IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF OCTOBER, 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.49850/2019 (T – RES) BETWEEN:
M/S. ASHRAYA CONSTRUCTIONS No.908-D, 19TH CROSS, 19TH MAIN IDEA HOUSE TOWNSHIP RAJARAJESHWARI NAGAR BENGALURU – 560 098 REPRESENTED BY ITS PARTNER SRI. D.S. CHANDRU TIN No.29041195224. ... PETITIONER [BY SRI MALLAHAR RAO, ADV.] AND:
1. STATE OF KARNATAKA REPRESENTED BY ITS PRINCIPAL SECRETARY FINANCE DEPARTMENT GOVERNMENT OF KARNATAKA II FLOOR, VIDHANASOUDHA BENGALURU – 560 001.
2. THE COMMISSIONER OF COMMERCIAL TAXES COMMERCIAL TAX OFFICER – 1 GANDHI NAGAR, BENGALURU – 560 009 3. THE DEPUTY COMMISSIONER OF COMMERCIAL TAX (AUDIT) – 2.5, DGSTO-2 ROOM No.642 2ND FLOOR, PIONEER PLAZA KENCHENAHALLI MAIN ROAD NEAR GOPALAN ARCADE MALL RAJARAJESHWARI NAGAR BENGALURU – 560 098. …RESPONDENTS [BY SRI T.K. VEDAMURTHY, AGA] THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED BANK ATTACHMENT NOTICES ISSUED U/S 45 OF THE KVAT ACT, 2003, ALL DATED 22.08.2019, FOR ATTACHMENT OF OVER-DRAFT BANK ACCOUNT OF THE PETITIONER, VIDE ANNEXURES – G, H AND J AND ETC., THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R Learned Additional Government Advocate accepts notice for the respondents.
The petitioner has challenged the bank attachment notices issued under Section 45 of the Karnataka Value Added Tax Act, 2003 (‘KVAT Act’ for short) dated 22.08.2019 for attachment of Over-Draft Bank Account of the petitioner at Annexures – G, H and J, relating to the assessment years 2014-15, 2015-16 and 2016-17 and for other consequential reliefs.
2. The petitioner is a partnership firm, registered dealer under the KVAT Act and also registered under the Central Sales Tax Act, 1956. The petitioner was subjected to assessment relating to the assessment years in question and the assessment orders were passed. It transpires that the assessee has preferred rectification application seeking rectification of the said assessment orders and the same is said to be pending.
3. It is the submission of the learned counsel for the petitioner that the attachment of bank Over- Draft Account of the petitioner is illegal. The credit facility extended by the bank by way of Over-Draft or otherwise cannot be considered to be authorising the department to realise the amount for which the Bank has agreed to give loan. Reliance is placed on the order of the cognate bench of this Court in the case of M/s. Karnataka Bank Limited vs. The Commissioner of Commercial Taxes in Karnataka, Bangalore and others reported in (1998) 45 Kant.L.J. 595.
4. Learned Additional Government Advocate appearing for the revenue would submit that the Bank has addressed a letter to the Assessing Authority stating that the Bankers are unable to remit the amount called for on account of non-payment of VAT for the assessment years in question since the petitioner has availed the Over-Draft and other credit facility and there is no balance available in their account. The copy of the said letter is placed on record along with a memo.
5. In view of the aforesaid, it is not in dispute that the attachment of the bank account of the petitioner is in respect of Over-Draft facility. The cognate bench of this Court has categorically observed thus:-
“4. Under Section 14 of the Karnataka Sales Tax Act, any person from whom money is due or may become due to the dealer or who holds or may subsequently be holding money for or on account of the dealer is liable to pay to the Assessing Authority the said amount. A credit facility by way of overdraft or otherwise cannot be considered to be authorising the department to realise the amount for which the Bank has agreed to give the loan. If the account of the defaulter runs in debit and there being no credit in his account, this should not be considered as the money belonging to the defaulter. The Bank is under no obligation to make payment to the Commercial Tax Department. It is only when the Bank or the other person holds any money on behalf of the defaulter or may be found subsequently holding. If at any particular point or time the Bank overdraft limits are availed, it cannot be considered that the money which is being drawn from the Bank belong to the defaulter. The Bank does not owe the money to the defaulter. Sanction of overdraft facility creates an agreement between the Bank and the borrower and it cannot be considered that the Bank is owing the money with the borrower simply because overdraft facility has been given.”
6. In the light of the said judgment, it is clear that if the account of the defaulter runs in debit and there being no credit in his account, the same should not be considered as the money belonging to the defaulter. The Bank is under no obligation to make payment to the Department. The Bank does not owe the money to the defaulter. Hence, the attachment of the Over-Draft Account of the petitioner by issuance of Bank attachment notice impugned cannot be held to be sustainable.
7. Hence, Annexures – G, H and J of even date 22.08.2019 stand quashed. The department is at liberty to initiate the recovery proceedings in any other mode in accordance with law.
The writ petition stands disposed of accordingly.
PMR Sd/- JUDGE