Gujarat High Court provides relief to Wipro

Gujarat High Court provides relief to Wipro

Tax department slammed for taking coercive measures

The Gujarat High Court has criticized the methods adopted by the Goods and Services Tax (GST) department to meet the revenue targets. It directed the state tax officials not to take coercive steps to recover the tax amounts, particularly when appeals and applications for the stay filed by the taxpayers were pending.

The Information Technology giant Wipro Limited had approached the high court challenging the action of the GST department. It contended that the provisions of the Gujarat Value Added Tax (GVAT) Act were not properly followed in the issuance of the notices.

Even as the company had challenged the assessment orders before the appellate authorities and the tribunal, the state tax department had issued notices to the HSBC Bank demanding to attach the company's accounts. The notice was served without explaining how the amount of Rs.49.8 crores was calculated.

The two-judge bench comprising Justice JB Pardiwala and Justice Nisha Thakore quashed all notices issued to Wipro and directed that all appeals filed by the company against the tax assessment should be heard within two months.

The bench observed, "When appeals are pending before the first appellate authority or the tribunal, with an application seeking a stay towards the recovery of the tax, the department should not proceed to take coercive steps for the recovery of the amount incurred by the dealer under the GVAT Act."

Clarifying 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 court ruled that the recovery targets for revenue collection should not be at the expense of foreclosing the remedies available to the assessee for challenging the correctness of a demand.

It stated, "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 foreclosed by a hasty recourse to coercive powers. Assessing officers and appellate authorities perform quasi-judicial functions under the GVAT Act, 2003."