2024 (7) TMI 371 - HC - GST

Provisional attachment of properties - availment of fake input tax credit - bogus billing have generated fake sale invoices to petitioner and fraudulently transferred input tax credit - HELD THAT - Prima facie it is apparent from the facts that the petitioner has indulged in to bogus billing and therefore without considering the veracity of the same as investigation/inquiry is undergoing, it is necessary to find out as to whether there is any basis to pass the provisional attachment of the movable property in addition to the immovable properties already attached by the respondent Department while invoking provisions of Section 83 of the Act. On perusal of the impugned order read with satisfaction note, the respondent authority has come to the conclusion that the immovable property of the petitioner is not sufficient to protect the interest of the revenue, which is further fortified from the averments made in the affidavit-in-reply to the effect that the petitioner has indulged into bogus billing by availing the ITC of more than Rs. 76 crore. Therefore, considering such facts, it cannot be said that the Commissioner has failed to form an opinion on the basis of tangible material that the petitioner is likely to be subject to demand which would be more than the value of the immovable properties and therefore it is necessary so to do for the purpose of protecting the interest of the Government revenue, provisional attachment of the movable property was also required. It cannot be said that the respondents have committed breach of provision of Section 83 of the Act which is intended to safeguard the interest of the revenue which cannot be said to any harassment to the petitioner as tried to be demonstrated. In the facts of the case, it cannot be said that the respondents have issued provisional attachment order over the movable properties with a view to harass the petitioner. The petitioner in the facts of the case appears to have indulged in the transaction of the fraudulent invoices resulting into loss of revenue by utilizing the ITC of more than Rs. 76 crore. Thus, no interference is called for in the impugned order of provisional attachment so far as the attachment over the movable properties of the petitioner during the pendency of the investigation as respondent authority has rightly formed an opinion as required under Section 83 of the Act so as to protect the interest of revenue, and hence the provisional attachment over the movable and immovable properties of the petitioner is required to be continued. Petition dismissed.

Issues Involved:
1. Provisional attachment of immovable and movable properties.
2. Legality of the provisional attachment under Section 83 of the CGST Act.
3. Impact of provisional attachment on business operations.
4. Compliance with CBEC Circular dated 23.02.2021.
5. Applicability of judicial precedents.

Detailed Analysis:

1. Provisional Attachment of Immoveable and Moveable Properties:
The petitioner, a sole proprietorship firm, challenged the provisional attachment orders dated 14.09.2023, which included factory land, factory building, plant and machinery, two residential flats, stock lying at the premises, two current bank accounts, fixed deposits, and all debtors' balances. The petitioner also sought the return of two seized mobile phones and protection from coercive measures.

2. Legality of the Provisional Attachment under Section 83 of the CGST Act:
The petitioner argued that the attachment orders were erroneous and adversely affected business operations. It was contended that the immovable properties alone were sufficient to secure the alleged tax liability of Rs. 32.67 crores, as supported by a valuation report. The petitioner relied on the Supreme Court's judgment in Radha Krishan Industries, which outlined the principles for the exercise of provisional attachment powers, emphasizing the necessity of tangible material and the proportionality of the attachment.

3. Impact of Provisional Attachment on Business Operations:
The petitioner highlighted that the attachment of movable properties, including bank accounts and stock, severely hampered daily business activities, payment to employees, and necessary transactions, thereby damaging the reputation and business relationships. The petitioner cited CBEC Circular dated 23.02.2021, which advises against hampering normal business activities through such attachments.

4. Compliance with CBEC Circular dated 23.02.2021:
The petitioner argued that the attachment of movable properties was contrary to the CBEC Circular, which stipulates that raw materials and inputs required for production or finished goods should not normally be attached. The petitioner maintained that the immovable properties' value was sufficient to protect the revenue's interest, making the attachment of movable properties unnecessary.

5. Applicability of Judicial Precedents:
The petitioner relied on several judicial precedents, including Radha Krishan Industries and Arya Metacast (P.) Ltd., which underscored the need for a cautious and proportional approach in exercising provisional attachment powers. These cases emphasized that attachments should not hamper normal business operations and should be based on tangible material indicating a risk to revenue recovery.

Respondent's Arguments:
The respondent contended that the petitioner was involved in fraudulent transactions, issuing invoices without actual supply of goods, and availing bogus ITC of Rs. 76.68 crores. The respondent justified the provisional attachment of both immovable and movable properties, arguing that the immovable properties alone were insufficient to cover the alleged tax liability. The respondent cited statements from transporters and other evidence indicating the petitioner's involvement in bogus billing.

Court's Findings:
The court noted that the petitioner was involved in bogus billing and availed fraudulent ITC. The court found that the respondent had formed an opinion based on tangible material that the petitioner's immovable properties were insufficient to secure the revenue's interest. The court held that the provisional attachment of movable properties was necessary to protect the revenue, in line with Section 83 of the CGST Act and the CBEC Circular.

Conclusion:
The court rejected the petition, upholding the provisional attachment of both movable and immovable properties. The court emphasized that the respondent's actions were justified to protect the revenue's interest and did not constitute harassment. The petition was dismissed, and the notice was discharged.

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