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GVAT - Whether Revenue can exercise power of provisional attachment even in cases of disputed tax liability under Gujarat Entry tax Act - NO: HC

By TIOL News Service:

AHMEDABAD, OCT 16, 2016: THE issue is - Whether the Authorities under Gujarat VAT Act can exercise their power of provisional attachment enshrined u/s 45(1), in cases of disputed tax liability under Gujarat Entry tax Act. NO IS THE VERDICT.

Facts of the case:

The assessee had preferred the present petition challenging the order, whereby the Asst CCT had placed the assessee's bank account under provisional attachment in exercise of powers u/s 45(1) of Gujarat VAT, 2005. This power was exercised in view of the possible tax, interest and penalty demand of Rs.20 lakhs concerning the assessee. The case of the assessee was that much of its possible tax liability would be relatable to entry tax and Gujarat Entry tax Act do not vest power of provisional attachment on the CCT. Further, the assessee also submitted that it had already deposited a sum of Rs.11 lakhs with the authorities under protest towards the possible basic duty liability.

On appeal, the High Court held that,

1. In the present case, admittedly, the assessment concerning the disputed tax liability of the assessee is not yet completed. What appears substantially undisputable is that the amount of Rs.20 lakhs quoted in the impugned order by way of assessee's possible tax, interest and penalty liability, mainly comprises of the disputed entry tax. The fact that the disputed tax liability represents in substantial measure, entry tax, is not in dispute. The Entry Tax Act does not contain any provision for provisional attachment.

2. Section 45(1) of the VAT Act, of course, authorizes the competent authority to exercise the power of provisional attachment pending the proceedings for assessment or reassessment of turnover escaping assessment to protect the interest of Revenue. Such power obviously cannot be imported for the purpose of the Entry Tax Act.

3. In facts of the present case therefore, when we notice that the assessee has already deposited a sum of Rs.11 lakhs towards the initial estimated tax penalty and interest liability of Rs.20 lakhs, which in any case, includes substantial portion of disputed entry tax, we would not permit the authorities to provisionally attach the assessee's bank account. Under the circumstances, impugned order is set aside.

(See 2016-TIOL-2473-HC-AHM-VAT)


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