2018 (12) TMI 1441 - HC - GST

Provisional attachment of Bank Accounts - It was submitted that even if the case of the respondents is taken at face value, at best, the tax liability of the petitioner would come to ₹ 13,84,000/- and therefore, the amount of ₹ 17,00,000/- deposited by the petitioner should be sufficient to protect the interests of the revenue - Held that - From the facts as emerging on record, it appears that the tax liability of the petitioner in terms of the goods seized as well as the transporter s statement, the same would not exceed ₹ 13,00,000/-. The petitioner has already deposited a sum of ₹ 17,00,000/- with the respondent. Insofar as the amount assessed towards the penalty is concerned, in the absence of any proceedings having been undertaken under the provisions of the GGST Act as well as any penalty having been imposed, the respondent authorities were not justified in resorting to such a drastic coercive measure of attachment of the bank accounts and seizure of goods, which results in bringing the business of the petitioner to a grinding halt. There is nothing to show that the respondents would not be in a position to recover any amount that the petitioner may ultimately be held liable to pay. In these circumstances, without recording any such satisfaction, the respondent could not have formed the opinion that it was necessary to resort to provisional attachment to protect the interest of the Government revenue. The impugned order of attachment, therefore, cannot be sustained. The impugned order of attachment dated 22.10.2018, attaching the bank accounts of the petitioner is hereby quashed and set aside - Appeal allowed.

Summary

Issues:
- Provisional attachment of bank accounts and goods under section 83 of the GGST Act without pending proceedings.
- Calculation of tax liability and justification for attachment.
- Justification for attachment based on inflated tax liability.
- Legal requirements for provisional attachment under section 83 of the GGST Act.
- Consideration of dealer's financial position before attachment.
- Balancing interest of revenue and dealer's business in attachment decisions.

Analysis:

1. Provisional Attachment without Pending Proceedings:
The petitioner challenged the provisional attachment of bank accounts and goods under section 83 of the GGST Act without any pending proceedings under relevant sections. The petitioner argued that the orders of provisional attachment were unjustified in the absence of ongoing proceedings, which was a crucial legal requirement for such action.

2. Calculation of Tax Liability and Justification for Attachment:
The respondents calculated the tax liability by adding 100% to the stock found during the search, resulting in an inflated tax liability figure. The petitioner had already paid a significant amount, covering more than the potential tax liability. The court noted that even if the respondent's case was accepted, the tax liability would not exceed a certain amount, making the attachment unreasonable.

3. Legal Requirements for Provisional Attachment:
Section 83 of the GGST Act allows provisional attachment to protect government revenue. The court emphasized that before resorting to such drastic action, the Commissioner must form an opinion that the taxpayer would not be able to pay the dues after assessment proceedings. In this case, the petitioner had deposited a substantial sum, indicating the ability to pay, and the attachment was deemed unnecessary.

4. Consideration of Dealer's Financial Position:
The court highlighted the importance of considering the dealer's financial position before attachment decisions. In this case, the petitioner was a going concern and had demonstrated the ability to pay dues. The court emphasized that attachment should not bring the dealer's business to a halt without proper justification.

5. Balancing Interests in Attachment Decisions:
The court cautioned authorities to balance the interest of revenue with the dealer's ability to continue business. While protecting revenue is essential, halting a dealer's business does not serve the revenue's interest. Drastic actions like attachment should be based on the dealer's background, financial position, and potential to pay assessed dues.

In conclusion, the court allowed the petition, quashing the orders of attachment and seizure. The court directed the release of the bank accounts and seized goods, emphasizing the need for authorities to carefully consider the dealer's financial position and business continuity before resorting to provisional attachment under the GGST Act.