NITABEN HARISHBHAI SHAH vs. OFFICE OF ASSISTANT COMMERCIAL TAX OFFICER, GUJARAT

C/SCA/17009/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 17009 of 2018

FOR APPROVAL AND SIGNATURE:

HONOURABLE MS.JUSTICE HARSHA DEVANI

and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ========================================================== NITABEN HARISHBHAI SHAH Versus OFFICE OF ASSISTANT COMMERCIAL TAX OFFICER, GUJARAT ========================================================== Appearance: MR. JAIMIN R DAVE(7022) for the Petitioner(s) No. 1 MR UTKARSH SHARMA, ASSISTANT GOVERNMENT PLEADER(1) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 10/04/2019

ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) Page 1 of 6

C/SCA/17009/2018 JUDGMENT 1. Rule. Mr. Utkarsh Sharma, learned Assistant Government Pleader waives service of notice of rule on behalf of the respondent. 2. Having regard to the controversy involved in the present case, which lies in a very narrow compass, with the consent of the learned advocates for the respective parties, the matter was taken up for final hearing today. 3. In this petition, the petitioner challenges the order dated 19.9.2018 passed by the respondent whereby the property of the petitioner has been attached under the provisions of section 155 of the Bombay Land Revenue Code. 4. The facts as averred in the petition are that the petitioner acquired the property being 4, Golden Tulip Bungalows, TP No.21/FP No.198, Shreyas Foundation, Ellisbridge, Ahmedabad (hereinafter referred to as the “subject property”) vide registered sale deed dated 25.3.2008 for a consideration of Rs.1,15,00,000/-. The said property was purchased from Shri Harishbhai F. Shah, Shri Bharatbhai F. Shah and Dairy Den Limited. The petitioner thereafter received the impugned notice of attachment dated 19.9.2018 for attachment of the subject property which was issued for recovery of alleged outstanding sales tax dues of one Shah Milk Processors Private Limited for assessment year 2001-02 amounting to Rs.14,83,009/- with interest. It is the case of the petitioner that since the petitioner's husband was the Director of the said company during the relevant period, the subject property is sought to be attached for recovery of the dues of the company. Page 2 of 6

C/SCA/17009/2018 JUDGMENT Being aggrieved, the petitioner has filed the present petition challenging the impugned notice as well as the order of attachment. 5. Mr. Jaimin Dave, learned advocate for the petitioner submitted that the petitioner herein is the wife of one of the Directors of the company. It was submitted that in respect of the dues of the company, it is not permissible for the authorities to proceed against the Director of the company, whereas the petitioner is the wife of the Director and is the sole owner of the said property. It was submitted that there is no provision under the Gujarat Sales Tax Act, 1969 and Gujarat Value Added Tax Act, 2003 which empowers the authorities thereunder to recover the dues of a private limited company from its Director. Therefore, the action of the respondent in seeking to recover the dues of the private limited company from the petitioner who happens to be the wife of one of the Directors, is without authority of law. 5.1 In support of his submission, the learned advocate placed reliance upon the decision of a Division Bench of this court in the case of M.R. Choksi v. State of Gujarat, (2012) 51 VST 73 (Guj.), wherein the court held that there is no statutory provision in the Gujarat Sales Tax Act, 1969 which empowers the sales tax authorities to fasten the liability of the company on its Director in the matter of payment of sales tax dues. Reliance was also placed upon the decision of this court in the case of C.V. Cherian v. C.A. Patel, (2012) 51 VST 71 (Guj.) wherein the court followed the above referred decision of this court in the case of M.R. Choksi. v. State of Gujarat (supra) wherein action was taken under the provisions of the Gujarat Page 3 of 6

C/SCA/17009/2018 JUDGMENT Value Added Tax Act. Reliance was also placed upon the decision of this court in the case of Different Solution Marketing (P.) Ltd. v. Assistant Commissioner of Commercial Taxes, (2016) 57 GST 36 (Gujarat), wherein once again the court placed reliance upon its earlier decision in the case of M.R. Choksi v. State of Gujarat (supra). Yet another decision of this court in the case of Umesh Mohanbhai Garala v. Commercial Tax Officer rendered on 8.7.2016 in Special Civil Application No.21206 of 2015 was relied upon for a similar proposition of law. It was, accordingly, submitted that the action of the respondent in attaching the property of the petitioner is without authority of law, and hence, the impugned notice as well as the order of attachment are required to be quashed and set aside. 6. On the other hand, Mr. Utkarsh Sharma, learned Assistant Government Pleader has placed reliance upon the averments made in the affidavit-in-reply filed on behalf of the respondent. It was submitted that if the provisions of the Gujarat Value Added Tax Act, 2003 are looked into and more particularly, sections 53(3) and 86 thereof, the same clearly indicate that any tax, interest and penalty which is assessed under that Act for any period can always be recovered from any person who was or is a Director of the company. It is to be established by such individual that the liability of payment and resulting recovery cannot be attributed to him/her. It was submitted that in the present case undisputedly the dues are for the assessment year 2001-2002 and even if the transaction of the property is to be looked into with regard to internal purchase and sale between the present petitioner and her husband and other relatives, which transfer is of the year 2008, the Page 4 of 6

C/SCA/17009/2018 JUDGMENT department was justified in attaching the subject property. It was contended that even in terms of section 47 of the Gujarat Value Added Tax Act, 2003 since such purchase has taken place after the tax amount had become due, such transfer is void as against the claim of the tax dues of the State. It was submitted that if the dues have arisen, the recovery is permissible to be carried out as per section 49 of the Gujarat Value Added Tax Act and that the petitioner cannot shy away from the responsibility towards the Government exchequer and tax dues. It was, accordingly, urged that the petition being devoid of merit, deserves to be dismissed. 7. In the opinion of this court, the contentions raised on behalf of the respondent are absolutely without any merit. What is contended on behalf of the respondent is that the property belonging to the Directors has been transferred to the petitioner and that the dues are of a period prior to the transfer, and hence, the tax dues can be recovered from the property of the petitioner. This court in the case of M.R. Choksi v. State of Gujarat (supra) has observed that there is no statutory provision in the Gujarat Sales Tax Act, 1969 which empowers the sales tax authorities to fasten the liability of the company on its Director in the matter of payment of sales tax dues. Similarly, there is no provision in the Gujarat Value Added Tax Act, 2003 also, which empowers the authorities acting thereunder to recover the dues of a private limited company from its Directors. Under the circumstances, when it is not permissible for the respondent to proceed against the Director of the company for recovery of the tax dues of the company, the question of recovering such dues from the property which belongs to the wife of the Director Page 5 of 6

C/SCA/17009/2018 JUDGMENT would not arise. The impugned action of the respondent is, therefore, without any authority of law and is not backed by any statutory provision. Under the circumstances, the impugned attachment notice as well as the order dated 19.9.2018 cannot be sustained. 8. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated 19.9.2018 as well as the impugned order dated 19.9.2018 (Annexure-A to the petition) are hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs. (HARSHA DEVANI, J) (BHARGAV D. KARIA, J) Z.G. SHAIKH Page 6 of 6