2021 (12) TMI 1353 - HC - GST

Attachment of Bank Accounts - fraudulent availment of ITC - non-application of mind - Section 83 of CGST Act - HELD THAT - The order impugned herein, wherein, the learned single Judge while setting aside the order of attachment, has observed that the 'opinion' of the second appellant is far more cryptic revealing total non-application of mind and merely repeating what the first appellant has stated in the request for sanction and accordingly, allowed the writ petition and directed the appellants to complete the process of assessment within a period of six weeks. This court, without going into the merits of the order impugned herein, finds it appropriate to modify the order passed by the learned single judge, only in respect of the direction issued to the appellants. Accordingly, the order impugned herein is modified to the effect that the appellants are at liberty to issue show cause notice to the first respondent within a period of four weeks from the date of receipt of a copy of this judgement and on receipt of the same, the first respondent shall file their objections and documentary evidence, if any, within a period of two weeks thereafter. Appeal disposed off.

Summary

Issues:

1. Validity of the order attaching the first respondent's bank accounts under Section 83 of the CGST Act.
2. Judicial review of the order passed by the learned single Judge in W.P. No. 32 of 2021 setting aside the attachment order.
3. Examination of the factual and legal positions leading to the attachment order.
4. Assessment of the arguments presented by both parties regarding the attachment order.
5. Analysis of the observations made by the learned single Judge regarding the opinion of the second appellant.
6. Modification of the order to issue a show cause notice and complete the assessment process within a specified timeframe.

Issue 1: Validity of the attachment order under Section 83 of the CGST Act

The appeal challenged the order attaching the first respondent's bank accounts under Section 83 of the CGST Act, alleging fraudulent input tax credit and tax evasion by the first respondent. The appellants argued that the attachment was justified to protect government revenue based on thorough investigation and documentary evidence. The learned counsel contended that the order was in the interest of the government revenue, emphasizing the evasion of GST due to ineligible ITC availed by the first respondent.

Issue 2: Judicial review of the order setting aside the attachment

The learned single Judge set aside the attachment order, citing a lack of proper application of mind in the second appellant's opinion. The court observed that the opinion was cryptic and merely repeated the first appellant's statements. The first respondent's counsel argued that the single Judge's decision was based on factual and legal considerations, warranting no interference by the higher court. The court, after hearing both sides, modified the order to issue a show cause notice and complete the assessment process within a specified timeframe.

Issue 3: Examination of the factual and legal positions

The search conducted at the first respondent's premises revealed fraudulent activities related to input tax credit and tax evasion. The appellants contended that the investigation was initiated against a related company involved in clandestine removal of goods, leading to the first respondent availing ineligible ITC. The attachment of the bank account was based on a thorough study of documents, including GSTR2A and GSTR 1 filings.

Issue 4: Assessment of arguments presented by both parties

The appellants argued that the first respondent did not respond adequately to the summons and that the investigation was ongoing. The first respondent's counsel countered, stating that all documentary evidence was provided, and full cooperation was extended during the investigation. The court considered these arguments and modified the order to facilitate a structured process for objections and assessment.

Issue 5: Analysis of the observations on the second appellant's opinion

The court noted deficiencies in the second appellant's opinion, highlighting a lack of detailed analysis and a mere repetition of the first appellant's stance. This observation influenced the decision to modify the order and ensure a more structured assessment process within a specified timeframe.

Issue 6: Modification of the order for issuing a show cause notice and assessment

The court modified the order to allow the appellants to issue a show cause notice within four weeks, followed by the first respondent filing objections and evidence within two weeks. The appellants were directed to examine the submissions and pass an assessment order based on merits within the statutory timeframe stipulated in the CGST Act, 2017. This modification aimed to streamline the assessment process and ensure a fair opportunity for both parties to present their case.