The Gujarat High Court has lambasted the state government and its tax department for the manner in which it has tried to recover a disputed tax amount of Rs 1.49 crore from an Indian consumer electronics company. The court has remarked that the “high-handed” and “arbitrary” action by the tax authorities is nothing short of “extortion”.
The remarks came from the division bench of Justices JB Pardiwala and AC Rao in a petition filed by Micromax Informatics Ltd against the tax department’s coercive recovery of Rs 1.49 crore under the Gujarat Value Added Tax (GVAT) Act.
When the officers concerned tendered an apology to the court, it directed the state to refund the amount recovered with coercion from the company along with 6% interest.
In March 2017, the company received a notice under the GVAT Act for audit assessment but it did not specify the grounds of inquiry. The firm produced books of accounts, sales invoices and credit and debit notes for the fiscal 2014-15. In October 2018, an assessment order was passed by deputy commissioner of sales tax, directing the company to pay Rs 1.49 crore as tax and interest due for 2014-15.
The company filed an appeal and a stay application against the assessment order in January 2019 claiming that it did not disclose the basis for the excess demand. Meanwhile, the firm’s bank received a notice from the tax authorities the same month for releasing the disputed tax amount; the company was unaware of it. The bank eventually informed the company on February 4 and the latter requested it not to clear the amount as an appeal was pending adjudication.
While the appeal and stay application was scheduled for hearing on January 29, it could not be taken up. On February 7 the tax authorities directed the company to submit 20% of the disputed tax as pre-deposit and pre-condition to grant stay. Accordingly, the company deposited Rs 29.85 lakh by February 14. But still, the next day, the tax authorities coerced the bank to release Rs 1.49 crore, without any advance notice to the company.
The company filed a refund request citing the 20% pre-deposit and the stay obtained by it, but in vain. Eventually, it approached the high court for relief.
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