2020 (1) TMI 933 - HC - GST

Attachment of Petitioner s bank account - fraudulent availing of Input Tax Credit - proceedings have been launched against the Petitioner under section 67 section 70 of the Act - Primary defence of the Respondents is that even if section 62, 63, 64, 67, 73 and 74 mentioned in section 83 of the Act are not referable to the case of the Petitioner, since a summons is issued to the Petitioner in pursuant to the inquiry initiated against M/s.Maps Global under section 67 of the Act, by the issuance of summons the proceedings get extended to the Petitioner also. HELD THAT - The analysis of section 83 of the Act will show that such interpretation is not permissible and not contemplated by the legislature. Section 83 read with Rule 159(1), and the form GST DRC-22, lay down a scheme as to how provisional attachment in certain cases is to be levied. Section 83 though uses the phrase pendency of any proceedings , the proceedings are referable to section 62, 63, 64, 67, 73 and 74 of the Act and none other. The bank account of the taxable person can be attached against whom the proceedings under the sections mentioned above are initiated. Section 83 does not provide for an automatic extension to any other taxable person from an inquiry specifically launched against a taxable person under these provisions. Section 83 read with section 159(2), and the form GST DRC-22 show that a proceeding has to be initiated against a specific taxable person, an opinion has to be formed that to protect the interest of Revenue an order of provisional attachment is necessary. Power to provisionally attach bank accounts is a drastic power. Considering the consequences that ensue from provisional attachment of bank accounts, the Courts have repeatedly emphasized that this power is not to be routinely exercised. Under Section 83, the legislature has no doubt conferred power on the authorities to provisionally attach bank accounts to safeguard government revenue, but the same is within well-defined ambit. Only upon contingencies provided therein that the power under section 83 can be exercised. This power is to be used in only limited circumstances and it is not an omnibus power - It is therefore not possible to accept the submission of the Respondents that even though specified proceedings have been launched against one taxable person, bank account of another taxable person can be provisionally attached merely based on the summons issued under section 70 to him. The order provisionally attaching the bank account of the Petitioner was without jurisdiction and is liable to be quashed and set aside - petition allowed - decided in favor of petitioner.

Issues Involved:
1. Legality of the provisional attachment of the Petitioner’s bank account under Section 83 of the CGST Act.
2. Interpretation and application of Section 83 in conjunction with other sections of the CGST Act.
3. Compliance with procedural requirements under Rule 159(1) of the CGST Rules.

Detailed Analysis:

1. Legality of the Provisional Attachment:
The Petitioner challenged the action of the authorities under the Central Goods and Service Tax, Mumbai, of attaching the Petitioner’s bank account in the State Bank of India. The Petitioner argued that the action was beyond the power conferred under Section 83 of the CGST Act. The Petitioner contended that the contingencies enumerated in Section 83, which allow for provisional attachment, were not satisfied in this case, as no proceedings under Sections 62, 63, 64, 67, 73, and 74 of the Act were initiated or pending against the Petitioner. The Petitioner had only received a summons under Section 70 of the Act, which is not referred to in Section 83.

2. Interpretation and Application of Section 83:
The Respondents argued that the power of provisional attachment is conferred to protect the interests of Revenue, and this case warranted such action. They contended that the money trail traced from M/s. Maps Global to the Petitioner justified the provisional attachment, even though the proceedings were initiated against M/s. Maps Global under Section 67. The Respondents claimed that the issuance of a summons under Section 70 to the Petitioner extended the proceedings to the Petitioner as well.

The Court analyzed Section 83, which allows for provisional attachment during the pendency of proceedings under Sections 62, 63, 64, 67, 73, and 74. The Court noted that Section 83 uses the phrase “pendency of any proceedings,” but these proceedings must be specifically under the sections mentioned. The Court emphasized that Section 83 does not provide for an automatic extension to any other taxable person from an inquiry launched against a specific taxable person under these provisions.

3. Compliance with Procedural Requirements:
The Court examined Rule 159(1) of the CGST Rules, which deals with the provisional attachment of property. The Rule requires the Commissioner to pass an order in FORM GST DRC-22, detailing the property attached. The Court noted that the format of the order specifies the particulars of a registered taxable person and the proceedings launched against them, indicating a nexus between the proceedings and the provisional attachment.

The Court found that the impugned order dated 22 October 2019, which provisionally attached the Petitioner’s bank account, was based on the assertion that proceedings were launched against the Petitioner under Sections 67 and 70. However, it was uncontroverted that no proceedings under Section 67 were initiated against the Petitioner. The Court concluded that the power under Section 83 could not have been invoked against the Petitioner, as no proceedings under the specified sections were pending.

Conclusion:
The Court held that the order dated 22 October 2019, provisionally attaching the Petitioner’s bank account, was without jurisdiction and liable to be quashed and set aside. The Court emphasized that the power to provisionally attach bank accounts is a drastic power and should not be routinely exercised. The Petition succeeded, and the provisional attachment on the bank account was lifted. The Court directed the concerned bank authorities to act upon the order, which would come into effect two weeks after being uploaded on the server of the Court.

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