A two-judge bench of the Gujarat High Court, while criticizing the methods adopted by tax officials to meet revenue targets given by the higher-ups, asked the state tax officials not to take coercive steps to recover tax amounts, particularly when appeals and applications for stay filed by taxpayers are pending in the tribunal.
IT giant Wipro Ltd, approached the High Court challenging the action of the department contending that the provisions of Gujarat Value Added Tax (GVAT) Act were not properly followed in issuance of the notices. The liability was assessed for different years. While the company challenged the assessment orders before appellate authorities and tribunal concerned, the Gujarat state tax department issued notices to banks like and HSBC asking for the company’s accounts to be attached.
The notice for transfer of the amount did not even explain how the department calculated the amount of Rs 49.8 crore.
After hearing the case, the bench of Justice and Justice Nisha Thakore quashed all notices issued to Wipro and issued a direction that all appeals filed by the company against tax assessment should be heard in two months.
While quashing notices issued to the bank and expeditious hearing of appeals, the bench observed, “ordinarily, when appeals are pending before the first appellate authority or the tribunal, as the case may be, with an application seeking stay towards recovery of the tax, then, in such circumstances, the department should not proceed to take coercive steps for the recovery of the amount incurred by the dealer under the GVAT Act.”
The HC clarified that its observation should not be construed as an “absolute proportion of law”, but the department “is expected to at least wait for the final outcome of the appeals on their own merits, more particularly, when the appeals are already admitted”.
The High Court further said that the recovery targets for revenue collection “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.”
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