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TMI Blog2020 (3) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... attachment orders under Section 83 - the issue answered in favour of the Revenue. Whether an order passed under Section 83 of the CGST Act, 2017, remains valid after the expiry of one year from the date of the order? - HELD THAT:- The authorities have acted in a blatantly highhanded and illegal manner by keeping the provisional attachments in a state of continuance for the period from 5th June, 2019 (when the first order of provisional attachment ceases to operate) till 31st October, 2019 (when fresh order for provisional attachment was passed). Section 83(2) is crystal clear that the provisional attachment shall cease upon expiry of one year. It was therefore incumbent on the authorities to either release the provisional attachment by informing the bank or by issuing a fresh order of provisional attachment, if the law so allowed. The failure to do the above is nothing short of being an act of highhandedness. Such actions of the authorities is an obloquy and reprehensible. No explanation has been provided for the same either in the affidavits filed in the earlier writ petitions or by counsel appearing on behalf of the respondent authorities during hearing of arguments - the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the orders passed by the Directorate General of Goods and Services Tax Intelligence, Kolkata Zonal Unit [hereinafter referred to as DGGI ], to provisionally attach the current bank accounts of the writ petitioner under Section 83 of the Central Goods and Services Tax Act, 2017. 2. For the purpose of convenience, the facts in writ petition W.P. No. 21272(W) of 2019 are being taken into consideration and are chronologically delineated hereinbelow: a. The writ petitioner no. 1 is a private limited company duly incorporated under the Companies Act, 2013, under the name of Amazonite Steels Private Limited [hereinafter referred to as the said company ] whereas petitioner no. 2 is the director of the said company. The said company is duly registered under the Central Goods and Services Tax Act, 2017 [hereinafter referred to as CGST Act, 2017 ] and West Bengal Goods and Services Tax Act, 2017, having its registration number as 19AAPCA2903C1ZW. b. The said company carries on its business transactions through the current account registered with M/s. Lakshmi Vilas Bank, New Alipur Branch [hereinafter referred to as the said bank ] having account no. 0125360000002129 [he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner company wrote to the said bank praying for immediate de-freezing of the said account. The relevant portion of the letter is delineated below: In this connection it is to inform you that although during the pendency of any proceedings under Section 67, the concerned authority had power to provisionally attach the bank account under sub-section (1) of Section 83 of the CGST Act, 2017 but under Section 83(2) of the CGST Act, 2017, such provisional attachment shall cease to have effect after one year from the date of the order made under sub-section (1) . The letter for provisional attachment was issued by the DGGI, GOI on 05-06-2018 and in terms of Section 83(2) the period of provisional attachment expired on 05-06-2019. In such circumstances, you are requested to immediately de-freeze the said account and allow the operation of the account forthwith. k. Thereafter, on 31st October, 2019, the Principal Additional Director General, Directorate General of Goods Services Tax Intelligence (hereinafter referred to as PDDGI ) passed a fresh provisional order directing the said bank to provisionally attach the said current account of the petitioner. The said order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 3(c), Section 3(d) and Section 5(2) to submit that Section 3(c) and 3(d) make it clear that Principal Commissioner of Central Tax and Commissioner of Central Tax are equivalent to Principal Additional Directors General of Central Tax and Additional Directors General of Central Tax . She further submitted that Section 5(2) allows an officer of central tax to exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of central tax who is subordinate to him. She submitted that the definition of Commissioner in Section 2(24) has to be read in conjunction with Section 3. In light of the same, she submitted that the orders passed by the respondent nos. 2 and 3 are absolutely legal and within the scope of the officers who have passed these orders. 6. For a better understanding of the issue, Section 2(24), Section 3 and Section 5 of the CGST Act, 2017 are delineated below:- Section 2 (24):- Commissioner means the Commissioner of central tax and includes the Principal Commissioner of central tax appointed under section 3 and the Commissioner of integrated tax appointed under the Integrated Goods and Services Tax Act; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is the superior officer and therefore, as per Section 5(2) of the CGST Act, 2017 she possesses the power to pass the provisional attachment orders under Section 83. Hence, the first issue is answered in favour of the Revenue. Issue B: 8. Mr. Arijit Chakrabarti learned counsel appearing on behalf of the petitioner company submitted in relation to the earlier writ petitions that the writ petitioners are aggrieved by the illegal and highhanded actions on the part of the respondent authorities. He submitted that the current accounts that were used by the petitioner companies for its daily business transactions was provisionally attached by the order dated 5th June, 2018, and ceased to have any effect after one year according to Section 83(2) of the CGST Act, 2017. 