2024 (3) TMI 483 - HC - GST

Issuance of provisional attachment order - benefit of Input Tax Credit availed from invoices issued from non-existing firms - no further proceedings drawn by the respondents either by issuance of show cause notice or by any proceedings drawn under Section 73 or for that matter under Section 74 of the CGST Act - HELD THAT - Except for the words in order to protect the interest of revenue there does not appear to be any reflection of the grounds/reasons/circumstances that compelled the Principal Commissioner to pass the order of provisional attachment. On looking at section 83, what is envisaged is upon initiation of any proceedings under Chapter XII, Chapter XIV or Chapter XV, the Commissioner has to make up an opinion that opinion is to be formed on the basis of the reasons which formed in the course of proceedings from the circumstances that prevailed in between etc., etc. If the opinions were not to be revealed and reflected in the order, the framers of law would have simply held that the Principal Commissioner had the power to issue orders of provisional attachment, protecting the interest of the government revenue. It has been emphatically held by Gujarat High Court in the case of M/S ANJANI IMPEX VERSUS STATE OF GUJARAT 2020 (10) TMI 760 - GUJARAT HIGH COURT and Andhra Pradesh High Court also in the case of M/S ARHAAN FERROUS AND NON FERROUS SOLUTIONS PVT LTD VERSUS THE SENIOR INTELLIGENCE OFFICER 2022 (5) TMI 560 - ANDHRA PRADESH HIGH COURT that once when Rule 159(5) provides for filing an objection, the person who intends to file an objection must know the reasons and grounds under which the order was passed, so that he can effectively file his objection and made the objections and grounds on the basis of which, the order of provisional attachment was passed. There are no doubt for the aforesaid reasons that the impugned order is un-sustainable and the same deserves to be and is accordingly set aside. Nonetheless, the right of the respondents stands reserved if they so want to pass a fresh order under Section 83 after framing of an opinion which may not be spell out in the order enabling the petitioner to avail the remedy available to him under Rule 159(5) of the CGST Rules. Petition allowed.

Summary

Issues Involved:
1. Provisional attachment order under Section 83 of the CGST Act.
2. Non-service of notice in Form ASMT-10.
3. Requirement of forming an opinion by the Commissioner before issuing a provisional attachment order.
4. Compliance with Rule 159(5) of the CGST Rules.

Summary:

1. Provisional Attachment Order under Section 83 of the CGST Act:
The petitioner challenged the order dated 18.05.2023, issued by the 3rd respondent, which provisionally attached the petitioner's bank account under Section 83 of the CGST Act. The petitioner, a partnership firm dealing in iron scraps, argued that they had been regularly filing returns and paying tax liabilities, including adjustments for input tax credit. The 2nd respondent issued Form GST DRC 01A, demanding Rs. 7,85,36,006/- for allegedly availing input tax credit from non-existing firms. However, no further proceedings were initiated under Sections 73 or 74 of the CGST Act.

2. Non-service of Notice in Form ASMT-10:
The petitioner contended that the provisional attachment order was issued without serving any notice in Form ASMT-10, denying them the opportunity to explain discrepancies or pay the tax liability. The petitioner argued that this omission violated the principles of natural justice and rendered the order arbitrary and unjust.

3. Requirement of Forming an Opinion by the Commissioner:
The petitioner argued that the Commissioner failed to form an opinion, as required under Section 83, that the provisional attachment was necessary to protect government revenue. The petitioner cited various High Court decisions emphasizing that such an opinion must be based on credible materials and reasons, which were absent in this case.

4. Compliance with Rule 159(5) of the CGST Rules:
The petitioner also claimed that the provisional attachment order was not served on them, preventing them from filing an objection under Rule 159(5) of the CGST Rules. The petitioner highlighted that the order was only communicated to their bank, causing significant inconvenience and difficulties in business operations.

Court's Analysis and Decision:
The court examined the provisions of Section 83(1) of the CGST Act and Rule 159(5) of the CGST Rules. It noted that the impugned order lacked specific reasons or circumstances justifying the provisional attachment. Citing decisions from the Gujarat and Andhra Pradesh High Courts, the court emphasized that the formation of an opinion by the Commissioner must be based on tangible material and reasons, which should be disclosed in the order to enable the petitioner to file an effective objection.

The court concluded that the impugned order was unsustainable due to the lack of reasons and grounds for the provisional attachment. It set aside the order but allowed the respondents to issue a fresh order under Section 83, provided they form a proper opinion and disclose the reasons, enabling the petitioner to avail the remedy under Rule 159(5).

Conclusion:
The writ petition was allowed, and the provisional attachment order was set aside. The respondents were granted the right to issue a fresh order under Section 83, complying with the legal requirements for forming an opinion and disclosing reasons.