2021 (2) TMI 917 - HC - GST

Provisional attachment of the bank account of the petitioner - Section 83 of the Central Goods and Service Tax Act, 2017 - HELD THAT - We are left with the situation where till date no notice has been issued under sub-Section (1) of Section 74. In the circumstances, this petition is allowed and impugned order attaching the bank accounts is set aside. It is, however, clarified that the revenue would be at liberty to take appropriate steps after initiating the proceedings in accordance with law.

Summary

Issues:
Challenging provisional attachment of bank account under Section 83 of the CGST Act. Interpretation of Section 74 regarding issuance of notice before initiating proceedings. Consideration of voluntary deposit by the taxpayer under Section 74(5) and implications on the requirement of notice. Analysis of the necessity of notice under Section 74(1) for initiating proceedings. Comparison with relevant case laws and judicial interpretations on attachment of accounts under Section 83.

Analysis:

The petitioner filed a petition challenging the provisional attachment of their bank account under Section 83 of the Central Goods and Service Tax Act, 2017. The core contention was the absence of a notice under Section 74(1) before initiating proceedings. The petitioner argued that Section 74 mandates the issuance of a notice before proceeding, and in this case, no such notice had been served. The respondent, however, relied on Section 74(5) to suggest that voluntary deposit by the petitioner obviated the need for a notice, contending that proceedings were not pending due to the deposit.

The court examined the provisions of Section 74 and emphasized the importance of a notice under sub-Section (1) for initiating proceedings. Reference was made to a judgment by the Karnataka High Court, highlighting the necessity of a notice under Section 74 before inferring the pendency of proceedings. The court also noted the petitioner's request to keep a specific account under lien, which was deemed to be made under duress due to the freezing of all accounts, without prejudicing their rights.

Further, the court considered the absence of a notice under Section 74 as crucial, as per a Division Bench judgment of the court in a related matter. The judgment emphasized the significance of protecting the revenue's interest while ensuring that attachment powers under Section 83 are used judiciously and sparingly. It was clarified that the attachment should aim to safeguard revenue interests and not lead to the closure of a business, especially when the account in question holds a debit balance.

Despite the arguments presented by respondent No.1, no contrary judgment was cited to challenge the interpretation of the provisions. Consequently, the court allowed the petition, setting aside the impugned order attaching the bank accounts. However, the court clarified that the revenue authorities could take appropriate steps after initiating proceedings in compliance with the law, ensuring a balanced approach between revenue protection and business continuity.