2021 (8) TMI 1121 - HC - GST

Provisional attachment of goods - bogus invoices - writ court granted relief to the respondent - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT - Admittedly, what was put to challenge was only the order of provisional attachment and the statutory machinery provides for a mechanism for filing objections against such provisional attachment. As rightly pointed out by the learned counsel appearing for the respondent/writ petitioner, the respondent appears to have understood the factual and legal provisions in a proper manner and has given a representation/objection, dated 18.03.2021, seeking to lift the order of attachment under Section 83 of the CGST Act. This application is undoubtedly an application to be reckoned under Rule 159(5) of the CGST Rules. However, the fact remains that the appellant/Department has not disposed of the said application by passing a reasoned order. The respondent has failed to comply with the conditions imposed by this Court while granting bail vide order dated 19.02.2021. No doubt, the respondent have preferred Special Leave Petition before the Hon'ble Supreme Court, in which, notice has been ordered. Thus, as on date, the respondent have not complied with the order passed by this Bail Court and the objections filed under Rule 159(5) of CGST Rules have not been disposed of by passing a reasoned order - The respondent, having sought for lifting the attachment by filing representation/objection dated 18.03.2021, ought to have pursued the same. Without pursuing the said objections, a challenge to the provisional attachment order has to be held to be premature. Appeal allowed.

Summary

Issues:
Challenge to provisional attachment under Section 83 of the CGST Act - Allegation of fraudulent input tax credit availed on fictitious invoices - Compliance with bail conditions - Legality of provisional attachment - Disposal of objections under Rule 159 of CGST Rules - Premature challenge to attachment order - Necessity of passing reasoned order on objections.

Analysis:
The Writ Appeal was filed by the Revenue challenging the order of provisional attachment under Section 83 of the CGST Act. The respondent contended that the allegations of fraudulently availing input tax credit on fictitious invoices were baseless. The Revenue argued that the respondent failed to comply with bail conditions and only paid a fraction of the estimated tax due. The learned Writ Court found that a substantial amount was already paid by the respondent towards the tax dues, rendering the attachment of the Bank Account unnecessary. The Court held that the attachment order infringed the respondent's rights under Article 19(1)(g) of the Constitution and directed the respondent to deposit a specified amount to vacate the attachment order. The Court also instructed the Revenue to complete the investigation promptly and consider seeking cancellation of bail for non-compliance.

The High Court observed that the challenge to the provisional attachment was premature as the respondent had filed objections under Rule 159(5) of the CGST Rules, but the Revenue had not disposed of them with a reasoned order. Citing a Supreme Court decision, the Court emphasized the necessity of passing a reasoned order on objections to prevent subjective decision-making. The Court noted that the respondent had not complied with bail conditions and objections were pending without a decision. The Court cautioned against premature conclusions on the attachment of Bank Accounts and future receivables, highlighting the statutory procedure for lifting such attachments.

In its judgment, the High Court allowed the Writ Appeal, setting aside the order and directions issued in the Writ Petition. The Court directed the respondent to submit fresh objections under Rule 159(5) of the CGST Rules within a specified timeframe. It emphasized the objective disposal of objections by the appropriate authority and the need to protect the Revenue's interests while ensuring the respondent's business activities were not unduly hindered by the attachments. The Court urged the authority to focus on recovering taxes and statutory dues while considering the respondent's objections, emphasizing a balanced approach to safeguard both parties' interests.