2019 (6) TMI 1106 - HC - GST

Provisional attachment of stock and Bank Accounts - section 83 of the Central Goods and Service Tax Act, 2017 - case of petitioner is that no notice under section 46 was issued at the relevant point of time when the order of provisional attachment was passed - HELD THAT - Section 46 of the Act is with regard to notice to return defaulter. Plain reading of section 46 would indicate that if a registered person fails to furnish a Return under section 39 or section 44 or section 45, a Notice would be issued requiring him to furnish such Return within a period of 15 days in such form and manner as it has been prescribed - Section 62 clarifies that if a registered person, to whom a Notice under section 46 has been served, fails to furnish the Return, the proper officer may, thereafter proceed to assess the tax liability of such person to the best of his judgement taking into account all the material available with him and issue the Assessment Order within a period of five years from the date specified under section 44 for furnishing of the Annual Return for the financial year to which the tax not paid relates. Section 83 would come into play only after the necessary action is taken under section 62 of the Act, referred to above. The language of section 83 is plain and simple. Section 83 makes it clear that during the pendency of any proceedings under section 62, if the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue he may, by order in writing, attach provisionally any property including the Bank Account belonging to the taxable person. The facts of this case are quite clear. It appears that much before the notice under section 46 came to be issued or rather, much before the assessment could be undertaken under section 62 of the Act, the authority straightway proceeded to pass orders of provisional attachment of the goods as well as two Bank Accounts, referred to above. Such action cannot be said to be in accordance with law. The impugned orders of provisional attachment of the goods as well as the two Bank Accounts deserve to be quashed - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Legality of the provisional attachment orders.
2. Compliance with procedural requirements under the Central Goods and Services Tax Act, 2017.
3. Undertaking by the petitioner to pay outstanding dues.

Detailed Analysis:

1. Legality of the Provisional Attachment Orders:

The petitioner, a company registered under the Companies Act, 1956, challenged the provisional attachment orders dated 30/10/2018, 26/11/2018, and 27/11/2018 issued by the Assistant Commissioner of Sales Tax (Unit-33), Kadi, District Mehsana. These orders directed the attachment of the petitioner’s bank accounts and stock worth substantial amounts. The petitioner contended that these orders were "illegal, highhanded, unjust, arbitrary and premature."

2. Compliance with Procedural Requirements under the Central Goods and Services Tax Act, 2017:

The petitioner argued that the provisional attachment orders were issued without following the due process as outlined in Sections 46, 62, and 83 of the Central Goods and Services Tax Act, 2017. Specifically, the petitioner pointed out that:

- Section 46 mandates that a notice be issued to a registered person who fails to furnish a return, requiring them to do so within fifteen days.
- Section 62 allows the proper officer to assess the tax liability if the registered person fails to furnish the return even after the notice under Section 46.
- Section 83 permits provisional attachment of property or bank accounts only during the pendency of proceedings under Sections 62, 63, 64, 67, 73, or 74.

The petitioner highlighted that the notice under Section 46 was issued on 27/11/2018, while the provisional attachment orders were passed before this date, on 30/10/2018 and 26/11/2018. Thus, the petitioner argued that the provisional attachment orders were issued without any pending proceedings under Section 62, making them unlawful.

3. Undertaking by the Petitioner to Pay Outstanding Dues:

The petitioner expressed readiness to pay the outstanding Goods and Services Tax (GST) dues in installments. The petitioner proposed to start making payments as soon as the attached stock was disposed of, with an initial payment of ?1,50,00,000 by 31/01/2019, followed by monthly payments of the same amount until the total estimated dues were cleared. The court accepted this proposal and stayed the impugned provisional attachment orders, subject to the petitioner’s compliance with the payment schedule and the filing of an undertaking.

Court’s Findings and Judgment:

The court examined the provisions of Sections 46, 62, and 83 of the Act and concluded that the provisional attachment orders were issued prematurely and without the necessary proceedings under Section 62 being initiated. The court stated:

- "Section 83 would come into play only after the necessary action is taken under section 62 of the Act."
- "The authority straightway proceeded to pass orders of provisional attachment of the goods as well as two Bank Accounts, referred to above. Such action, in our opinion, cannot be said to be in accordance with law."

Consequently, the court quashed the provisional attachment orders and directed the authorities to finalize the proceedings under Section 62 expeditiously. The court also acknowledged the petitioner’s undertaking to continue depositing ?1.50 Crore every month towards the current and outstanding GST dues.

Conclusion:

The court ruled in favor of the petitioner, quashing the provisional attachment orders and emphasizing the need for adherence to procedural requirements under the Central Goods and Services Tax Act, 2017. The petitioner’s commitment to pay the outstanding dues in installments was accepted, and the court directed the authorities to expedite the assessment proceedings.