2021 (5) TMI 980 - HC - GST

Attachment of property - allegation against the petitioner company is that the petitioner company had fraudulently availed input tax credit on fictitious invoices to discharge the GST liability - petitioner submits that Section 67 cannot be against the future receivables so as to strangulate the entire business module of the petitioner - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT - Admittedly, an amount of ₹ 5.68 Crores, which was lying in the account has been appropriated till date. The petitioner has also agreed to remit another sum of ₹ 1 Crore. Thus, as against the proposed/estimated tax due involved i.e. ₹ 21 Crores, the petitioner has already discharged a sum of ₹ 5.68 Crores i.e. 27.05%. After all, there is a mechanism provided under the Act for proper adjudication of the tax due and determination under Sections 73 and 74 of the Act. Therefore, there is no meaning in attaching the bank accounts further - The respondents have reportedly commenced the investigation during October, 2020. The respondents can issue notice under Section 73 of the CGST Act, 2017 and thereafter, determine the amount due and recover the amounts. The impugned attachment orders dated 12.01.2021 and 28.01.2021 are required to be interfered with - It is made clear that the attachment proceedings cannot be at the cost of right of provision under Article 19(1)(g) of the Constitution of India - the petitioner shall deposit a sum of ₹ 1 Crore within a period of one week from the date of receipt of a copy of this order, as was undertaken by the learned Senior Counsel for the petitioner. On such deposit of Rupees One Crore, the impugned attachment orders shall stand vacated - petition allowed.

Summary

Issues:
Challenge to attachment orders under Section 83 of the CGST Act, 2017; Appropriation of funds during investigation; Bail conditions and payment schedule; Allegations of fraudulent activities by the petitioner company; Dispute over recovery proceedings and compliance with bail conditions; Defense of attachment orders by respondents; Interference with attachment orders; Protection of constitutional rights during attachment proceedings.

Analysis:
The Writ Petition challenges attachment orders issued under Section 83 of the CGST Act, 2017, against the petitioner company. The orders were based on a search and investigation conducted in October 2020, leading to the appropriation of funds amounting to ?5.68 Crores from the petitioner's accounts. Directors were arrested and released on bail with conditions, including payment of outstanding taxes in instalments.

The petitioner argues that the attachment orders have severely impacted its business, which employed thousands of individuals, and contests the alleged fraudulent GST credit availing. The petitioner has already paid a significant sum and agreed to pay an additional ?1 Crore. The defense challenges the recovery process, citing violations of statutory provisions and bail conditions.

The respondents justify the attachment orders due to alleged large-scale fraud by the petitioner, invoking Section 83 of the CGST Act, 2017, to protect revenue interests. They argue that the orders freeze account debits but allow credits, minimizing prejudice to the petitioner. The defense highlights breaches of bail conditions and external salary payments to employees.

The court acknowledges the wide powers under Section 67 of the CGST Act, 2017, for provisional asset attachment but emphasizes that such actions should not hinder future receivables. Considering the funds already paid by the petitioner and the ongoing investigation, the court finds no justification for further account attachment.

Consequently, the court interferes with the attachment orders, emphasizing the protection of constitutional rights and directing the petitioner to deposit ?1 Crore within a week to vacate the orders. Transparent account maintenance is mandated, and the respondents are instructed to expedite the investigation and issue show cause notices promptly. The court allows the Writ Petition, with no costs incurred, and closes the related miscellaneous petition.