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TMI Blog2021 (1) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Petitioner with the HDFC Bank Limited; (b) pending the admission, hearing and final disposal of this petition, direct the Respondent No.2 to lift the attachment over the CC/Current Bank Account No.066028304000013 with the AMCO Bank, Current Bank Account No.02372320002872 and Savings Bank Account No.02371000038487 with the HDFC Bank Limited and permit the Petitioner to operate such bank account; (c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition." 2. The facts giving rise to this writ-application may be summarised as under : 3. The writ-applicant is a proprietor of a proprietary concern running in the name of M/s.Chechani Trading Company. The concern is engaged in the business of trading of ferrous and non-ferrous metal scrap. The writ-applicant holds a valid registration certificate under the provisions of the CGST Act and the GGST Act respectively. 4. It appears from the materials on record that a spot visit was carried out by the flying squad of the department on 11th August 2020 at the premises of the writ-applicant. The department is prima facie of the view that the purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt with the present writ-application. 10. On 9th December 2020, this Court passed the following order : "1. We have heard Mr. Tushar Hemani, the learned Sr. Counsel assisted by Ms. Vaibhavi Parikh, the learned counsel appearing for the writ applicant and Mr. Chintan Dave, the learned AGP appearing for the State - respondents on advance copy served upon him. 2. The challenge in this writ application is to the legality and validity of the order of provisional attachment of the bank accounts passed under Section 83 of the Gujarat Goods and Services Tax Act, ("GST Act" for short). There are two orders on record. The first order is dated 28.08.2020 (inadvertently mentioned as 28.08.2018, at Annexure-A) passed by the Additional Commissioner, CGST, Ahmedabad South for the provisional attachment of the Cash Credit/Current Account held by the writ applicant with the AMCO Bank. The second order is also of the provisional attachment under Section 83 of the GST Act of one Current Bank Account and one Savings Bank Account held by the writ applicant in the HDFC Bank Ltd. The challenge to this action of invoking Section 83 of the Act by the respondents is on manifold grounds. 3. One of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isional attachment, there were no proceedings pending under Section 67 of the Act. He would further submit that the proceedings under Section 67 of the Act are deemed to have come to an end once the process of inspection, search and seizure of the goods, documents, books or things is over and the authorized officer leaves the premises of the taxable person on whose premises the inspection and search is being conducted. 13. According to Mr.Hemani, as on 11th August 2020, i.e. the date of the impugned order of provisional attachment, no other proceedings were pending under any other provision of the CGST Act. 14. Mr.Hemani would submit that the impugned orders are very cryptic and those do not reflect any application of mind. He would submit that neither any assessment has been framed so far nor any demand has been raised in the case of the writ-applicant in accordance with the scheme of the Act. He would argue that in the absence of assessment, the quantum of demand cannot be determined precisely and, therefore, the action of attaching the bank accounts for protecting the interest of the Revenue keeping in mind some probable demand which may arise at some point of time in future i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senior standing counsel appearing for the respondents. Ms.Raval would submit that the action in the form of provisional attachment of the two bank accounts in exercise of the powers under Section 83 of the Act is just and valid. It is on the basis of the materials on record that the Additional Commissioner, CGST, was convinced that in order to protect the interest of the Revenue it is essential to exercise the powers conferred under Section 83 of the Act for the purpose of provisional attachment of the bank accounts. He would argue that the principal contention on behalf of the writ-applicant that as the proceedings under Section 67 of the Act could be said to have come to an end, the power under Section 83 of the Act for the purpose of provisional attachment of the bank accounts could not have been exercised, is without any merit. 22. Ms.Raval would submit that the decision of this High Court in the case of Kushal Ltd. (supra) has been made a subject matter of challenge before the Supreme Court by filing the Special Leave to Appeal No.10070 of 2020 and by way of an interim order dated 16th November 2020, the Supreme Court has said that the view expressed by this High Court in Kus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eps have to be taken in such manner as prescribed. Rule 159(1) of the CGST Rules, 2017, deals with the provisional attachment of the property. This rule reads thus :- "(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." 