2021 (12) TMI 225 - HC - GST

Provisional attachment of properties - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT - As is quite clear from the various decisions which have been discussed, that there shall need to be ordinarily the pendency of proceedings under Sections 62 or 63 or 64 or 67 or 73 or 74 of the GST Act for the commissioner to form an opinion for the purpose of protecting the interest of the Government Revenue to order in writing to attach the provisionally any property including the bank account belonging to the taxable person. In absence of any kind of pendency of proceedings, it is not permissible for the respondent authority to invoke powers under Section 83 for the purpose of provisional attachment. The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled. Such powers when exercised must need to be preceded by the formation of an opinion by the Commissioner that it is necessary to so do it for the purpose of protecting the interest of the Government Revenue and the opinion needs to be formed on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting the interest of the Government Revenue - the reference to the provisions of Rule 159(5) also provides that a person whose property is attached is entitled to the safeguard of submitting the objections that the property was or is not liable to attachment and needs to be given an opportunity of being heard and the Commissioner is duty bound to deal with the objections by passing a reasoned order which must be communicated to the taxable person whose property is attached. In the instant case, the search was carried out under the GGST Act at the office premises of the petitioner no.1 and the panchnama was drawn on 04.10.2019. There was discrepancy noticed in the stock, therefore summons came to be issued on 22.10.2019 under Section 70 of the GGST Act - The search proceedings were initiated on 07.07.2021 at the residential premises and concluded on the same date, it concluded on 09.07.2021 at the head office and at the factory and office premises, it continued upto 15.07.2021. The directors since were not present, they were asked to remain present and the proceeding was postponed on 16.07.2021. Once again, the search team on 10.08.2021 had visited the factory and office premises to carry out the search. The Court chooses not to enter into the arena of the merit at this stage when the hearing has already been concluded, however, noticing that there are certain obligations to be fulfilled by the company, it is deemed appropriate that the respondent authority shall deliver the order of the hearing, concluded of the show cause notices, within 10 days of the receipt of the copy of this order. This petition is being disposed of without entering into the merits of the matter. The disposal of this matter shall not prejudice the rights of the parties before the authority concerned.

Summary

Issues Involved:
1. Provisional attachment under Section 83 of the CGST Act.
2. Legality of the attachment orders issued by the respondent authorities.
3. Compliance with procedural requirements and principles of natural justice.
4. Petitioner's cooperation with the investigation.

Issue-Wise Detailed Analysis:

1. Provisional Attachment under Section 83 of the CGST Act:
The petitioner challenged the provisional attachment order attaching the properties of Madhav Copper Limited under Section 83 of the CGST Act and GGST Act. The petitioners argued that the provisional attachment was issued without any pending proceedings, and the Commissioner did not form a necessary opinion before exercising these powers. The Court referred to the Supreme Court's decision in *Radha Krishan Industries vs. State of Himachal Pradesh*, which emphasized that provisional attachment is a draconian power and must be exercised with due caution and based on tangible material regarding statutory requirements.

2. Legality of the Attachment Orders Issued by the Respondent Authorities:
The respondents argued that the attachment orders were issued to protect government revenue and were necessary due to the ongoing investigation revealing the petitioner's involvement in fraudulent transactions. The petitioner contended that the attachment orders were illegal as they were issued without proper formation of opinion and in the absence of pending proceedings under Sections 62, 63, 64, 67, 73, or 74 of the GST Act. The Court noted that the search proceedings initiated on 07.07.2021 justified the attachment orders, but emphasized the need for strict compliance with statutory provisions and procedural requirements.

3. Compliance with Procedural Requirements and Principles of Natural Justice:
The Court highlighted the importance of procedural requirements, including the right to submit objections and the opportunity of hearing, which must be strictly observed. The Court directed the respondent authority to deliver the order of the hearing concluded within ten days, ensuring compliance with principles of natural justice. The Court also referred to various judgments, including *Bhavesh Kiritbhai Kalani vs. Union of India* and *Vinodkumar Murlidhar Chechani vs. State of Gujarat*, which underscored the need for tangible material and objective facts to justify the exercise of provisional attachment powers.

4. Petitioner's Cooperation with the Investigation:
The Court noted that the petitioners had cooperated with the investigation, including providing detailed statements and documents. The Court directed the petitioner to continue cooperating with the investigation and present themselves before the Assistant Commissioner as required. The Court also emphasized the need for the investigation to be completed expeditiously and granted a period of eight weeks for its completion.

Conclusion:
The Court directed the respondent authority to deliver the order of the hearing concluded within ten days and allowed the petitioner to utilize the finished goods for fulfilling contractual obligations. The Court emphasized the need for strict compliance with statutory provisions and procedural requirements, ensuring the protection of government revenue while safeguarding the petitioner's rights. The investigation was directed to be completed within eight weeks, with the petitioner required to cooperate fully.