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2021 (1) TMI 795 - HC - GSTProvisional attachment of Bank Accounts of petitioner - Section 83 of Gujarat GST Act - HELD THAT - During the pendency of any proceedings under Sections 62, 63, 64, 67, 73 and 74, the Commissioner can provisionally attach any property including the bank account belonging to the taxable person. For this purpose, the Commissioner has to form an opinion that it is necessary to do so for protecting the interest of the Government Revenue. These steps have to be taken in such manner as prescribed. Rule 159(1) of the CGST Rules, 2017, deals with the provisional attachment of the property. The form of the order shows that it is to be addressed to the taxable person. The sections under which the proceedings are launched against such a taxable person are to be referred and then a direction is to be issued for not allowing any debit. Although the provisions of Section 281B of the Income Tax Act is pari materia to Section 83 of the State GST Act, yet one pertinent feature of Section 281B of the Income Tax Act is that it gives guidelines for making the provisional attachment. Such guidelines are missing so far as Section 83 of the State GST Act is concerned - having regard to the fact that there is hardly a balance of ₹ 22,065/- in the two bank accounts, we see no good reason to continue the provisional attachment. The impugned order of provisional attachment of the two bank accounts is hereby quashed and set-aside - Application allowed.
Issues Involved:
1. Legality and validity of the provisional attachment of bank accounts under Section 83 of the CGST Act. 2. Pendency of proceedings under Section 67 of the CGST Act at the time of provisional attachment. 3. Adequacy and application of mind in forming the opinion for provisional attachment. 4. Hardship caused to the petitioner due to the provisional attachment. Detailed Analysis: Legality and Validity of Provisional Attachment: The petitioner challenged the legality and validity of the order of provisional attachment of bank accounts under Section 83 of the CGST Act. The court noted that the power under Section 83 is drastic and should be exercised with care and circumspection. The court emphasized that the subjective satisfaction required for provisional attachment must be based on credible material and should not be arbitrary or capricious. The court referred to its earlier decisions, highlighting that the power of provisional attachment should be used sparingly and only on substantive grounds. The court concluded that the provisional attachment in this case was not justified as it did not meet the necessary criteria for protecting the interest of the Revenue. Pendency of Proceedings under Section 67: The petitioner argued that no proceedings were pending under Section 67 of the CGST Act at the time of the provisional attachment. The court referred to the decision in Kushal Ltd. vs. Union of India, where it was held that the sine qua non for exercising powers under Section 83 is the pendency of proceedings under specific sections, including Section 67. The court noted that the Supreme Court had kept the view expressed in Kushal Ltd. in abeyance, pending a final decision. Therefore, the court refrained from delving into the argument regarding the pendency of proceedings under Section 67. Adequacy and Application of Mind: The petitioner contended that the impugned orders were cryptic and lacked application of mind. The court emphasized that the formation of opinion for provisional attachment must be based on relevant material and should reflect an intense application of mind. The court found that the impugned orders did not demonstrate any such application of mind and were arbitrary. The court reiterated that the power under Section 83 should be exercised only if there is a reasonable apprehension that the assessee may default on the ultimate collection of the demand. Hardship Caused to the Petitioner: The petitioner highlighted the hardship caused due to the provisional attachment of his bank accounts, which affected his ability to conduct business and file income tax returns. The court acknowledged the undue hardship and noted that the balance in the attached bank accounts was minimal. The court emphasized that the power of provisional attachment should not be used to harass the assessee or have an irreversible detrimental effect on the business. The court concluded that the provisional attachment of the bank accounts with a paltry balance served no good purpose and caused undue hardship to the petitioner. Conclusion: The court allowed the writ application, quashing the impugned order of provisional attachment of the bank accounts. The court directed the respondents to lift the provisional attachment and permit the petitioner to operate the bank accounts. The court also highlighted the need for guidelines to ensure that the power under Section 83 is exercised judiciously and not mechanically. The court requested the Union of India and the CBDT to consider issuing appropriate instructions or guidelines to prevent the mechanical exercise of power under Section 83, which leads to unnecessary litigation.
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