2024 (7) TMI 1025 - HC - GST

Challenge to provisional orders of attachment - continuation of attachment beyond the period of one year - HELD THAT - Admittedly, in this case, the provisional orders of attachment had been issued under Section 83 of the said Act. It may be noted, that once, a provisional order of attachment has been issued under Section 83 of the said Act, the statute itself considering the drastic nature of the order confers a right on the person whose property is attached to file an objection under Rule 159 (5) of the said Rules - Once, an objection is filed, it is for the Commissioner to consider whether or not such order of attachment is required to be continued or not. Admittedly, in this case, no such objection has been filed. Although, a lot of stress has been laid by the petitioner to, inter alia, contend that the orders of attachment cannot be continued for more than a year, in this case, it is found that fresh provisional orders of attachment has been issued. The respondents have prima facie been able to explain the circumstances under which such provisional orders of attachment had been necessitated, inasmuch as, the notices under Section 74 of the said Act, could not be served on the petitioner. At this stage it cannot be ruled out that the petitioner was avoiding service of notice. Although, the order of provisional attachment appears to be drastic, there is no embargo on exercise of power. The present case does not suggest that the petitioner has in anyway been harassed or any of the rights of the petitioner, as enshrined in the constitutional provisions has been infringed, especially when the petitioner did not apply for release of the property, by filing an objection in terms of the Rule 159 (5) of the said Rules. Prima facie there appears to be sufficient material for the respondents to pass fresh provisional orders of attachment to protect the interest of revenue. Even after the fresh orders of attachment dated 9th February, 2024 under Section 83 of the said Act had been passed, no steps had been taken by the petitioner to object to the continuance of such orders in the manner provided for in the statute. At this stage when the inquiry to determine liability under Section 74 of the said Act is in progress, and having regard to facts noted above it cannot be said that there was no material for formation of opinion for issuing order of provisional attachment. Since the petitioner did not approach the respondents by way of an application in terms of Rule 159 (5) of the said Rules, and there appears to be no explanation by the petitioner for not approaching the respondents, the petitioner, at this stage, is not entitled to invoke the extraordinary writ jurisdiction of this Court. Petition dismissed.

Summary

Issues Involved:
1. Validity of provisional attachment orders under Section 83 of the Central Goods and Service Tax Act, 2017.
2. Continuation of provisional attachment orders beyond one year.
3. Petitioner’s failure to file objections under Rule 159(5) of the CGST Rules, 2017.
4. Respondents’ justification for issuing fresh provisional attachment orders.
5. Legal precedents and guidelines relevant to the case.

Detailed Analysis:

1. Validity of Provisional Attachment Orders:
The petitioner challenged seven provisional attachment orders issued under Section 83 of the CGST Act, 2017. The orders were dated 3rd February 2023, 10th February 2023, and 9th February 2024. The petitioner argued that these orders were issued based on an investigation alleging control over certain entities, which the petitioner denied.

2. Continuation Beyond One Year:
The petitioner contended that the provisional attachment orders could not continue beyond one year from their issuance date, citing Section 83(2) of the CGST Act. The petitioner relied on the judgment of the Hon’ble High Court at New Delhi in M/s. VKS Industries v. Commissioner, Central Excise and CGST, which stated that such orders cease to have effect after one year. The petitioner also referred to guidelines issued by the Ministry of Finance, which support this claim.

3. Failure to File Objections:
The respondents argued that the petitioner did not file any objections under Rule 159(5) of the CGST Rules, 2017, which allows the attached party to contest the attachment. The Court noted that the petitioner did not utilize this provision and failed to apply for the release of the property during the one-year period.

4. Justification for Fresh Orders:
The respondents justified issuing fresh provisional attachment orders by stating that the petitioner avoided service of show cause notices. They presented postal endorsements indicating that the notices could not be delivered as the petitioner could not be located. The respondents conducted searches at the petitioner’s business and residence, corroborating their claims. The Court found that the respondents had prima facie reasons to issue fresh orders to protect revenue interests.

5. Legal Precedents and Guidelines:
The petitioner cited judgments from the High Court of Gujarat in Valerius Industries v. Union of India and Meenakshi Trendz v. State of Gujarat, which outline the circumstances under which provisional attachment orders can be issued. The Court observed that these judgments do not apply to the present case, as the petitioner did not file objections under Rule 159(5). The Court also referred to the Supreme Court judgment in Radha Krishna Industries v. State of Himachal Pradesh, which emphasized that fresh attachment orders could be issued if there is a change in circumstances.

Conclusion:
The Court concluded that the petitioner’s failure to file objections under Rule 159(5) and the respondents’ justified reasons for issuing fresh attachment orders warranted the dismissal of the writ petition. The Court found no merit in the petitioner’s claims that the orders of attachment could not continue beyond one year or that the entire proceeding was vitiated. The writ petition was dismissed, with no order as to costs.