9. Mr. Chakrabarti further argued that various representations were made to the respondent authorities praying before them to defreeze the said accounts of the petitioners but to no avail. He further submits that the fresh orders dated 31st October, 2019, passed by respondent no. 3 was not even served personally upon the petitioner, in fact, it was annexed along with the Affidavit-in-Opposition filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Others 2002 LAB I.C. 65 and the Supreme Court judgment in Indian National Congress (I) Vs. Institute of Social Welfare and Others (2002) 5 SCC 685 to bring home the point that an authority cannot act beyond the powers conferred by the statute. He submitted that in fiscal statutes, the Supreme Court has time and again held that strict interpretation is required to be followed and no liability of tax can be imposed dehors the statute. He further relied on the Supreme Court judgments in CIT Bombay Vs. Gwalior Rayon Silk Manufacturing Company Ltd. (1992) 3 SCC 326 and State of Jharkhand and others Vs. Ambay Cements and another AIR 2005 SC 4168 to buttress the argument that when the language is plain and unambiguous and the provision penal in nature, the same must be strictly construed and the courts should not do violence to the provision by reading and/or adding something that is not intended by the legislature. 13. Mr. Chakraborty further relied on judgements of the Punjab and Haryana High Court, Calcutta High Court and Andhra Pradesh High Court in PML Industries Ltd. Vs. Commissioner of Central Excise 2013 (290) ELT 3 (P H), I.C.I. India Ltd. Vs. Collector of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners creates embargo on the rights of the petitioners as guaranteed under Article 19(1)(g), 300A and 301 of the Constitution of India, the order of provisional attachment during pendency of investigation cannot continue for an indefinite period, and it is for that reason the Legislature had provided the period of one year for completion of such investigation and adjudication of alleged demand, if any, and in the interregnum, provisional attachment would be in operation. 17. Mrs. Sanjukta Gupta, counsel appearing on behalf of the respondents submitted that in the instant case investigation has been initiated under Section 67 of the CGST Act, 2017 and the demand will be made under Section 74 of the CGST Act, 2017. The counsel submits that the fresh order of provisional attachment was issued on the grounds that the investigation authorities have come across fresh evidences against the writ petitioners and also that there is no bar under Section 83 of the CGST Act, 2017, preventing a fresh order of provisional attachment. 18. The learned counsel relied on the case of Shrimati Priti v. State of Gujarat 2011 SCC Online Guj 1869 wherein the Court interpreted the scope of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several fake transactions with various iron and steel manufacturing units and passed on fake input tax credit to these companies. She further submitted that the petitioner companies were nonexistent at their registered address and on search carried out by the officers of DGGI on Shri Sanjay Kr. Bhuwalka and Shri Neeraj Jain various incriminating documents had been recovered and seized. She further submitted that these two persons were controlling several companies including the petitioner companies and had passed on approximately ₹ 40 crores of fake input tax credit. She submitted that these persons had been arrested on May 12, 2018 and have been presently enlarged on bail on furnishing personal bond of ₹ 50 lakhs each by an order of the High Court dated October 9, 2018. Mrs. Gupta highlighted the factual aspect that the erstwhile directors (directors at the time of search and seizure) of the three petitioner companies had made statements to the investigating authorities that they were dummy directors who are unemployed and had simply submitted copies of their personal documents to Shri Bhuwalka who operated the bank accounts of the three petitioner companies. She furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place. (2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things: Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall, as soon as may be after its seizure under sub-section (2), be disposed of by the proper officer in such manner as may be prescribed. (9) Where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him under sub-section (2), he shall prepare an inventory of such goods in such manner as may be prescribed. (10) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word Magistrate , wherever it occurs, the word Commissioner were substituted. (11) Where the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. (6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder. (7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. (8) Where any person chargeable with tax under sub-section (1) prays the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent. of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded. (9) The proper officer shall, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the order made under sub-section (1). Rule 159: Provisional Attachment of Property (1) Where the Commissioner decides to attach any property, including bank account in accordance with the provisions of section 83, he shall pass an order in FORM GST DRC-22 to that effect mentioning therein, the details of property which is attached. (2) The Commissioner shall send a copy of the order of attachment to the concerned Revenue Authority or Transport Authority or any such Authority to place encumbrance on the said movable or immovable property, which shall be removed only on the written instructions from the Commissioner to that effect. (3) Where the property attached is of perishable or hazardous nature, and if the taxable person pays an amount equivalent to the market price of such property or the amount that is or may become payable by the taxable person, whichever is lower, then such property shall be released forthwith, by an order in FORM GST DRC-23, on proof of payment. (4) Where the taxable person fails to pay the amount referred to in sub-rule (3) in respect of the said property of perishable or hazardous nature, the Commissioner may dispose of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 83 of the Act for provisional attachment should be exercised only if there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of wholly or any part of his/her property with a view to thwarting the ultimate collection of demand and in order to achieve the said objective, the attachment should be of the properties and to that extent, it is required to achieve this objective. (5) The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (6) The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings. (7) The authority before exercising power under Section 83 of the Act for provisional attachment should take into consideration two things: (i) whether it is a revenue neutral situation (ii) the statement of output liability or input credit . Having regard to the amount paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars and that period has also expired on and with August 19, 1989. It is thus clear that the attachment under section 281B cannot survive beyond the said date, namely, beyond August 19, 1989. The petitioner shall be entitled to encash or withdraw the amounts concerned subject, of course, to any demand for any tax due as on today. Even if there is any such demand, the amount equal to such demand shall be retained and the remaining amount returned to the petitioner. 