Gujarat High Court Condemns Coercive Steps Taken By Dept. For Recovery Of Dues From Wipro While Appeal Was Pending

The writ petitioner, Wipro Ltd. is in the business of information technology services, including the sale of hardware and software, the sale of consumer products, and the supply and installation of solar power generation plants. The writ petitioner was registered under the VAT Act and the Central Sales Tax Act, 1956 for the relevant period.

The writ petitioner has challenged the legality and validity of the notice issued by the state tax officer to the branch manager of State Bank India in which the bank was asked to provide the details of the closing balance to the state tax inspector and then issue a demand draft as per the available closing balance of the dealer.

The writ petitioner submitted that appeals against the assessment orders were pending before the first appellate authority as well as the Tribunal.

The writ petitioner contended that the department did not bring any tangible material on the basis of which he had framed an opinion that the writ petitioner was likely to defeat the demand and, therefore, attachment was necessary to protect the interest of government revenue.

The writ petitioner contended that the department had initiated recovery proceedings without following the procedure prescribed under Section 44 of the VAT Act and threatened the bank manager with issuing a demand draft in favour of the department from the account of the writ applicant.

The court while quashing the notice, directed the first appellate authority and the Tribunal to take up all the appeals filed by the writ applicants for hearing and dispose of them within a period of two months.

"We must once again eradicate the misconception of the law in the minds of the department as regards Section 44 of the GVAT Act, 2003. All the impugned notices issued to the banks are based on Section 44 of the GVAT Act," the court said.

The court observed that in the absence of a debtor-creditor relationship, the department could not have asked the bank to debit the accounts of the writ petitioner and credit an amount as specified in the notices to the treasury of the State Government.

The court said that the department should not have proceeded to take coercive steps for the recovery of the amount incurred by the dealer under the GVAT Act when appeals were pending before the first appellate authority or the Tribunal with an application seeking a stay towards the recovery of the tax.

"Administrative directions for fulfilling recovery targets for the collection of revenue should not be at the expense of foreclosing the remedies which are available to assessees for challenging the correctness of a demand. The sanctity of the rule of law must be preserved. The remedies which are legitimately open in law to an assessee to challenge a demand cannot be allowed to be foreclosed by a hasty recourse to coercive powers. Assessing Officers and appellate authorities perform quasi-judicial functions under the GVAT Act, 2003," the court said.

Case Title: M/s Wipro Ltd. Versus State of Gujarat

Citation: R/Special Civil Application No. 11190 of 2021

Dated: 09/03/2022

Counsel For Petitioner: Senior Advocate Tushar Hemani

Counsel For Respondent: APG Utkarsh Sharma

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