Allowed

Rajeshkumar Chandulal Modh v. State of Gujarat

Gujarat HC14 Oct 2022SCA/16606/2020

Case brief

AI extract

What is this about?

The High Court allowed special civil applications challenging notices and attachment orders sought to recover VAT dues from petitioners. The Court held that properties held by petitioners, which were owned by the original assessee prior to relevant tax proceedings and later transferred/returned to petitioners, were not liable for attachment. Consequently, the impugned notices and orders were quash

What did the court decide?

The impugned notices and the order of attachment creating charge over the petitioners' property were quashed and set aside.

Rajeshkumar Chandulal Modh Vs State of Gujarat — Cheque Dishonour | Gujarat HC (2022)

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 16394 of 2022

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With

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R/SPECIAL CIVIL APPLICATION NO. 16606 of 2020

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FOR APPROVAL AND SIGNATURE:

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HONOURABLE MR. JUSTICE N.V.ANJARIA

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and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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1 Whether Reporters of Local Papers may be allowed to see the judgment ?

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2 To be referred to the Reporter or not ?

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3 Whether their Lordships wish to see the fair copy of the judgment ?

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4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

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SHILPABEN PARESHKUMAR MODH

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Versus STATE OF GUJARAT

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Appearance:

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MR HARDIK P MODH(5344) for the Petitioner(s) No. 1,2 MR TRUPESH KATHIRIYA, AGP for the Respondent(s) No. 1 NOTICE NOT RECD BACK for the Respondent(s) No. 2 NOTICE SERVED for the Respondent(s) No. 3,4

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CORAM: HONOURABLE MR. JUSTICE N.V.ANJARIA

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and

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HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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Date : 14/10/2022

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Page 1 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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ORAL JUDGMENT

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(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

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1.Heard learned advocate Mr. Hardik P. Modh for

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the petitioners and learned Assistant Government Pleader Mr. Trupesh Kathiriya for the respondent State.

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2.Having regard to the controversy involved in

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these petitions, with the consent of the learned advocates for the respective parties, the petitions are taken up for final hearing.

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3.The issues involved in both these petitions are similar and therefore, have been heard together and are disposed of by this common judgment.

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4.Rule returnable forthwith in each petition. Learned Assistant Government Pleader Mr. Kathiriya waives service of notice of rule on

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Page 2 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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behalf of the respondent State in each petition.

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5.Petitioner no.1 of Special Civil Application

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No.16394/2022 is a widow lady, her husband Pareshkumar Modh expired on 3.05.2015 whereas petitioner no.2 is a minor son of the petitioner and are residing at the address shown in the cause title. Petitioner of Special Civil Application No.16606/2020 is the brother of late Shri Pareshkumar Modh.

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6.For the sake of convenience, facts are narrated from Special Civil Application No. 16394/2022.

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6.1) The property in question is situated at Block No.21, Saraswati Nagar Co-Op. Housing Society, Siddhpur, District Patan,

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Gujarat and was originally owned by Late

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Shri Chandulal Lallubhai Modh, father-in-law

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Page 3 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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of the petitioner no.1 from 06.12.1967. The

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said property was later on transferred in name of Shri Rajeshkumar Chandulal Modhpetitioner of SCA No.16606/2020 by Resolution No. 24(1) on 26.04.2003. It is the case of the petitioners that due to internal family partition amongst the brothers, the property was later on transferred in name of late Shri Pareshkumar Modh on 15.07.2011. Due to demise of Shri Pareshkumar Modh on 03.05.2015, the property in question has been inherited in name of the petitioner no.1 and her minor son through Resolution No. 31 dated 05.03.2016 passed by Saraswati Nagar Co-Op. Housing Society Ltd.

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6.2) The petitioners received a notice

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dated 13.04.2016 under section 200 of the

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Bombay Land Revenue Code, 1879 which was addressed to her late husband from respondent

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No.3, directing to pay government dues

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Page 4 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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pending for the period between 2012-2013 and 2013-2014 along with interest.

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6.3) Upon receipt of the notice dated

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13.04.2016, the petitioners vide letter dated 25.04.2016 informed the respondent No.3 that

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no due of Gujarat Value Added Tax department was pending. It was stated that late husband of the petitioner no.1 had been running business of travelling and he had never done

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any other business. The petitioners, therefore, requested the respondent for withdrawal of the notice.

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6.4) The petitioners thereafter, again

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received a notice dated 11.05.2017 which was

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also addressed to late Shri Pareshkumar Modh,

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directing to pay government dues for the period between 2012-2013 and 2013-2014 under the provisions of Gujarat Value Added Tax Act and Central Sales Tax Act.