30. Rule 159(1) states that when the Commissioner decides to attach any property including the bank account, he shall pass an order in form GST DRC-22. Various forms have been appended to the GST Rules 2017. Form GST DRC-22 lays down the format in which the order has to be issued provisionally attaching the property and the communication thereof to the financial institution. The form is reproduced hereinbelow for ready reference. "FORM GST DRC - 22 [See rule 159(1)] Date: Reference No.: To ------ Name _________ Address (Bank/Post Office/Financial Institution/Immovable property registering authority) Provisional attachment of property under section 83 It is to inform that M/s.__________ (name) having principal place of business at__________ (address) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions noted hereinabove, it emerges that a search came to be conducted under section 67 of the GST Acts on 27.9.2018, whereupon it was discovered that the petitioners had purchased goods and availed input tax credit thereon and had passed on input tax credit to various buyers by raising GST invoices without there being any actual movement of goods at their end either as recipient or as supplier. During the course of investigation, it was found that the petitioners were engaged in the business of trading of paper and electronics and had availed GST on the basis of only invoices and no goods were actually received by them. It appears that according to the respondents, investigation pursuant to the search conducted under section 67 of the GST Acts is still going on and therefore, according to the respondents, the proceedings under section 67 of the GST Acts are not yet completed. 11. Section 67 of the GST Acts to the extent the same is relevant for the present purpose reads as under:- "67 Power of inspection, search and seizure.- (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-- (a) a taxable person has suppressed any transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be attracted. In terms thereof, pursuant to an authorisation issued in this behalf, the proper officer may search the premises in respect of which the search is authorised and seize goods, documents or books or things and retain the documents or books or things so long as may be necessary for any inquiry or proceedings under the Act. In the present case, search proceedings were conducted at the premises of the petitioners on 27.9.2018. Thereafter, there was a visit by the respondents on 1.4.2019 which led to the arrest of the second petitioner. Thereafter, no search has been conducted at the premises of the petitioners. The search proceedings have, therefore, ended. It is the case of the respondents that proceedings under section 67 of the GST Acts are not yet completed and the matter is still under investigation. In the opinion of this court, it may be that pursuant to the search, inquiry or other proceedings under the Act may have been undertaken; however, such inquiry or other proceedings are not under section 67 of the GST Acts and hence, it cannot be said that any proceedings are pending under section 67 of the GST Acts. 13. In this case, the orders of provisional attachme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Act, more particularly, Section 83 of the Act. 35. We shall now look into the order passed by the Supreme Court referred to above. The order reads thus : "Heard learned counsel for the parties. On the question of interim relief, we agree with the apprehension expressed by the petitioner-Union of India that the impugned judgment being followed in other similar cases cannot be ruled out. That ought not to be permitted as the issue is pending consideration before this court. In other words, the view expressed in the impugned judgment is kept in abeyance and it cannot be followed in other cases till the issue is finally answered/decided by this Court. List this matter after two weeks. Reply affidavit, if any, be filed, in the mean time." 36. Thus, the Supreme Court has kept the view expressed by this Court in Kushal Ltd. (supra) in abeyance and has further clarified that the same should not be followed in other cases till the issue is finally answered/decided by the Supreme Court. 37. In view of the aforesaid, we refrain ourselves from going into the argument of Mr.Hemani as regards the pendency of the proceedings under Section 67 of the Act on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed, as it has been held by the Supreme Court in Sheonath Singh's case [AIR 1971 SC 2451], that the Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court. In the case at hand, Ms. Mehta, the learned A.G.P. appearing for the respondents very fairly submitted that not only the impugned order of provisional attachment is bereft of any reason, but there is nothing on the original file on the basis of which this Court may be in a position to ascertain the genuineness of the belief formed by the authority. The word "necessary" means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word "necessary" must be construed in the connection in which it is used. The formation of the opinion by the authority should reflect intense application of mind with reference to the material available o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted S.637(i)(a) it knew that government would entrust to the Board its power under S. 237 (b). Could the legislature have left without any restraints or limitations the entire power of ordering an investigation to the subjective decision of the Government or