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VAT - Revenue Department has no authority to forcibly collect post dated cheques from raiding parties, in name of unascertained tax arrears: HC

By TIOL News Service

AHEMDABAD, JULY 29, 2017: THE ISSUE BEFORE THE COURT IS - Whether Revenue Department has any authority to forcibly collect post dated cheques from raiding parties, in the name of unascertained tax arrears. NO is the verdict.

Facts of the case:

The petitioner dealer is a proprietory concern and is dealing in chemicals for which purpose the petitioner enjoys registration under the VAT Act as well as the CST Act. During the subject year, the VAT Authorities carried out raid on the business premises of petitioner, wherein which they collected six post dated cheques. Subsequently, the Commercial Tax Officer attached the petitioner’s house where his office was also situated, for unpaid tax arrears in exercise of powers u/s 45 of VAT Act.

On appeal, the HC held that,

++ this court has criticized the tendency of the officers of the raiding parties to forcibly collect post dated cheques towards unascertained and unassessed tax liabilities. The admitted position is that no assessment, final or provisional, has been made containing such demand for the period during which the authorities are assessing the petitioner’s liability of tax and interest. It is, therefore, difficult to appreciate that the petitioner would have voluntarily agreed to pay such sum for which he would have willingly given post dated cheques. There is no authority in law in which the tax authorities can forcibly collect post dated cheques. Under the circumstances, the respondents are directed to not present the post dated cheques collected from the petitioner for realisation and return the said cheques. We make it clear that in present case, the raid was carried out on 02.05.2017, when the cheques were collected and the petition was filed promptly on 08.05.2017 without any loss of time. This would, therefore, demonstrate the petitioner’s bona fides. If in a given case, upon issuing the post dated cheques the assessee has gained some benefit or avoided certain tax liability and thereafter moved the court after a long period of time, such conduct would be one of the factors which the court may take into consideration in the process of deciding whether the post dated cheques were voluntarily given or not and whether in any case discretion in exercise of writ jurisdiction should be granted or not.

In passing :  Please also see 2017-TIOL-955-HC-DEL-CX

 

(See 2017-TIOL-1427-HC-AHM-VAT)


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