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2019 (9) TMI 741 - HC - GSTProvisional attachment of Bank Account - irregular availment of input tax credit - invocation of section 83 of CGST Act 2017 - period between July 2017 and May 2019 - whether the respondent No.1 was justified in invoking Section 83 of the Act for the purpose of passing an order of attachment of the bank accounts? - revenue neutrality. HELD THAT - Section 83 of the State GST Act empowers the Assessing Authority to make a provisional attachment of any property of the assessee during the pendency of any proceeding for the assessment or reassessment of any turnover even though there is no demand outstanding against the assessee if he is of the opinion that it is necessary to do so to protect the interest of the revenue. This provision has been made in order to protect the interest of the revenue in cases where the raising of demand is likely to take time because of the investigations and there is apprehension that the assessee may default the ultimate collection of the demand. Section 83 gives a power to be exercised during the pendency of any proceeding for assessment or reassessment so that the assessee may not fritter away or secrete his resources out of the reach of the Commercial Tax department when the assessment or reassessment is completed. The expression for the purpose of protecting the interest of the revenue occurring in Section 83 of the Act is very wide in its meaning. The orders of provisional attachment must be in writing. There must be some material on record to indicate that the Assessing Authority had formed an opinion on the basis thereof that it was necessary to attach the property in order to protect the interest of the revenue. The provisional attachment provided under section 83 is more like an attachment before judgment under the Code of Civil Procedure. It is a liability on the property. However the power conferred upon the Assessing Authority under Section 83 is very drastic farreaching power and that power has to be used sparingly and only on substantive weighty grounds and for valid reasons. To ensure that this power is not misused no safeguards have been provided in the Section 83. The Bombay High Court in GANDHI TRADING VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS 1999 (7) TMI 59 - BOMBAY HIGH COURT has opined that the attachment should be made as far as possible of the immovable properties if that can protect the Revenue. The attachment of bank accounts and trading assets should be resorted to only as a last resort because the attachment of the bank accounts of the assessee would paralyse the functions and business of the assessee - The Authority therefore should exercise the power conferred upon him under Section 83 of the Act with circumspection and fairly and reasonably. No hard and fast rule can be laid down as to how and under what circumstances the power under Section 83 can be invoked by the Authority. The discretion conferred on the Authority shall be brought to bear having regard to the facts and circumstances of each case. It is not permissible for the Authority to equate the provisional attachment envisaged under Section 83 of the Act with attachment in the course of the recovery proceedings. The orders of provisional attachment of the bank accounts of the writ applicants are hereby quashed and set aside - Application allowed.
Issues Involved:
1. Provisional attachment of bank accounts under Section 83 of the Central Goods and Services Tax (CGST) Act, 2017. 2. Validity of corrigendum issued to rectify the reference from Section 74 to Section 67 of the CGST Act. 3. Authority of the Additional Director General to pass the order of provisional attachment. 4. Subjective satisfaction of the Commissioner for provisional attachment. 5. Balance between protecting government revenue and allowing business operations. Issue-wise Detailed Analysis: 1. Provisional Attachment of Bank Accounts: The writ applicants challenged the provisional attachment of their bank accounts under Section 83 of the CGST Act. The attachment was made on the grounds of alleged fraudulent availment of Input Tax Credit (ITC) and the need to protect government revenue. The applicants argued that no proceedings under Section 74 were pending, and thus, the attachment was without authority of law. The court noted that the total ITC availed by the applicants was Rs. 59,49,18,103, while the total tax paid was Rs. 63,62,41,525, indicating an excess payment of Rs. 4,13,23,422. The court concluded that the interest of the government revenue was sufficiently secured, and the provisional attachment was not justified. 2. Validity of Corrigendum: The respondents issued a corrigendum to rectify the reference from Section 74 to Section 67 of the CGST Act in the provisional attachment order. The applicants argued that such a corrigendum was not permissible in law. The court found that the corrigendum was issued to correct an inadvertent error and did not alter the scope of the original order. The court held that the corrigendum was valid and did not vitiate the proceedings. 3. Authority of the Additional Director General: The applicants contended that only the Commissioner could pass an order of provisional attachment under Section 83 of the CGST Act, and the Additional Director General lacked the authority. The court observed that the Additional Director General is equal in rank to the Commissioner and thus had the authority to invoke Section 83. 4. Subjective Satisfaction of the Commissioner: The applicants argued that the subjective satisfaction required for provisional attachment was not met, as no proceedings under Section 67 were pending. The court emphasized that the subjective satisfaction must be based on credible materials and supervening factors. The court found that the respondents had sufficient material indicating substantial evasion of tax, justifying the provisional attachment. 5. Balance Between Protecting Government Revenue and Allowing Business Operations: The court highlighted the need to balance the interest of government revenue and the business operations of the taxpayer. It noted that drastic measures like provisional attachment should be used sparingly and only when necessary to protect revenue. The court referred to previous judgments emphasizing that attachment of bank accounts should be a last resort and should not paralyze the business operations of the taxpayer. Conclusion: The court quashed the orders of provisional attachment of the bank accounts, holding that the interest of the government revenue was sufficiently secured by the excess tax paid by the applicants. The court also upheld the validity of the corrigendum and the authority of the Additional Director General to pass the provisional attachment order. The court emphasized the need for careful and balanced use of provisional attachment powers to protect revenue without unduly harming business operations.
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