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Page 5 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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6.5) Upon receipt of the notice dated 11.05.2017, the petitioners enquired with the respondents about the dues sought to be recovered from the petitioners and the petitioners came to know that such due was to be recovered form M/s. Govind Trading Co. which was owned by late Shri Chandulal Lallubhal Modh, who obtained registration on 20.01.2003 under provisions of Gujarat Sales

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Tax Act, 1969 in name of Srinath Trading Company, having Registration No. 24030401145. The petitioners also came to know that from the certificate issued under Gujarat Sales Tax Act, 1969 that name of the said firm was later on changed to Vraj Trading Company on 01.04.2008 which was further changed in name of M/s. Govind Trading Co. on 01.04.2012.

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6.6) It is the case of the petitioners that M/s. Govind Trading Co. was a

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Page 6 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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proprietorship concern owned by late Shri

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Chandulal Lallubhai Modh and he acted as commission agent for doing business of various agricultural products. M/s. Govind

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Trading Co. was registered under Bombay Shops & Establishment Regulation on 21.03.2012 and registered with Agriculture Produce Market Committee, Siddhpur from 10.04.2012 for a period of one year commencing from 01.04.2012 to 31.03.2013.

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6.7) It also came to the knowledge of the petitioners that the recovery against M/s Govind Trading Co. was made pursuant to the order dated 31.03.2014 passed by respondent

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No. 2 under Sections 75 and 100 of the

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Gujarat Value Added Tax Act, 2003 (For short “VAT Act”) and Section 9(2) of the Central Sales Tax Act, 1956 on account of

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cancellation of Registration ab-initio since Govind Trading Company could not produce

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Page 7 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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requisite documents showing for claim of

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legitimate Input Tax Credit on purchase of goods from Mahavir Trading Company and

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Bhagwati Enterprises, the registration granted to Govind Trading Co. was cancelled from the date it was granted to them.

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6.8) It is the case of the petitioners

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that the order dated 31.03.2014 passed by the

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respondent No. 2 has not been further challenged as Shri Chandulal Lallubhal Modh passed away on 20.08.2014.

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6.9) The petitioners thereafter received

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the notice dated 20.07.2020 issued by respondent no.4- Maintenance Surveyor under Section 135D of the Bombay Land Revenue

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Regulation, 1879 inviting objections, if any, in respect of making an entry in the register

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of mutation creating charge by respondent

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over the residential unit where the

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Page 8 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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petitioner no.1 is staying with his minor son for recovery of arrears of VAT and interest thereon under the provisions of the VAT Act. This entry was proposed to be made pursuant to the letter dated 30.06.2020 filed by the respondent No.3 for recovery of government dues for the period between 2012-2013 and 2013-2014 from M/s. Govind Trading Co., which was owned by late Shri Chandulal Lallubhai Modh.

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6.10) It is the case of the petitioners that since the petitioners did not receive a copy of the letter dated 30.06.2020 referred to in the notice dated 20.07.2020, family member of the petitioners approached the office of the respondent No. 3 and requested

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to supply a copy of the letter dated 30.06.2020, however, the petitioners were not provided a copy of the letter even though the

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repeated request was made for it. The

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Page 9 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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petitioners thereafter approached the office of respondent No.4 whereby the petitioners’ family member was provided a copy of the letter dated 30.06.2020.

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6.11) It is the case of the petitioner no.1 that she is not concerned with the business of M/s. Govind Trading Co and therefore, the action of the respondents of creating charge over the residential premises

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of the petitioners is against provisions of the VAT Act and Rules made thereunder.

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6.12) The petitioners being aggrieved by

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such action of the respondents, have

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approached this Court by way of present petitions.

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7.Learned advocate Mr. Hardik Modh for the petitioner submitted that the property in question upon which charge is created by the

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Page 10 of 25

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respondent authorities is neither owned by

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Ms. Govind Trading Company nor by Shri Chandulal Modh, proprietor of the firm. It was submitted that the outstanding dues was sought to be recovered from the properties belonging to the petitioners only because prior to 2003, the property in question was owned by late Shri Chandulal Modh. It was submitted that the outstanding dues of the respondent cannot be recovered from the family members of the assessee unless and until it is proved that the property was illegally transferred by the assessee in the name of the family members.

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7.1) It was submitted that section 47 of the VAT Act deals with the transactions

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relating to transfer of property to defraud the revenue which can be considered to be void. It was submitted that the property in question is not owned by assessee M/s Govind

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Page 11 of 25

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C/SCA/16394/2022 JUDGMENT DATED: 14/10/2022

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Trading Company or its proprietor Shri Chandulal Lallubhai Modh since 2003 and ownership of the property in question was transferred much before the period when the tax of assessee became due and thereafter, the property was inherited by the petitioners in the year 2016 from late Shri Pareshkumar Modh.

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7.2) Reliance was placed on the decision of Apex Court in case of Tax Recovery Officer

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v. Gangadhar Viswanath Ranade reported in (1998) 234 ITR 188 with regard to section 281 of the Income Tax Act, 1961 which provides that any transfer made by the assessee during the pendency of the proceedings as void if the same is entered into with an intention to defraud the revenue.

