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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 ..... e 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 - having regard to the fact that there is hardly a balance of ₹ 22,065/- in the two bank accounts, we see no good reason to continue the provisional attachment. The impugned order of provisional attachment of the two bank accounts is hereby quashed and set-aside - Application allowed. - R/Special Civil Application No. 12498 of 2020 With Civil Application (For Fixing Date Of Hearing) No. 1 of 2020 In R/Special Civil Application No. 12498 of 2020 - - - Dated:- 4-1-2021 - Honourable Mr. Justice J.B. Pardiwala And Honourable Mr. Justice Ilesh J. Vora For the Petitioner(s) : Mr Tushar Hemani, Sr. Advocate With Ms Vaibhavi K. Parikh For the Respondent(s) : Government Pleader, Mrs Kalpana K.Raval with Mr Nikunt K Raval ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. By this writ-application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs : (a) quash and set-aside the impugned orders dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provisional Attachment of Property under section 83 It is to inform that M/s.Chechani Trading Company having principal place of business at 1514, GIDC Phase-3, Vatva, Ahmedabad 382445 bearing registration number as GSTIN: 24AAHPC1431G1ZF, PAN No.AAHPC1431G is a registered taxable person under the CGST Act. Proceedings have been initiated against the aforesaid taxable person under section 67 of the said Act to determine the tax or any other amount due from the said person. As per information available with the department, it has come to my notice that the said person has a- Saving/current/FD/RD/depository account in your bank having account no.066028304000013. In order to protect the interests of revenue and in exercise of the powers conferred under section 83 of the Act, I Mohit Agrawal, Additional Commissioner, hereby provisionally attach the aforesaid account. No debit shall be allowed to be made from the said account or any other account operated by the aforesaid person on the same PAN without the prior permission of this department. 8. Thus, it appears on plain reading of the order referred to above that as the proceedings under Section 67 of the Act c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to the submissions canvassed on either side, that the writ applicant has been able to make out strong prima facie case to have an interim order in his favour so far as the Cash No.066028304000013 Credit/Current maintained with the AMCO Bank, Ahmedabad is concerned. 6. In such circumstances, by way of an interim order, we direct that the provisional attachment of the cash credit account referred to above maintained with the AMCO Bank, Ahmedabad, shall no longer operate. The provisional attachment is ordered to be lifted. The AMCO Bank shall permit the writ applicant to operate the Cash Credit Account referred to above. So far as other two accounts maintained with HDFC Bank Ltd. are concerned, appropriate order shall be passed on the next date of hearing. 7. Let Notice be issued to the respondents, returnable on 23.12.2020. No further notice now be issued to the respondents as Mr. Chintan Dave, the learned AGP has already entered his appearance. 8. In view of this order passed today, the connected civil application would not survive and stands disposed of accordingly. 11. Thus, the provisional attachment of the cash credit account was ordered to be lifted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni next submitted that great hardship is being caused to the writ-applicant on account of the provisional attachment of his two bank accounts. All his official transactions are linked to these two bank accounts including his own income-tax return, etc. It is argued that today the writ-applicant is not able to file his income-tax return as the PAN card is attached to these two accounts which are now provisionally attached. He would argue that the writ-applicant cannot even open a new account as, for the purpose of opening a new account, the PAN card is required and once any bank feeds into a PAN card number for the purpose of opening a new account, the data of the provisional attachment of the two bank accounts would be immediately revealed. 18. In the last, Mr.Hemani would submit that the purchases made by the writ-applicant from the concerned parties are absolutely genuine and there is no good ground or reason for the department to doubt such transactions. 19. In such circumstances referred to above, Mr.Hemani, the learned senior counsel, prays that there being merit in his writ-application, the same may be allowed and the impugned order be quashed and set-aside. 20. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng no merit in this writ-application, the same may be rejected. 27. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the respondent no.2 committed any error in passing the impugned order of provisional attachment of the bank accounts. 