the Board? There is no doubt that the formation of opinion by the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided for the opinion of the government and not of the court such an opinion is not subject to a challenge on the ground of propriety, reasonableness or sufficiency. But the Authority is required to arrive at such an opinion from circumstances suggesting what is set out in sub-clauses (i), (ii) or (iii). If these circumstances were not to exist, can the government still say that in its opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute." 39 The Supreme Court while expressly referring to the expressions such as "reason to believe", "in the opinion" of observed : "Therefore, the words, "reason to believe" or "in the opinion of do not always lead to the construction that the process of entertaining "reason to believe" or "the opinion" is an altogether subjective to process not lending itself even to a limited scrutiny by the court that such "a reason to believe" or "opinion" was not formed on relevant facts or within the limits or as Lord Radcliffe and Lord Reid called the restraints of the statute as an alternative safeguard to rules of natural justice where the function is administrative." 40 In the Income-tax Officer, Calcutta and Ors. vs. Lakhmani Mewal Das [AIR 1976 SC 1753], the Supreme Court construed the expression "reason to believe" employed in Section 147 of the Income-Tax Act, 1961 and observed: the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purpose everything depends upon the true intent and meaning of the empowering Act. The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependents, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good. There is nothing paradoxical in the imposition of such legal limits. It would indeed be paradoxical if they were not imposed." 33. The Court is entitled to examine whether there has been any material available with the State Government and the reasons record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the I.T.O. and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the I.T.O. on the point as to whether action should be initiated for reopening the assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The reason for the formation of the belief must be held in good faith and should not be a mere pretence." 43 There is one another pertinent feature of this matter. When the search of the industrial premises of the writ applicant was undertaken, the further inquiry in that regard revealed that there were no goods involved, but there were o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just because, a search has been undertaken resulting in seizure of goods by itself may not be sufficient to arrive at the subjective satisfaction that it is necessary to pass an order of provisional attachment to protect government revenue." 40. This Court summarised its final conclusion in paragraph 52 of the said order as under : "[1] The order of provisional attachment before the assessment order is made, may be justified if the assessing authority or any other authority empowered in law is of the opinion that it is necessary to protect the interest of revenue. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant the formation of the belief. [2] The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. [3] The power of provisional attachment under Section 83 of the Act should be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of provisional attachment of any property is to protect the interest of the Revenue. Say for instance, tomorrow an order of assessment is passed and liability of the assessee to pay a particular amount is fixed. It is at that stage that the department may consider recovering the amount determined towards the tax liability from the amount lying in the bank accounts. In the same manner, if any immovable property has been provisionally attached and final liability towards the payment of tax is fixed under the order of assessment, then such immovable property can be put to auction for the purpose of recovering the dues. In the case on hand, we do not propose to interfere with the investigation already undertaken by the department. Ultimately, if sufficient material surfaces indicating the involvement of the writ-applicant in some bogus transaction, the next step in the process can always be a show-cause notice under Section 73 or Section 74 of the Act, as the case may be. However, to provisionally attach all the bank accounts and that too those accounts in which there is hardly any balance would only cause undue hardship to the assessee. This is the grey area where the Revenue or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisionally any property, including bank account, belonging to the taxable person. On a plain reading of the said provision, it is evident that before resorting to such drastic action, the Commissioner is required to form an opinion that it is necessary to do so to protect the interest of the revenue. For the purpose of arriving at such an opinion, the Commissioner should first form an opinion that the petitioner would not be in a position to pay the tax dues after the assessment proceedings are over. In the facts of the present case, the petitioner firm is a going business and the petitioner has readily deposited a sum of Rs. 17,00,000/- which covers more than the tax liability