2020 (10) TMI 1214 - HC - GST

Removal of Provisional attachment of Bank Accounts - Section 83 of the GST Act, 2017 - HELD THAT - Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion. But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a precondition to the formation of opinion. The use of the word may indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. The order of provisional attachment of the five bank accounts of the writ applicant under Section 83 of the Act is quashed and set aside - Application allowed.

Issues Involved:
1. Legality of the provisional attachment of bank accounts under Section 83 of the GST Act, 2017.
2. Requirement of material evidence for forming an opinion under Section 83.
3. Judicial scrutiny of the subjective satisfaction of the authority.
4. Conditions for exercising the power of provisional attachment.
5. Impact of provisional attachment on the business of the assessee.

Issue-wise Detailed Analysis:

1. Legality of the Provisional Attachment of Bank Accounts:
The writ applicant challenged the provisional attachment of five bank accounts under Section 83 of the GST Act, 2017. The court held that the order of provisional attachment was not sustainable in law, as it was a result of a mechanical exercise of power without proper justification.

2. Requirement of Material Evidence for Forming an Opinion:
Section 83 requires the Commissioner to form an opinion that provisional attachment is necessary to protect the interest of government revenue. This opinion must be based on credible material. The court emphasized that the existence of relevant material is a precondition for forming such an opinion. The statutory requirement of reasonable belief is meant to safeguard citizens from vexatious proceedings.

3. Judicial Scrutiny of the Subjective Satisfaction of the Authority:
The court noted that while the formation of opinion under Section 83 is subjective, it must be based on credible material. The court can examine the materials to determine whether an honest and reasonable person could form such an opinion. In this case, the court found that the impugned order lacked any reason and there was no material on the original file to justify the belief formed by the authority.

4. Conditions for Exercising the Power of Provisional Attachment:
The court outlined that the power of provisional attachment should be used sparingly and only on substantive grounds. The authority must have a reasonable apprehension that the assessee may default on the ultimate collection of the demand. The power should be exercised with extreme care and caution, and there must be sufficient material to justify the satisfaction that the assessee is about to dispose of property to thwart the collection of demand.

5. Impact of Provisional Attachment on the Business of the Assessee:
The court highlighted that the power under Section 83 should not be used to harass the assessee or have an irreversible detrimental effect on the business. Attachment of bank accounts and trading assets should be a last resort. The court found that none of the conditions for exercising the power of provisional attachment were fulfilled in this case.

Conclusion:
The writ application was allowed, and the order of provisional attachment of the five bank accounts was quashed and set aside. The court ordered the removal of the attachment and clarified that this order would not prevent the Department from taking appropriate action afresh in accordance with the law.

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