2025 (2) TMI 469 - HC - GST

Challenge to order of provisional attachment of property un/s 83 of the CGST Act 2017 on the premise that it suffers from manifest arbitrariness and in excess of the respondent s jurisdiction u/s 83 of the Central Goods and Services Tax Act 2017 - HELD THAT - From a reading of the impugned order under Section 83 of the Act this court is of the view that the impugned proceeding under Section 83 of the Act does not disclose any tangible material which led to the formation of opinon that the provisional attachment is necessary for the purpose of protecting the interest of the revenue. The impugned order merely states that proceedings are initiated under Section 67 of the Act to determine the libaility of the petitioner. The only information it refers to is with reference to the account held by the petitioner with the said Bank. The order then proceeds to state that provisional attachment is necessary for the purpose of protecting the interest of the revenue i.e. a mere reproduction of Section 83 of the Act. It appears that the respondent was under the misconception that inititiation of proceedings under Chapter XII, XIV and XV of the Act by itself would enable or rather warrant exercise of power under Section 83 of the Act. The impugned proceeding does not show application of mind by the respondent to the existence or otherwise of the existence of the above jurisdictional elements/aspects thereby vitiating the impugned proceeding. Section 83 of the Act is designed to provide for dealing with situations where it could brook no delay and immediacy of action is necessary to protect the interest of the revenue. In view of the above legislative intent and object Section 83 of the Act does not provide for pre-decisional hearing which is normally in compliance with natural justice but instead only provides for a post decisional hearing. It may be relevant to clarify that it is now judicially acknowledged that the necessity for speed may call for immediate action and the need for promptitude may exclude the duty of giving a pre-decisional hearing to the person affected. However it does not dispense with disclosing reasons which led to the formation of opinon that the provisional attachment is necessary for the purpose of protecting the interest of the revenue. Having come to a conclusion that giving of reason is essential while making provisional attachment under Section 83 of the Act the submission of the respondent of deficiency either in Form DRC 22 or the portal for not supplying reason in the proceeding provisionally attaching the property under Section 83 of the Act cannot be a justification. I say so for the cardinal principle of giving reason as condition for decision-making cannot be martyred for the cause of immediacy nor inadequacy of provision in the form / portal to enabling disclosure of reasons. In any view if the contention of the respondent were to be accepted nevertheless nothing prevented the respondent from serving the notice containing reasons by other modes provided under Section 169 of the Act such as tendering sending by post etc. Thus the impugned proceedings stands vitiated for not furnishing reasons which led to the formation of opinion that the provisonal attachment is necessary in the interest of protecting the interest of the revenue. Conclusion - i) The impugned order does not disclose any material muchless tangible material which led to the formation of opinion that provisional attachment in exercise of power under Section 83 of the Act is necessary to protect the interest of the revenue. ii) The impugned proceedings does not disclose any reason warranting exercise of power under Section 83 of the Act. iii) The impugned proceedings does not disclose that the respondent had after applying its mind to the material arrived at a conclusion that it is necessary to exercise the power under Section 83 to protect the interest of the revenue and that any other measure less rigorous would not be adequate. The impugned order is set aside. The writ petition stands disposed of.

Summary

The judgment pertains to a writ petition filed challenging the provisional attachment of property under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner, a proprietary concern engaged in the trading of gold bullion and jewelry, contested the attachment of its bank accounts by the authorities, arguing that the order was arbitrary and beyond the jurisdiction of the respondents.

Issues Presented and Considered:

The core legal questions considered in this case include:

1. Whether the provisional attachment order under Section 83 of the CGST Act was issued with jurisdiction and based on tangible material.

2. Whether the order disclosed reasons necessary to protect the interest of the government revenue.

3. Whether the procedural safeguards under Rule 159(5) of the CGST Rules were adhered to, particularly regarding the opportunity to file objections.

Issue-wise Detailed Analysis:

1. Jurisdiction and Tangible Material:

Relevant Legal Framework and Precedents: Section 83 of the CGST Act allows for provisional attachment to protect government revenue. The Supreme Court in Radha Krishan Industries v. State of H.P. emphasized that such power is draconian and should be exercised with restraint, based on tangible material indicating necessity.

Court's Interpretation and Reasoning: The Court observed that the provisional attachment order did not disclose any tangible material that led to the formation of the opinion that such attachment was necessary. The order merely reproduced the language of Section 83 without demonstrating any specific grounds or evidence.

Key Evidence and Findings: The petitioner argued that there was no material indicating a live link to the necessity of the attachment. The respondent's failure to disclose reasons or tangible material in the order was highlighted.

Application of Law to Facts: The Court applied the principles laid down by the Supreme Court, emphasizing the need for tangible material to justify the attachment. The absence of such material rendered the order without jurisdiction.

Treatment of Competing Arguments: The respondent's argument that the attachment was necessary to protect revenue was not supported by disclosed reasons or evidence. The Court rejected the justification based on the inadequacy of the form or portal to disclose reasons.

Conclusions: The Court concluded that the order lacked jurisdiction due to the absence of tangible material and reasons, rendering it invalid.

2. Disclosure of Reasons:

Relevant Legal Framework and Precedents: The requirement to disclose reasons is an essential facet of natural justice, ensuring transparency and enabling the affected party to understand the basis of the decision.

Court's Interpretation and Reasoning: The Court emphasized that reasons are crucial for linking the material to the conclusions reached. The absence of reasons in the provisional attachment order made the opportunity to object under Rule 159(5) illusory.

Key Evidence and Findings: The petitioner had submitted objections through letters, but the respondent did not consider them, citing non-compliance with the prescribed form. The Court found this approach technical and unjustified.

Application of Law to Facts: The Court held that the failure to disclose reasons violated the principles of natural justice and procedural fairness, as it deprived the petitioner of a meaningful opportunity to object.

Treatment of Competing Arguments: The respondent's claim of technical limitations in the form or portal for disclosing reasons was rejected. The Court noted that alternative methods of communication could have been employed.

Conclusions: The lack of disclosed reasons invalidated the provisional attachment order, as it failed to meet the requirements of natural justice.

Significant Holdings:

The Court reiterated the principles established by the Supreme Court regarding the exercise of power under Section 83 of the CGST Act:

"The power to order a provisional attachment is draconian in nature and the conditions prescribed by the statute for its exercise must be strictly fulfilled."

"The formation of an opinion by the Commissioner must be based on tangible material bearing on the necessity of ordering a provisional attachment."

"The reasons for the attachment must be disclosed to ensure procedural fairness and compliance with natural justice."

The Court set aside the impugned order, finding that it failed to disclose any tangible material or reasons justifying the provisional attachment, thereby violating the statutory and judicially established requirements.