26. Counsel for Revenue has relied on Shrimati Priti (supra) for buttressing the argument that fresh issue of provisional attachment orders is permissible even after the expiry of one-year period as prescribed under the Act. The relevant paragraph of the judgement is as follows: 13. Contention that an order of provisional attachment can last only for one year and that no further order thereafter, can be passed is not borne out from statutory provisions contained in Section 45 of the Act. It is undoubtedly true that sub-section(2) of Section 45 statutorily provides for maximum life of a provisional order to last not beyond one year from the date of order. There is nothing in the language used in the said section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 28. Bad facts make bad cases the court crafts its decision to create an outcome dictated by the facts, instead of an outcome based on a proper legal analysis - I am very well aware of the above adage and do not intend to fall prey to the same. Ergo, the interpretation of Section 83 of the CGST Act, 2017 is not based on the facts that have been presented by the respondents in their affidavits, but on the legal principles of interpretation of fiscal statutes and examination of the precedents cited by parties. Upon hearing both the parties on the third issue, the Court is of the opinion that the powers conferred under Section 83 are drastic and extraordinary in nature. The Court also believes that the powers under this section should not be invoked routinely and must be exercised with due caution, circumspection and deliberation. The judgments relied on by the learned counsel for petitioners in Valerius Industries (supra) and Pranit Hem Desai (supra) can be distinguished on the grounds that they only highlight the rationale and nature of the powers conferred under Section 83. These judgements do not deliberate upon the point of fresh issue of an order for provisional atta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for provisional attachment. The contention in hand is with respect to issue of fresh order of provisional attachment and not extension of the same. On this note, the case laws referred to by the learned counsel shall not be applicable to the issue in hand. 31. One need not join issue with regard to the judgments cited by the petitioner with respect to interpretation of fiscal statutes, as I am firmly of the view that Section 83 has to be construed literally and strictly. On a perusal of Section 83, it is evident that Section 83 does not provide for an extension of an order for provisional attachment and any such extension shall be dehors the statute. Section 83 empowers the competent authority to issue an order for provisional attachment of property including bank accounts if it is of the opinion that such a step is necessary for protecting the interest of government revenue. It is palpably clear that Section 83(2) permits continuation of a provisional attachment order for a period of one year from the date of order after which it ceases to remain in effect. However, there is nothing in the section which indicates that upon completion of the prescribed period, a fresh order c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in the earlier writ petitions, fresh material has also been unearthed by the DGGI. 34. However, given the far-reaching consequences of provisional attachment under Section 83, the Court is of the opinion that an issuance of a fresh order under Section 83 of the CGST Act, 2017 will require a fresh review and assessment of the circumstances in hand. In no manner, a fresh order should be issued in the garb of an extension of the earlier order without actually evaluating and analysing the requirement of doing so. 35. Another point raised by the petitioner is with respect to non-service of the fresh order personally upon the petitioner. Section 83 of the CGST Act, 2017 read with Rule 159 of the CGST Rules, 2017 does not provide for supply of an order of provisional attachment of a bank account to the assessee concerned. Accordingly, there is no requirement on the part of the respondent to serve such an order under Section 83 personally upon the petitioners. 36. In light of the discussions made hereinabove, the third issue is decided in favour of the Revenue. 37. I would like to summarize the issues that have been answered by this Court for an easier understanding of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate authority may be of the opinion that such an attachment is further required to protect the interest of Revenue, and may therefore, issue a fresh order upon compliance of the formalities in Section 83(1). Accordingly, the issue is answered in favour of the Revenue. EPILOGUE: A tax collector should collect taxes from a tax payer just like a bee collects honey from a flower in an expert manner without disturbing its petals Kautilya in Arthashastra. 38. The new regime under the GST Act, 2017 is a new legislative creation by which the Union Government along with all the State Governments have streamlined various statutes under which tax was earlier collected to enhance the ease of doing business by preventing multi-point taxation that was extremely cumbersome and time consuming for the citizens of India. The raison d etre of the GST Act, 2017 is to reduce the burden of tax and also to simplify the procedures. This, however, is coupled with certain far reaching and drastic measures that would be applicable on persons who evade the payment of such taxes. One need not stress the importance of the responsibility that comes upon the government officials who take such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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