2025 (2) TMI 505 - HC - GST

Legality and jurisdiction of the provisional attachment orders issued under Section 83 of the Gujarat Goods and Services Tax Act 2017 - period of one year from attachment was completed without renewal - HELD THAT - On perusal of the statement of the petitioner recorded on 21.10.2023 which is recorded pursuant to the summons issued under section 70 of the GST Act and placed on record it clearly shows the admission on the part of the petitioner that the petitioner has indulged into the fraudulent activity of issuance of the bogus bills as well as availing the input tax credit which shows the prima facie case against the petitioner. Moreover on perusal of the intimation of the tax ascertained as being payable under section 74 (5) of the GST Act issued by the respondent on 04.12.2024 it clearly shows the modus operandi of the petitioner for financial year 2022-23 for which the estimated total liability of tax penalty and interest comes to Rs.12, 33, 58, 313/-. Considering the record which is available for perusal before us it is prima facie apparent that the petitioner has indulged into fraudulent activity which requires the exercise of powers conferred under section 83 of the Act for provisional attachment which was made by the respondent on the date of search on 17.10.2023. Therefore the question now paused before this Court is whether on completion of one year from the date of the provisional attachment on 17.10.2023 of the bank account of the petitioner the respondent could have renewed the provisional attachment by the impugned order dated 13.11.2024 so far as the bank account of ICICI Bank is concerned and other three bank accounts on 18.12.2024 or not. In the facts of the case therefore reliance placed by the petitioner in the case of RHC Global Exports Private Limited 2024 (9) TMI 1544 - SC ORDER would be no avail as the respondent has applied its mind for the provisional attachment of the bank accounts after recording the satisfaction and after issuance of the intimation in Form DRC 01A. Therefore only on that ground that the orders are for renewal of provisional attachment the same cannot be quashed and set aside by adopting the modus operandi to defraud the revenue along with others is not tenable. This Court in the case of M/s. Dhanlaxmi Metal Industries 2024 (7) TMI 371 - GUJARAT HIGH COURT in similar facts has held that Considering the facts of the case it cannot be said that the respondents have committed breach of provision of Section 83 of the Act which is intended to safeguard the interest of the revenue which cannot be said to any harassment to the petitioner as tried to be demonstrated. In the facts of the case it cannot be said that the respondents have issued provisional attachment order over the movable properties with a view to harass the petitioner. The same analogy in the facts of the case is applied as the petitioner has prima facie found to be indulged in the modus operandi of the issuance of bogus bills and availing ITC on the basis of such bills whereas in the facts of the case in M/s. Radha Krishan Industries 2021 (4) TMI 837 - SUPREME COURT the appellant before the Hon ble Apex Court was the person who has received the bogus invoice along with the goods whreas it is found in the present case that the petitioner has sold the goods of higher value without invoice and has availed ITC on the goods which were of lower value as stated in the modus operandi. Conclusion - It cannot be said that the respondent has committed breach of provision of section 83 of the GST Act which is intended to safeguard the interest of the revenue which cannot be said to any harassment to the petitioner as tried to be demonstrated. In the facts of the case therefore the issuance of the impugned orders for provisional attachment over the bank accounts are not required to be interfered with as the petitioner appears to have indulged in the transaction of the fraudulent invoices resulting into loss of revenue by utilizing the ITC of more than Rs. 18.97 crore. No interference is called for in the impugned orders of provisional attachment of the bank accounts of the petitioner during the pendency of the investigation as respondent is rightly found an information as required under section 83 of the GST Act so as to protect the interest of revenue and hence the provisional attachment of the bank accounts of the petitioner is required to be continue - Petition dismissed.

Summary

1. The core legal issues considered in this judgment revolve around the legality and jurisdiction of the provisional attachment orders issued under Section 83 of the Gujarat Goods and Services Tax Act, 2017 (GST Act). The primary questions include whether the renewal of the provisional attachment orders was justified, whether the respondent had the jurisdiction to issue such orders, and whether the procedural requirements, including the satisfaction note and hearing opportunities, were adhered to by the respondent.

2. The legal framework is grounded in Section 83 of the GST Act, which allows for the provisional attachment of property, including bank accounts, to protect government revenue. The court examined the procedural adherence to this section, particularly focusing on the duration of the attachment and the requirement for satisfaction notes. The precedents considered include the Supreme Court's decisions in Radha Krishan Industries v. State of Himachal Pradesh and RHC Global Exports Private Limited v. Union of India, which emphasize the necessity of a tangible link between the attachment and the protection of revenue.

The court interpreted Section 83 to mean that while the initial attachment lasts for one year, there is no prohibition against renewing the attachment if a new satisfaction note is recorded. The court found that the respondent recorded a new satisfaction note on 13.11.2024 and 18.12.2024, which justified the renewal of the attachment orders. The petitioner argued that the renewal was improper due to a lack of jurisdiction and procedural deficiencies, including insufficient time to respond to the satisfaction note. However, the court concluded that the respondent had jurisdiction based on authorization from the Additional Commissioner and that the procedural requirements were met, albeit minimally.

Key evidence included the satisfaction notes and the petitioner's statement acknowledging involvement in fraudulent activities. The court found that the petitioner's modus operandi involved using input tax credits from lower-value mobile phones to offset liabilities on higher-value phones, constituting a significant tax evasion scheme. The court considered competing arguments regarding jurisdiction and procedural fairness but ultimately sided with the respondent, emphasizing the ongoing investigation and the substantial evidence of fraud.

3. The significant holdings of the court include the affirmation of the respondent's jurisdiction and the procedural validity of the renewed attachment orders. The court held that the provisional attachment was necessary to protect government revenue, given the prima facie evidence of the petitioner's involvement in a large-scale tax evasion scheme. The judgment reinforced the principle that provisional attachments under Section 83 can be renewed with a new satisfaction note, provided there is a legitimate basis for protecting revenue.

The court concluded that the petitioner's objections regarding jurisdiction and procedural deficiencies were insufficient to invalidate the attachment orders. The petition was rejected, and the provisional attachment of the petitioner's bank accounts was upheld to continue during the ongoing investigation.