2024 (9) TMI 830 - HC - GST

Challenge to provisional attachment order - expiry of the period of one year - requirement of fresh reasons for a second provisional attachment of a bank account - HELD THAT - In M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH ORS. 2021 (4) TMI 837 - SUPREME COURT the Supreme Court has held in relation to Section 83 of the Act that a second attachment of the bank account may be made under Section 83 of the Act, but the Department has to provide fresh reasons for the same. Upon perusal of Sub-section 2 of Section 83 of the Act, it appears that such provisional attachment shall cease to have effect after the expiry of a period of one year. The department cannot be allowed simpliciter to issue a second notice, and thereafter, third and fourth and continue with the provisional attachment for four to five years without giving any fresh reason for the said provisional attachment. If the same was allowed, Sub-section 2 of Section 83 of the Act would become otiose and have no relevance whatsoever. The legislature never intended this provision to be read in a casual manner, as the provision for provisional attachment is a drastic measure that the Department takes even before assessing the liability of the petitioner. This provision is in the nature of preventive detention in criminal cases where one detains a person without any offence having been committed - it becomes extremely necessary for the Department to justify the reasons for such a provisional attachment and without such justification being provided by the Department, by way of specific reasons, such provisional attachment would be illegal, arbitrary and non est in law. The provisional attachment order dated May 16, 2024 is quashed and set aside. The bank concerned is directed to remove the attachment and immediately allow the petitioner to have access to the said bank account - Petition allowed.

Summary

Issues:
1. Validity of provisional attachment order under Section 83 of the Central Goods and Service Tax Act, 2017.
2. Requirement of fresh reasons for a second provisional attachment of a bank account.
3. Compliance with statutory provisions and principles of natural justice in issuing provisional attachment orders.

Analysis:
The High Court heard arguments from both parties regarding a writ petition challenging a provisional attachment order dated May 16, 2024, issued under Section 83 of the Central Goods and Service Tax Act, 2017. The petitioner contended that a previous attachment order on the same bank account had been removed after a writ petition, and the subsequent attachment lacked fresh reasons and specificity. The Court noted that the arbitrary action of attaching the account without fresh reasons was draconian and unsustainable under the law. Referring to the Supreme Court's ruling in Radha Krishan Industries vs. State of Himanchal Pradesh, the Court emphasized the necessity of providing fresh reasons for a second attachment and the importance of strict compliance with statutory requirements for provisional attachments. The Court highlighted the need for tangible material supporting the necessity of an attachment to protect government revenue.

The Court further discussed the provisions of Section 83 of the Act, emphasizing that a provisional attachment ceases to have effect after one year. It cautioned against allowing repeated attachments without fresh reasons, as it would render the statutory provision meaningless. Citing a judgment from the Calcutta High Court, the Court underscored the importance of responsible tax collection and the need for drastic measures to prevent tax evasion. The Court stressed that the provision for provisional attachment should not be taken lightly, likening it to preventive detention in criminal cases.

In conclusion, the Court found that the Department failed to justify the second provisional attachment with specific reasons, rendering it illegal, arbitrary, and non-existent in law. Therefore, the Court quashed the provisional attachment order dated May 16, 2024, directing the bank to remove the attachment and grant the petitioner access to the account. The Department was given liberty to proceed in accordance with the law. The writ petition was allowed in favor of the petitioner.