that may be assessed. It is not the case of the respondents that the petitioner is a fly by night operator or that it does not have the means to pay the dues that might to assessed at the end of assessment proceedings, which at present have not even been commenced. There is nothing to show that the respondents would not be in a position to recover any amount that the petitioner may ultimately be held liable to pay. In these circumstances, without recording any such satisfaction, the respondent could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt can attach an account only if there is some balance in the form of FDR or savings. The power of attachment of bank account cannot be exercised as per whims and caprices of the Authority. The Commissioner is bound to ensure that by attachment of property or bank account, interest of revenue is going to be protected. In case a property is mortgaged with bank and value of property is less than outstanding dues of bank, provisional attachment is meaningless and action remains only on paper. In the absence of record showing that interest of revenue is protected by attaching property or bank account, action deserves to be declared as taken without application of mind and formation of opinion on the basis of cogent material. Thus, attachment of current account having debit balance does not protect interest of revenue, instead merely ruins the business of a dealer. Such an action of attachment of "over cash credit" account for the sake of recovery of confirmed demand, may in some peculiar case, may be still permitted but not at the stage of pending investigation." 47. Section 83 of the Act, 2017, is in pari materia with the provisions of Section 281B of the Income Tax Act, 1961. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head (1), make a reference to the Valuation Officer referred to in the provision of the Income-Tax Act, 1961 who shall estimate the fair market value of the property in the manner provided under that provision and submit a report of the estimate to the Assessing Officer within a period of thirty days from the date of receipt of such reference. (5) An order revoking the provisional attachment under head (3) shall be made (a) within forty-five days from the date of receipt of the guarantee, where a reference to the Valuation Officer has been made under head (4); or (b) within fifteen days from the date of receipt of guarantee in any other cases. (6) Where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay that sum within the time specified in the notice of demand, the Assessing Officer may invoke the guarantee furnished under head (3) wholly or in part, to recover the amount. (7) The Assessing Officer shall in the interests of the revenue invoke the bank guarantee, if the assessee fails to renew the guarantee referred to in head (3), or fails to furnish a new guarantee from a scheduled bank for an equal amount, fifteen days bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing ultimate collection of demand and in order to achieve said objective attachment should be of properties and to extent it is required to achieve this object. It 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. Attachment of bank accounts and trading assets should be resorted to only as a last resort. In any event, attachment under this provision should not be equated with attachment in the course of recovery proceedings. In the event the revenue is adequately protected by attachment, there is no justification for Assessing Officer for making an order of demand directing assessee to deposit entire demand within seven days of order of assessment. Further, provisional attachment can be levied even in cases where proceedings under provisions of the Income-Tax Act, 1961 dealing with search and Seizure are yet to be initiated. Therefore, invoking this provision and issuing notice under the provision of the lncome-Tax Act, 1961 dealing with assessment in case of search or requisition on same day would not effect validity of order passed under this provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of other properties and amounts due from debtors and depositors." 49. Thus, although the provisions of Section 281B of the Income Tax Act is pari materia to Section 83 of the State GST Act, yet one pertinent feature of Section 281B of the Income Tax Act is that it gives guidelines for making the provisional attachment. Such guidelines are missing so far as Section 83 of the State GST Act is concerned. 50. In the overall view of the matter, more particularly, having regard to the fact that there is hardly a balance of Rs. 22,065/- in the two bank accounts, we see no good reason to continue the provisional attachment. 51. In the result, this writ-application succeeds and is hereby allowed. The impugned order of provisional attachment of the two bank accounts is hereby quashed and set-aside. The connected Civil Application would not survive and the same is disposed of accordingly. 52. It is clarified that this order shall have no bearing on the further proceedings that the authority may deem fit to initiate in accordance with law. 53. We have noticed over a period of time that in each and every matter in which proceedings under Section 67 of the Act are initiated, an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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