2022 (8) TMI 1244 - HC - GST

Validity of Provisional attachment of the bank accounts of the petitioner and of his firm - formation of opinion - proximate nexus with the cause - existence of tangible material attach the bank accounts - Section 83 of The Central Goods Services Tax Act, 2017 - HELD THAT - Plain reading of Section 83 of the CGST Act leaves no manner of doubt that firstly, there is necessity of the formation of opinion by the Commissioner; secondly, the opinion must be formed before ordering a provisional attachment; thirdly, the opinion must indicate that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourthly, the order must be in writing for the attachment of any property of the taxable person; and fifthly, observance of the Rules by the Commissioner in regard to the manner of attachment. Each of these components of Section 83 are integral to a valid exercise of power. The statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. This necessarily requires existence of tangible material before the Commissioner so as to enable him to form his opinion for provisional attachment of the property of an assessee/person including bank account, which may indicates a live link to the necessity to order a provisional attachment to protect the interest of the Government Revenue. Each of the ingredients of Section 83 must be strictly applied and complied before a provisional attachment on the property of an assesses can be made. In the impugned provisional attachment order there is absence of the aforesaid ingredients of Section 83. Therefore, the impugned order having been passed by the respondent No.2 by arbitrarily exercising his power, can not be sustained. Therefore, it deserves to be quashed. Facts of the present case clearly reveals that no proceedings under Section 74 of the C.G.S.T. Act has yet been initiated. That apart the respondent No.2 while passing the impugned order, has neither recorded his opinion nor referred to any tangible material which necessitated him to pass the impugned provisional attachment order so as to protect the interest of the Government revenue. The basic ingredients required for passing the impugned order under Section 83 of the CGST Act as also authoritatively pronounced by Hon ble Supreme Court and binding upon the respondents under Article 141 of the Constitution of India, have been deliberately and completely ignored by the respondent No.2. The impugned order dated 19.05.2022 under Section 83 of the C.G.S.T. Act 2017 passed by the respondent no.2, can not be sustained - Writ petition is allowed with cost of Rs. 50,000/- which shall be paid by the respondents to the petitioner within two weeks.

Summary

Issues Involved:
1. Provisional attachment of bank accounts under Section 83 of the CGST Act, 2017.
2. Validity of the formation of opinion by the Commissioner for provisional attachment.
3. Compliance with procedural requirements under Section 83 of the CGST Act.
4. Imposition of costs for arbitrary and illegal actions by the respondent.

Issue-wise Detailed Analysis:

1. Provisional attachment of bank accounts under Section 83 of the CGST Act, 2017:
The petitioner sought relief against the order dated 19.05.2022, which directed the provisional attachment of the petitioner's bank accounts. The petitioner's earlier bank account attachment was quashed by the court on 11.05.2022 due to the absence of pending proceedings under Section 74 of the CGST Act at the time of attachment. Despite this, a new attachment order was issued the next day, which became the subject of the current writ petition.

2. Validity of the formation of opinion by the Commissioner for provisional attachment:
The respondents admitted that no proceedings under Section 74 of the CGST Act had been initiated against the petitioner as of 14.07.2022. The court emphasized that the Commissioner must form an opinion based on tangible material indicating the necessity of attachment to protect government revenue. The Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh (2021) 6 SCC 771 clarified that the formation of opinion must bear a proximate and live nexus to the purpose of protecting government revenue and must be based on tangible material.

3. Compliance with procedural requirements under Section 83 of the CGST Act:
Section 83 requires the Commissioner to form an opinion that attachment is necessary to protect government revenue and to issue an order in writing. The court found that the impugned order lacked the necessary ingredients, such as the formation of opinion and reference to tangible material. The court noted that each component of Section 83 must be strictly applied and complied with before a provisional attachment can be made. The absence of these components rendered the impugned order arbitrary and unsustainable.

4. Imposition of costs for arbitrary and illegal actions by the respondent:
The court referred to the Supreme Court's decision in Punjab State Power Corporation Ltd. v. Atma Singh Grewal (2014) 13 SCC 666, which stressed that costs should be real and compensatory and, in some cases, exemplary. The court highlighted the need to recover costs from erring officers who make frivolous and irrational decisions. Given the arbitrary and illegal manner in which the impugned order was passed, the court imposed a cost of Rs. 50,000/- on the respondents, to be paid to the petitioner within two weeks.

Conclusion:
The impugned order dated 19.05.2022 under Section 83 of the CGST Act, 2017, was quashed due to the absence of necessary procedural compliance and tangible material. The writ petition was allowed with a cost of Rs. 50,000/- imposed on the respondents for their arbitrary and illegal actions.