A division bench of the Gujarat High Court has held that the provision allowing attachment under section 44 of the Gujarat Value Added Tax Act is being misused to the maximum.
The proceedings under Section 44 of the GVAT Act are in the nature of garnishee proceedings, i.e. attachment of a debt by means of which judgment-creditor is enabled to reach the money due from the judgment-debtor, which is in the hands of a third person.
The writ-applicant no.1, 2, 3 are a Company, its Director and his brother who is a third person. The Company incurred liability towards the payment of tax under the provisions of the GVAT Act. The department has attached the personal immovable properties of the writ applicants No.2 and 3 respectively for the purpose of discharging of such liability in exercise of powers under Section 44 of the GVAT Act.
The bench comprising Justice J.B.Pardiwala and Justice Nisha M. Thakore observed “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.”
Quashing the orders, the Court observed that “The reasons of morality and fairness can have no application to bring a citizen who is not within the four corners of the taxing statute within its fold so as to make him liable to payment of tax. The entire approach of the department that as it is not in a position to recover anything from the company, it can run after the Director of the company and attach his personal properties. The writ applicant No.3 has even otherwise no legal connection with the company. He just happens to be the brother of the writ applicant No.2 before us.”
While concluding, the Court added that “Over a period of time, we have noticed that Section 44 of the GVAT Act is being misused to the maximum. Either the authorities concerned have no idea about the scope and true purport of Section 44 of the GVAT Act or they just pretend to be ignorant of the correct interpretation of Section 44 of the GVAT Act.”
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