2022 (5) TMI 1418 - HC - GST

Provisional attachment of Bank Accounts - during the pendency of the assessment proceedings, which was initiated under Section 67 by way of search and seizure, the first respondent has invoked Section 83 of the TNGST Act - HELD THAT - With regard to the invocation of Section 83 of the TNGST Act, the provisions merely says that, where during the pendency of any proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 and Section 74 of the Act, if the Commissioner is of an opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary so to do, he may, by order in writing, attach provisionally any property, including bank account, belonging to the taxable persons - The simple language used in Section 83 of the TNGST Act may suggest that, if the Commissioner is of an opinion that, for the purpose of protecting the interest of the Government Revenue, he can invoke Section 83 of the TNGST Act and to attach the property provisionally including the bank account of the assessee. On what basis, the Commissioner has decided to invoke Section 83 to go for a provisional attachment before which, whether the Commissioner has formed an opinion to do so, before forming such opinion, what are all the tangible material available before him or placed before him, so as to enable him to form such an opinion, all these aspects have not been even indicated in the order of provisional attachment. The order of provisional attachment made by the first respondent dated 20.12.2021, shall not stand in the legal scrutiny. Therefore, it is liable to be interfered with, accordingly, it is set aside. As a sequel, the consequential order, informing the petitioner by the respondent Bank authorities dated 30.12.2021 is also set aside - It is made clear that, this order, setting aside the provisional attachment order and the consequential Bank communication in respect of these two cases, shall not stand in the way for the respondent / Revenue to invoke Section 83 once again, if they have reasons with tangible materials and records to form an opinion that in the interest of Revenue, such an invocation of Section 83 become inevitable and after recording such reasons that kind of invocation could be possible at the hands of the Revenue. Petition disposed off.

Summary

Issues Involved:
1. Legality of the provisional attachment order under Section 83 of the TNGST Act.
2. Compliance with mandatory guidelines set by the Supreme Court in Radhakrishnan's case.
3. Maintainability of the writ petitions due to non-exhaustion of alternate remedies under Rule 159(5) of the TNGST Rules.

Detailed Analysis:

1. Legality of the Provisional Attachment Order under Section 83 of the TNGST Act:
The petitioners, registered under the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act), faced a search under Section 67 of the TNGST Act, which led to the discovery of incriminating documents indicating potential tax evasion. Consequently, the Revenue initiated assessment proceedings and invoked Section 83 of the TNGST Act to freeze the petitioners' bank accounts. The petitioners challenged this action, arguing that the first respondent lacked material or reason to form an opinion that the attachment was necessary to protect the Revenue's interest. The court observed that the Commissioner must form an opinion based on tangible material that the assessee is likely to defeat the demand and that the provisional attachment is necessary to protect the government's revenue. The court found that the order lacked such reasoning and tangible material, rendering it legally unsustainable.

2. Compliance with Mandatory Guidelines Set by the Supreme Court in Radhakrishnan's Case:
The petitioners relied heavily on the Supreme Court's decision in Radhakrishnan Industries vs. State of Himachal Pradesh, which provided detailed mandatory guidelines for invoking Section 83 of the GST Act. The Supreme Court emphasized that the power to order a provisional attachment is draconian and must be exercised strictly according to the statute's conditions. The Commissioner must form an opinion based on tangible material that the assessee is likely to defeat the demand. The court noted that the impugned order did not meet these criteria, as it failed to indicate the basis on which the Commissioner formed his opinion. The court concluded that the mandatory guidelines from the Radhakrishnan case were not followed, making the provisional attachment order invalid.

3. Maintainability of the Writ Petitions Due to Non-Exhaustion of Alternate Remedies under Rule 159(5) of the TNGST Rules:
The respondents argued that the writ petitions were not maintainable because the petitioners had not exhausted the remedy provided under Rule 159(5) of the TNGST Rules, which allows for filing an application to lift the provisional attachment. The petitioners countered that they had filed a detailed objection and request to withdraw the attachment orders within the stipulated time, but the Commissioner had not considered it. The court accepted the petitioners' argument, stating that since they had approached the first respondent with an application under Rule 159(5), the writ petitions were maintainable. The court emphasized that if the Commissioner does not consider such applications, the assessee can invoke the court's jurisdiction under Article 226 of the Constitution.

Conclusion:
The court set aside the provisional attachment order dated 20.12.2021 and the consequential bank communication dated 30.12.2021, as the order did not comply with the mandatory guidelines from the Supreme Court's Radhakrishnan case. However, the court clarified that the Revenue could invoke Section 83 again if they have tangible materials and records to justify such action. The court also directed the Revenue to complete the assessment with the petitioners' cooperation. The writ petitions were ordered accordingly, with no order as to costs, and the connected miscellaneous petitions were closed.