2020 (10) TMI 999 - HC - GST

Validity of Garnishee Order - attachment order - time limitation under Section 117 of the Central Goods and Services Tax Act, 2017 - Court stayed the operation of the Garnishee Notice, for a period of two days for the reason that even before the expiry of the appeal time, as prescribed under Section 117 of the Central Goods and Services Tax Act, 2017 - HELD THAT - A perusal of the material available on record prima facie shows that even before the expiry of the time granted for filing an appeal for the assessment years January, 2020 to June, 2020, Garnishee Notice came to be issued. Similar is for the assessment year January, 2019 to December, 2019. Therefore, the execution of Garnishee Notice seeking attachment of ₹ 12,14,61,114/- appears to be on higher side. According to the petitioner, if an appeal is preferred, he has to deposit only 10% of the disputed tax. Be that as it may, for the present, with the consent of both the parties, the order impugned, dated 26.8.2020, is stayed subject to the petitioner depositing ₹ 2,50,00,000/- within a period of three (3) weeks, in default, the stay shall stand vacated. Meanwhile, the respondents shall file their counters. Post on 24.09.2020.

Summary

Issues Involved:
Stay of Garnishee Notice pending appeal, legality of challenging Garnishee Notice without filing an appeal, authority's power to order penalty, validity of seeking attachment of funds, requirement of deposit for filing an appeal.

Analysis:
The High Court, in a recent judgment, addressed the issue of staying the operation of a Garnishee Notice pending appeal. The Court noted that the Garnishee Notice was issued before the expiry of the appeal time for certain assessment years, indicating a potential procedural irregularity. The Court observed discrepancies in the issuance of the notice for different tax periods, questioning the validity of seeking attachment of a significant amount. The petitioner argued that an appeal would require depositing only 10% of the disputed tax, highlighting a procedural aspect in challenging tax assessments.

The legality of challenging the Garnishee Notice without filing an appeal was also a crucial point of contention. The Standing Counsel for Union of India argued that the petitioner should have first filed an appeal against the assessment order before challenging the notice through a writ petition. This raised questions about the correct legal procedure to be followed in such cases and the necessity of exhausting appeal remedies before resorting to writ petitions.

Furthermore, the issue of the authority's power to order a substantial penalty amount was raised concerning the tax period from February 2018 to December 2018. The petitioner contended that the authority lacked the power to order payment of a specific penalty amount, adding a layer of complexity to the case. The Court had to assess the legality and validity of such penalty orders in light of the relevant tax laws and regulations.

Regarding the validity of seeking attachment of funds through the Garnishee Notice, the Court examined the amount sought to be attached and found it potentially excessive. The Court expressed concerns about the proportionality and reasonableness of the attachment sought, signaling a need for a balanced approach in enforcing tax recovery measures. The Court's decision to stay the order subject to a specific deposit by the petitioner highlighted the importance of balancing the interests of both parties while ensuring compliance with legal requirements.

In conclusion, the judgment delved into various legal intricacies surrounding tax assessments, appeals, and enforcement measures. By analyzing the issues of stay of Garnishee Notice, legality of challenging without appeal, authority's power to order penalty, validity of attachment, and deposit requirements for appeals, the Court provided a comprehensive overview of the legal considerations involved in the case.