2021 (8) TMI 344 - HC - GST

Denial to lift the order of provisional attachment of the petitioner s bank account - no proceedings are pending against the petitioner under Sections 62 or 63 or 64 or 67 or 73 or 74 of the CGST Act - Jurisdiction to invoke the power conferred by Section 83 of the CGST Act read with Rule 159(1) of the CGST Rules did not exist - HELD THAT - In the considered opinion of the Court, the approach of the respondent no.3 that a fraud has been practiced, by itself and without there being any provision in the relevant statute conferring power which could be invoked for such purpose, was not sufficient ground to clothe her with the power to order provisional attachment of a bank account under Section 83 read with Rule 159(1). It is also well settled that where a person on whom fraud is committed is in a position to discover the truth by due diligence, fraud is not proved. To empower a Commissioner to order provisional attachment on account of presence of vitiating circumstances as the one under consideration before the respondent no.3, the statute itself ought to have provided so and the power to attach property, which is of a drastic nature, ought not to have been exercised on facts and in the circumstances. As a matter of fact, no proceedings under Sections 62 or 63 or 64 or 67 or 73 or 74 of the CGST Act are pending; hence, the respondent no.3 committed an error of jurisdictional fact for which the Court is constrained to hold that she had no authority to invoke the power conferred by Section 83 of the CGST Act read with Rule 159(1) of the CGST Rules. Section 83 of the CGST Act read with Rule 159(1) of the CGST Rules empowers a Commissioner to protect the interests of the revenue by way of provisional attachment, but such provisional attachment cannot be ordered without fulfillment of the condition(s) precedent - In the absence of fulfillment of such conditions(s) precedent, the respondent no.3 could not have protected the interest of the revenue in the manner she proceeded to pass the impugned order. The order impugned cannot be sustained - Petition allowed.

Summary

Issues:
Challenge to order of provisional attachment of bank account under CGST Act.

Analysis:
The writ petition challenged an order of provisional attachment of the petitioner's bank account under the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner argued that no proceedings were pending against them under specific sections of the CGST Act, rendering the attachment order jurisdictionally flawed. Citing legal precedents, the petitioner contended that the power to provisionally attach property, including a bank account, must strictly adhere to statutory conditions. The petitioner requested the quashing of the attachment order and the unfreezing of the bank account.

The respondents justified the attachment order by alleging that the petitioner had engaged in fraudulent practices related to Input Tax Credit, causing revenue loss. They argued that fraud vitiates proceedings, justifying the maintenance of the provisional attachment.

The Court analyzed the legal arguments presented. It referred to a Supreme Court decision and a Gujarat High Court decision related to provisional attachment under the CGST Act. The Court noted that the Supreme Court's decision clarified that unless proceedings were pending against a taxable person under specified sections of the CGST Act, no provisional attachment order could be made. The Court emphasized the need for strict compliance with statutory conditions for exercising the power to order provisional attachment.

The Court found that the respondent had failed to address the petitioner's contention regarding the absence of pending proceedings under relevant sections of the CGST Act. It concluded that the respondent lacked the authority to invoke the power conferred by the CGST Act for provisional attachment due to the absence of pending proceedings. The Court highlighted that the power to attach property must not be exercised without fulfilling the necessary conditions precedent.

Consequently, the Court set aside the impugned order of provisional attachment and directed the respondent to defreeze the petitioner's bank account. The writ petition was allowed, with no order as to costs.