultimately finalized, the petitioner will not pay, would si
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