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7.3) It was further submitted that the

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respondents are only entitled to recover the

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Page 12 of 25

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dues in the manner as specified under section 44 of the VAT Act. It was pointed out that no notice was issued under the said provision for recovery of any dues to the petitioners before transfer of property took place in the name of the petitioners. It was submitted that there is no mechanism provided under the Act to recover the dues of father-in-law of the petitioner no.1 from the property owned by her. The husband of the petitioner was running a travelling business and therefore, outstanding dues of M/s Govind Trading Company pertaining to financial year 20122013 and 2013-2014 cannot be recovered from the properties of the petitioners as the property which was originally owned in the name of Shri Chandulal Modh was transferred in the name of Shri Rajeshkumar Modh in the year 2003 and there is no allegation that such property was transferred illegally in the name of the petitioners.

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Page 13 of 25

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7.4) Learned advocate Mr. Modh submitted

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that section 135B of the Gujarat Land Revenue

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Code, 1879 provides for mutating an entry in the revenue record to create a charge over the property if the same is legitimate on a due intimation from the authority. It was submitted that in the facts of the case as there are no dues of the Government against the petitioners and therefore, in facts of the case, no charge could have been mutated in the revenue records.

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8.On the other hand, learned Assistant Government Pleader Mr. Trupesh Kathiriya for the respondent State submitted that the

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property in question was owned by the proprietor of M/s. Govnid Trading Company i.e. Shri Chandulal Modh in the year 2003 and due to internal family partition amongst brothers, property was later transferred in

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Page 14 of 25

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the name of Shri Pareshkumar Modh on

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15.07.2011 and due to demise of Pareshkumar Modh on 3.05.2015, property in question has been inherited in the name of his wife the petitioners herein. Similarly the property being block no.22 which was in the name of Shri Mahendrakumar Modh was transferred in

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the name of Shri Pareshkumar Modh in the year 2003 and thereafter same was transferred in the name of Shri Rajeshkumar Modh.

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8.1) It was therefore, submitted that the property originally belonged to Shri Chandulal Modh who expired in the year 2014 and as such, the respondents are entitled to recover the outstanding dues of M/s. Govind Trading Company from the property which originally belonged to the proprietor of M/s Govind Trading Company. It was submitted that as per the provisions of section 57 of the

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VAT Act, liability is of the petitioners to

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Page 15 of 25

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pay the outstanding dues of their father or

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father-in-law out of the estate of the deceased to the extent to which estate is capable of meeting charge. It was therefore, submitted by learned Assistant Government Pleader Mr. Kathariya that as the property in question upon which attachment is made belonged to late Shri Chandulal Modh, same is liable to be sold by the department under section 55 of the VAT Act for recovery of outstanding dues of more than 1,53,00,000/-.

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9.Having heard the learned advocates for the respective parties and having considered the facts of the case and material on record, it appears that the property in question was not

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in the name of Shri Chandulal Modh, proprietor of M/s. Govind Trading Company when the assessment order was passed for the Assessment Year 2012-2013 and 2013-2014 under

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sections 75 and 100 of the VAT Act read with

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Page 16 of 25

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section 9(2) of the Central Sales Tax Act, 1956 raising demand by the respondent authorities on account of cancellation of sales tax number.

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Provisions of sections 44 and 47 of the

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VAT Act read as under:

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“44. Special mode of recovery.

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(1) Notwithstanding anything contained in any law or contract to the contrary, the Commissioner may at any time or from time to time, by notice in writing, a copy of which shall be forwarded to the dealer at his last known address, require,

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(a) any person from whom any amount of monies is due, or may become due, to a dealer on whom notice has been served under sub-section (1), or

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(b) any person who holds or may subsequently hold monies for or on account of such dealer, to pay the Commissioner, either forthwith upon the monies becoming due or being held or within the time specified in the notice (but not before the monies becomes due or is held as aforesaid) so much of the monies as is sufficient to pay the amount. due by the dealer in respect of the

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Page 17 of 25

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arrears of tax, penalty or interest under this Act, or the whole of the money when it is equal to or less than that amount.

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Explanation - For the purposes of this sub-section, the amount of monies due to a dealer from, or monies held for or on account of a dealer by any person, shall be calculated by the Commissioner after deducting therefrom such claims, if any, lawfully subsisting, as may have fallen due for payment by such dealer to such person.

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(2) The Commissioner may amend or revoke any such notice or extended the time for making any payment in pursuance of the notice.

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(3) Any person making any payment in compliance with a notice under this section shall be deemed to have made the payment under the authority of the dealer, and the receipt thereof by the Commissioner shall continue a good and sufficient discharge of the liability of such person to the extent of the amount specified in the receipt.

