WRIT JURISDICTION TO LIFT BANK ATTACHMENT - MAINTAINABLE?

[Mr. M. GOVINDARAJAN]

Section 83 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides that where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.

Rule 159(1) provides that where the Commissioner decides to attach any property, including bank account in accordance with the provisions of section 83, he shall pass an order in Form GST DRC-22 to that effect mentioning therein, the details of property which is attached.    A copy of such order shall also be sent to the person whose property is being attached under section 83.   Any person whose property is attached may file an objection in Form GST DRC-22A to the effect that the property attached was or is not liable to attachment, and the Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in Form GST DRC- 23.

In case of attachment of properties and bank accounts of the registered persons by the Department, it is used to approach the High Court to set aside the attachment order.  In many a case the High Courts give remedy to the registered persons.  But the High Court, Kerala gave a different order in passing that the Writ petition cannot be filed before availing the statutory remedy available under Rule 159(5) In M/S S.R TRADERS VERSUS THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE GENERAL OF GST INTELLIGENCE, THE STATE TAX OFFICER - 2023 (6) TMI 684 - KERALA HIGH COURT

In the above case the petitioner is a partnership firm carrying on the business in the trade of scrap of goods.  The Proper Officer conducted a search at the premises of the petitioner.   The Proper Officer arrested the Managing partner of the petitioner.  Show cause notices were issued under Section 74(1) of the Act.  The show cause notice alleged that the petitioner had purchased goods from two non existing units in Tamil Nadu and involved in issuing fake invoices without actual supply of goods for the purpose of passing on fraudulent input tax credit.  The petitioner was unable to access the portal of the Department to file reply.

Therefore the petitioner filed a writ petition in 20342 of 2022.  The Department cancelled the certificate of registration of the petitioner while the above said writ petition is pending before the High Court.  The High Court set aside the order of the Department cancelling the registration certificate.  The High Court remanded the matter to the Authority for its reconsideration.  In the meantime the Department attached the immovable properties and the bank accounts of the petitioner invoking Section 83 of the Act read with Rule 159(1). 

The petitioner submitted the following before the High Court-

• Search and seizure were motivated at the behest of the petitioner’s rivals in business.
• The order passed by the Department attaching the immovable properties and bank accounts is arbitrary, unjustifiable and violative of the petitioner’s fundamental right to carry on business. 
• The Department passed the impugned order without any application of mind and in flagrant violation of the settled provisions of law. 
• The Department can at the maximum penalty under Chapter XIX of the Act.  Therefore the impugned order is not tenable.
• Section 83 can be invoked only after the initiation of proceeding sunder Chapter XII, XIV or XV of the Act.
• The first respondent is having no power to issue the impugned order.   Only Commissioner is vested with the power to issue the impugned order. 

The Department, in its counter affidavit raised preliminary objection on the maintainability of writ petition on the following grounds-

• The Act and Rules have an inbuilt mechanism for redressal of grievances.
• Rule 159(5) provides for the challenging the impugned order by the petitioner.
• Without availing the statutory remedy the petitioner approached the High Court for relief.

The Department prayed that the writ petitioner is to be dismissed in limine. 

The Department in addition to the above preliminary objection, contended the following before the High Court-

• On the basis of complaints and information received by the Intelligence wing it came to notice that many fake invoices supplies have been issued in respect of supply of scrap materials. 
• During the investigation conducted by the Department in the premises of the petitioner it is revealed that the petitioner was availing input tax credit of to the tune of Rs.32 crores to fictitious and non operational suppliers.
• Therefore show cause notices were issued to the petitioner and later on the registration certificate was cancelled by the Department.
• Even after the cancellation of the registration certificate the Managing Partner of the petitioner has conducted the business using the registration number of his family members. 
• Therefore the Department has provisionally attached the properties and bank accounts of the petitioner invoking section 83 of the Act.
• There is no mala fide in passing the impugned order on the part of the Department.
• The impugned order has been passed to protect the interests of the Government revenue.
• The show cause notices issued to the petitioner undoubtedly substantiate the proceedings have been initiated against the petitioner under Section 74 for perpetrating fraud on the Government by evading tax to the tune of Rs. 32 crores.

The Department prayed for the dismissal of the writ petition since it is devoid of any merits. 

The High Court considered the submissions made by both the parties to this petition.   The High Court observed that it is evident that the Department issued two show cause notices against the petitioner, alleging that the petitioner has not paid/short paid/erroneously refunded input tax credit by perpetrating fraud on the Government and that too by suppression and brazen manipulation.  The investigation is in progress.  The Department prima facie found that the petitioner has indulged in fraudulent activities.  Therefore the High Court held that the Department deemed it fit to invoke section 83 of the Act and pass the impugned orders to protect the revenue of the Government.

The High Court further observed that Rule 159(5) specifically provides a person whose property has been provisionally attached under Section 83 of the Act to remove the Commissioner for lifting of the attachment.  Rule 159(5) provides that any person whose property is attached may file an objection in FORM GST DRC-22A to the effect that the property attached was or is not liable to attachment, and the Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in Form GST DRC- 23. Without availing the above statutory remedy the petitioner has filed the present writ petition invoking Article 226 of the Constitution of India. 

The High Court further held that it is well settled that the writ jurisdiction of the High Court is only to be exercised in extra-ordinary circumstances, especially when there is an alternative and efficacious statutory remedy.