2022 (3) TMI 262 - HC - GST

Provisional attachment - Validity of circular dated 23rd February, 2021 - ultra vires the provisions of the Central Goods and Services Tax Act, 2017 or not - reading down of the Circular to make the recording of reasons or grounds of attachment mandatory in the attachment order or Form DRC-22 issued in terms of Rule 159(1) of the CGST Rules - whether the remedy of the petitioner to lodge his objection to the order of provisional attachment under section 83 read with Rule 159(1) of the CGST Rules can be effectively exercised without communication of the opinion of the Commissioner atleast at that stage or not? HELD THAT - In our view the safeguard as provided in clause 3.1.5 in the said circular by providing that the power of provisional attachment must not be exercised in a routine/mechanical manner and careful examination of all the facts of the case is important to determine whether the case is fit for exercising power under section 83. - In our view, none of those safeguards setout in the said circular dated 23rd February, 2021 would affect the rights of the petitioner as the said circular though grants power to the Commissioner to record reasons in file, however with a caution that the power must not be exercised in the routine or mechanical manner and shall be exercised only after careful examination of the facts of the case. Whether the remedy of the petitioner to lodge his objection to the order of provisional attachment under section 83 read with Rule 159(1) of the CGST Rules can be effectively exercised without communication of the opinion of the Commissioner atleast at that stage or not? A perusal of the scheme of section 83 of CGST Act and Rule 159 clearly indicate that the remedy provided to an assessee to lodge the objection can be exercised effectively only if the petitioner knows the reasons or opinion prima facie formed by the Commissioner before exercising the power under section 83 of the CGST Act read with Rule 159(1) to enable the petitioner to record the objections to the prima facie opinion formed by the Commissioner. Unless such prima facie opinion atleast at this stage is communicated to the petitioner, the petitioner would not be able to lodge the objection and to canvass that the prima facie opinion formed by the Commissioner was not in accordance with section 83 read with Rule 159(1) and there was no threat of loss of revenue to the respondents. Insofar as the judgment of the Supreme Court in case of BACHHITTAR SINGH VERSUS STATE OF PUNJAB 1962 (3) TMI 84 - SUPREME COURT relied upon by the learned counsel for the petitioner is concerned, a perusal of the said judgment indicates that the order passed in the said judgment has dealt with the order passed by the Commissioner in file and was not communicated to the petitioner. The question arose in that matter whether such order which remained in file and not having been communicated to the petitioner could be termed as an enforceable order or not - The said judgment would not advance the case of the petitioner. On perusal of provisions of section 83 read with Rule 159(1), it can be said that the petitioner would be entitled to the copy of the opinion formed by the Commissioner before filing an objection. In view of the fact that the petitioner has impugned the validity of the circular issued by the respondents, the same cannot be challenged before the Appellate Authority - Petition dismissed.

Summary

Issues Involved:
1. Validity of the circular dated 23rd February 2021.
2. Compliance with Section 83 of the CGST Act, 2017.
3. Provisional attachment procedure under Rule 159 of the CGST Rules.
4. Communication of the Commissioner's opinion.
5. Availability of alternate remedies.

Detailed Analysis:

1. Validity of the Circular Dated 23rd February 2021:
The petitioner challenged the circular dated 23rd February 2021, claiming it was ultra vires the CGST Act, 2017. The petitioner sought either a declaration of invalidity or a reading down of the circular to mandate the recording of reasons or grounds of attachment in the attachment order or Form DRC-22.

2. Compliance with Section 83 of the CGST Act, 2017:
The petitioner argued that the attachment order under Section 83 must be in writing and issued in FORM GST DRC-22 as prescribed by Rule 159(1). The attachment order was addressed to the bank manager, not the petitioner, which the petitioner claimed was non-compliant with Section 83.

3. Provisional Attachment Procedure under Rule 159 of the CGST Rules:
The petitioner contended that the Commissioner's opinion must be communicated to the petitioner to enable them to raise objections. The circular's clauses 3.1.2, 3.1.4, and 3.1.5 were cited, arguing that the opinion formed by the Commissioner must be communicated to the taxable person.

4. Communication of the Commissioner's Opinion:
The court examined whether the Commissioner's opinion must be communicated to the petitioner to enable the effective exercise of the right to lodge objections under Rule 159(5). It was concluded that the opinion must be communicated to the petitioner to allow them to file objections effectively.

5. Availability of Alternate Remedies:
The respondent argued that the petitioner should have availed the alternate remedy of appeal against the provisional attachment order. The court held that since the petitioner challenged the validity of the circular, the writ petition was maintainable, and the alternate remedy was not a bar.

Conclusion:
The court directed the respondent to furnish a certified copy of the Commissioner's opinion to the petitioner within one week. The petitioner was allowed to raise objections within one week of receiving the opinion. The respondent was to grant a hearing and decide on the objections within two weeks. If the bank accounts were no longer liable for attachment, the provisional attachment would be withdrawn; otherwise, the objections would be rejected. The writ petition was dismissed with these directions, and no costs were awarded.