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(4) Any person discharging any liability to the dealer after receipt of the notice referred to in this section, shall be personally liable to the Commissioner to the extent of the liability discharged or to the extent of the liability of the dealer for tax, penalty and interest, whichever is less.

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Page 18 of 25

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(5) Where a person to whom a notice under this section is sent objects to it by a statement in writing that the sum demanded or any part thereof is not due or payable to the dealer or that he does not hold any monies for or account of the dealer, the Commissioner shall hold an inquiry and after giving to such person or dealer a reasonable opportunity of being heard, make such order as he thinks fit.

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(6) Any amount of monies which the aforesaid person is required to pay to the Commissioner, or for which he is personally liable to the Commissioner under this section shall, if it remains unpaid, be recoverable as an arrears of land revenue.

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(7) The Commissioner may apply to the court in whose custody there is monies belonging to the dealer for payment of the amount of such monies towards the outstanding amount of tax, interest and penalty payable by the dealer.

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47. Transfer to defraud revenue void.

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Where a dealer after any tax has become due from him creates a charge on or parts with the possession by way of sale, mortage, exchange or any other mode of transfer whatsoever of any of any of his

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Page 19 of 25

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property in favour of any other person with the intention of defrauding the government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the dealer.”

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Considering the above provisions, the outstanding dues under the VAT Act can be recovered from the properties which are in the name of assessee and the properties which are in the name of others transferred illegitimately so as to defraud the revenue. Only because the property in question was in the name of late Shri Chandulal Modh prior to 2003, the same cannot be attached to recover the outstanding dues.

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Admittedly the property in question was in the name of the petitioners prior to the date of assessment order and therefore, the same cannot be attached by the respondent

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Page 20 of 25

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authorities to recover the outstanding dues of the assessee.

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With regard to the contention raised on behalf of the respondent authorities to recover the dues from the legal heirs of the deceased assessee, it would be germane to refer to the provision of section 57 of the

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VAT Act which reads as under:

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“57. Special provision regarding liability to pay tax in certain cases.

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(1) Where a person who is or has been a dealer, liable to pay tax under this Act, dies, then-

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(a) if a business carried on by the dealer is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such dealer under this Act or under any earlier law, and

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(b) if the business carried on by the dealer is discontinued, whether before or after his death, his legal representative shall be liable to pay out of the estate of the

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Page 21 of 25

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deceased, to the extent to which the estate is capable of meeting the charge, the tax, penalty or interest due from such dealer under this Act or under any earlier law,-

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whether such tax interest or penalty has been assessed before his death but has remained unpaid or is assessed after his death.

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(2) Where a dealer, liable to pay tax under this Act, is a Hindu Undivided Family and the property of the Hindu Undivided Family is partitioned amongst the various members or groups of members then each member or group of members shall jointly and severally be liable to pay the tax, interest or penalty due from the dealer under this Act or under any earlier law upto the time of the partition whether such tax, penalty or interest has been assessed before partition but has remained unpaid or is assessed after the partition.

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(3) Where a dealer, liable to pay tax under this Act, is a firm, and the firm is dissolved, then every person who was a partner shall be jointly and severally liable to pay to the extent to which he is liable to pay to the extent to which he is liable under section 54 the tax, interest or penalty due from the firm under this Act or under any earlier law, upto the time of dissolution whether such tax, interest or penalty has been

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Page 22 of 25

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assessed before the dissolution, but has remained unpaid or is assessed after dissolution.

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(4) Where the dealer liable to pay tax under this Act,

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(a) is the guardian of a ward on whose behalf the business is carried on by the guardian, or

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(b) is a trustee who carries on the business under a trust for a beneficiary.

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then if the guardianship or trust is terminated, the ward or, as the case may be, the beneficiary shall be liable to pay the tax, interest or penalty due from the dealer upto the time of the termination of the guardianship or trust, whether such tax, interest or penalty has been assessed before the termination of guardianship or trust but has remained unpaid or is assessed thereafter.

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(5) Where a person becomes liable to pay tax in the manner described in clause (a) of sub-section (1), then such person shall, (notwithstanding anything contained in section 3), be liable to pay tax on the sales of goods made by him on and after the date of such succession or transfer and shall (unless he already holds a certificate of registration) in the case of succession, within six months and in the case of transfer,

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Page 23 of 25

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within thirty days, thereof apply for registration.”

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In view of the above provision, legal

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representatives are liable to pay the dues of the deceased only out of the estate of the deceased to the extent to which the estate is capable to meet the tax charges, penalty or interest due from the assessee. However, in facts of the case, there is no estate of late Shri Chandulal Modh as it is not in dispute that the property in question is already transferred in the name of petitioners in the year 2003/2011 itself and therefore, property in the name of the petitioners could not have been attached by the respondent authority.

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