2021 (10) TMI 523 - HC - GST

Attachment of Bank Accounts of petitioner - case of petitioner is that the impugned attachment is without any statutory sanction as it is consequent upon action under Section 67 of the Act, which deals with the power of the authorities to engage in inspection, search and seizure - Section 83 of CGST Act - HELD THAT - In the present case, there are serious allegations in regard to the excess claim of ITC based on transactions with non-existent or fraudulent entities. However, such allegations are to be based upon supporting materials and evidences if they are to translate into an opinion as required in terms of Section 83. No doubt, there are instances where, even prior to the passing of the assessment order sufficient material would be available even at the time of investigation to support a prima facie conclusion of suppression or excess claim. However, the brief for opinion by R1 and the opinion of R2 must contain references to the material while according sanction under Section 83. The power conferred upon an authority under Section 83 is substantial and with great power comes great responsibility. The authority concerned must justify the invocation of the coercive and intrusive recovery proceedings against the assessee, even prior to determination of liability and passing of an assessment order. The burden that lies upon the revenue is heavy and has to be seen to be discharged by them in a proper manner in each and every case where power under Section 83 is invoked. The opinion of R2 in this case is far more cryptic revealing total nonapplication of mind and merely repeating what R1 has stated in his request for sanction. The impugned order of attachment is set aside. Petition allowed.

Issues Involved:
1. Legality of the provisional attachment under Section 83 of the CGST Act.
2. Validity of the Commissioner's opinion for attachment under Section 83.
3. Procedural compliance in forming the opinion for attachment.
4. Impact of premature conclusions on the attachment process.
5. Judicial precedents on provisional attachment under GST laws.

Detailed Analysis:

1. Legality of the Provisional Attachment under Section 83 of the CGST Act:
The petitioner, an assessee under the CGST Act, challenged the attachment of their bank accounts dated 23.11.2020, arguing it lacked statutory sanction. The attachment was consequent upon search and seizure actions under Section 67 of the CGST Act. The court noted that Section 83 allows for provisional attachment to protect revenue during the pendency of proceedings under several sections, including Section 67, based on the Commissioner's opinion.

2. Validity of the Commissioner's Opinion for Attachment under Section 83:
The court scrutinized whether the Commissioner's opinion, which justified the attachment, was based on a legitimate and legal apprehension that the interests of the revenue needed protection. The court found that the opinion was non-speaking and lacked references to the materials found during the investigation. It was noted that the opinion merely stated the attachment was to protect revenue without detailing the reasons or evidence supporting this conclusion.

3. Procedural Compliance in Forming the Opinion for Attachment:
The court emphasized that the formation of the Commissioner's opinion under Section 83 must be based on tangible material and must be reasoned. The court found that R2 (Senior Intelligence Officer) erred by concluding prematurely that the petitioner was availing fraudulent ITC from bogus units, without completing the necessary verification and hearings. R1 (Principal Additional Director General) perpetuated this error by approving the attachment based on the same flawed reasoning.

4. Impact of Premature Conclusions on the Attachment Process:
The court highlighted that the investigation process involves collecting material and verifying it in conjunction with the assessee. Premature conclusions by R2 and R1, without proper verification, led to an unjustified attachment. The court noted that the authorities should have completed the assessment process and verified the claims before arriving at such conclusions.

5. Judicial Precedents on Provisional Attachment under GST Laws:
The petitioner cited several judgments, including those from the Gujarat and Bombay High Courts, which stressed that the power under Section 83 should be exercised sparingly and based on credible material. The court referred to the Supreme Court's judgment in M/s. Radhakrishnan Industries, which held that the power to order provisional attachment is draconian and must be exercised with strict adherence to statutory conditions. The court found that the opinion in the present case was inadequate, similar to the deficiencies noted by the Supreme Court in Radhakrishnan Industries.

Conclusion:
The court allowed the writ petition, setting aside the impugned order of attachment. It directed the respondents to complete the assessment process within six weeks. The court clarified that this order only pertained to the bank attachment and did not preclude the revenue from invoking Section 83 again if warranted by future circumstances, in accordance with the law. No costs were awarded, and connected miscellaneous petitions were closed.

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