2021 (9) TMI 821 - HC - GST

Lefting of Provisional attachment of bank accounts - the period of one year would come to an end on 21.09.2021 - no proceedings have been initiated under Section 74 of CGST Act as against the petitioner till date. - Section 83 of CGST Act - issuance of bogus/fake invoices without supply of goods - availment of irregular ITC - HELD THAT - It must be noted that the exercise of right under Rule 159(5) of CGST Rules presupposes the communication of provisional order of attachment. The fact that the petitioner came to know of the said provisional attachment order from his bankers would be of no relevance vis- -vis in the absence of demonstration by the respondent Authority with legally acceptable material to communicate such order, the contention taken that the representation to seek the relief as provided under Rule 159(5) of CGST Rules is belated, cannot be accepted There was an obligation for the respondent Authority to have considered the representation of the petitioner under Rule 159(5) of the CGST Rules. - However, as the period of one year would come to an end on 21.09.2021, it would be travesty of justice, if the matter is remanded back keeping the option open for the respondent Authority to pass orders on the representation of the petitioner, which theoretically would entitle the respondent, if circumstances are so made out to reject lifting of such attachment. Admittedly, no proceedings have been initiated under Section 74 of CGST Act as against the petitioner till date. What must also be noticed is that though the statement of objections of the respondent Authority seeks to make out a case that the proceedings under Section 74 of CGST Act are sought to be instituted and in the context of which the provisional attachment under Section 83 of CGST Act is resorted to, the impending proceedings under Section 74 of the CGST Act cannot be a ground to exercise power under Section 83 for the provisional attachment. If the only ground made out in the statement objections and the very order of attachment at Annexure-A is the proceedings under Section 74 of the CGST Act, even if there are other proceedings that may be considered to be pending against the petitioner as long as the proceedings under Section 74 are not initiated by issuing a show-cause notice, the order of attachment purportedly relating to the proceedings under Section 74 cannot be upheld. The question of law answered in the affirmative - Order of attachment set aside.

Summary

Issues Involved:
1. Legality of the provisional attachment of the petitioner's bank accounts under Section 83 of the CGST Act.
2. Compliance with procedural requirements under Rule 159 of the CGST Rules.
3. Communication and service of the provisional attachment order to the petitioner.
4. Consideration of the petitioner's representation under Rule 159(5) of the CGST Rules.

Detailed Analysis:

1. Legality of the Provisional Attachment of the Petitioner's Bank Accounts under Section 83 of the CGST Act:
The petitioner sought to set aside the provisional attachment of their bank accounts, arguing that the conditions for such an attachment under Section 83 of the CGST Act were not met. The respondents contended that the attachment was necessary due to ongoing investigations into GST evasion involving fake invoices and fraudulent Input Tax Credit claims. The court noted that the provisional attachment's legality hinged on whether the Commissioner had formed an opinion that such an attachment was necessary to protect government revenue, which was not evident in the present case. Additionally, no proceedings under Section 74 of the CGST Act had been initiated against the petitioner, undermining the basis for the attachment.

2. Compliance with Procedural Requirements under Rule 159 of the CGST Rules:
The petitioner argued that the procedural requirements under Rule 159 of the CGST Rules were not followed. Specifically, the attachment order was not communicated to the petitioner in the prescribed manner, and the necessary forms (GST DRC-22 and GST DRC-23) were not used. The court emphasized that strict adherence to the prescribed procedure was essential, as it had significant economic consequences for the petitioner. The court found that the provisional attachment order was not in the requisite form and lacked necessary averments, rendering it procedurally defective.

3. Communication and Service of the Provisional Attachment Order to the Petitioner:
The petitioner claimed they were unaware of the attachment until informed by their bank, and no communication was sent to them. The respondents asserted that a copy of the attachment order was sent to the petitioner's address, but no evidence was provided to support this claim. The court highlighted the importance of communicating the attachment order to the affected party to enable them to exercise their rights under Rule 159(2) and (5) of the CGST Rules. The lack of evidence of communication to the petitioner meant the procedural requirements were not met, invalidating the attachment.

4. Consideration of the Petitioner's Representation under Rule 159(5) of the CGST Rules:
The petitioner submitted a representation seeking the release of the attachment, which the respondents did not consider, arguing it was filed beyond the seven-day period specified in Rule 159(5). The court noted that the right to file objections and be heard under Rule 159(5) presupposed the communication of the attachment order. Since the petitioner was not properly informed of the attachment, the delay in filing the representation was irrelevant. The court held that the respondents were obligated to consider the representation, and their failure to do so further invalidated the attachment.

Conclusion:
The court concluded that the provisional attachment of the petitioner's bank accounts was not legally justified due to non-compliance with procedural requirements and the lack of proper communication of the attachment order. The petition was allowed, and the provisional attachment order dated 21.09.2020 was set aside. The respondents were directed to issue necessary communication to the bank to lift the attachment, considering the one-year period for provisional attachments under Section 83(2) of the CGST Act had expired.