28. Under the scheme of Act, levy and collection of tax are provided for in Chapter III, assessment is under Chapter XII and inspection, search, seizure and arrest are dealt with under Chapter XIV. Chapter XV which deals with the demand and recovery. This chapter provides for the provisional attachment under Section 83. Section 83, under which the power is exercised reads thus :- Provisional attachment to protect revenue in certain cases. - (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that to protect the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion), hereby provisionally attach the aforesaid account / property. No debit shall be allowed to be made from the said account or any other account operated by the aforesaid person on the same PAN without the prior permission of this department. or The property mentioned above shall not be allowed to be disposed of without the prior permission of this department. Signature Name Designation Copy to - 31. The form of the order shows that it is to be addressed to the taxable person. The sections under which the proceedings are launched against such a taxable person are to be referred and then a direction is to be issued for not allowing any debit. 32. Section 83 of the Act refers to the pendency of proceeding under Sections 62, 63, 64, 67, 73 and 74 respectively. Section 63 deals with the assessment of unregistered persons. Section 64 is regarding a summary assessment in respect of certain special cases. Section 67 falls in Chapter XIV and refers to the power of inspection, search and seizure. Section 73 is in Chapter XV wherein it deals with the determination of tax not paid or short paid or erroneously refunded or wrongly availed, utilised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged 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 authorized 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 with the previous permission of such officer: Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act. (3) The documents, books or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the order made under sub-section (1). 14. On a plain reading of section 83 of the GST Acts, it is clear that a sine qua non for exercise of powers thereunder is that proceedings should be pending under section 62 or section 63 or section 64 or section 67 or section 73 or section 74 of the GST Acts. In the present case, the proceedings under section 67 of the GST Acts are no longer pending and pursuant to the search, proceedings under any of the other sections mentioned in section 83 have not been initiated. Under the circumstances, on the date when the orders of provisional attachment came to be made, the basic requirement for exercise of powers under section 83 of the GST Acts was not satisfied. The provisional attachment of the bank accounts of the petitioners under section 83 of the GST Acts is, therefore, not in consonance with the provisions thereof and cannot be sustained. 16. As discussed hereinabove, in the absence of pendency of any proceedings under sections 62, 63, 64, 67, 73 or 74 of the GST Acts, the orders of provisional attachment of the bank accounts of the petitioners under section 83 of the GST Acts are without authority of law and are rendered un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion. But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a pre-condition to the formation of opinion. The use of the word may indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offences punishable under the Act, observed : The legislature had to leave it to the discretion of the Government as it would be in a better position to know the requirement. Further, the discretion conferred upon the Government is not absolute. It is in The nature of a statutory obligation or duty. It is the requirement which would necessitate exercise of power by the Government. When a necessity would arise and of what type being uncertain the legislature could not have laid down any other guideline except the guidance of necessity . It is really for that reason that the legislature while conferring discretion upon the Government has provided that the Government shall appoint as many Special Judges as may be necessary. The words as may be necessary in our opinion is the guideline according to which the Government has to exercise its discretion to achieve the object of speedy trial. The term necessary means what is indispensable, needful or essential. 38 In Barium Chemicals Ltd. vs. Company Law Board [AIR 1967 SC 295], the Supreme Court pointed out, on consideration of several English and Indian authorities that the expressions is satisfied , is of the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist circumstances from which the Authority forms an opinion that they are suggestive of the crucial matters set out in the three sub-clauses. It is hard to contemplate that the legislature could have left to the subjective process both the formation of opinion and also the existence of circumstances on which it is to be founded. It is also not reasonable to say that the clause permitted the Authority to say that it has formed the opinion on circumstances which in its opinion exist and which in its opinion suggest an intent to defraud or a fraudulent or unlawful purpose. It is equally unreasonable to think that the legislature could have abandoned even the small safeguard of requiring the opinion to be founded on existent circumstances which suggest the things for which an investigation can be ordered and left the opinion and even the existence of circumstances from which it is to be formed to a subjective process. These analysis finds support in Gower's Modern Company Law (2nd Ed.) p. 547 where the learned author, while dealing with S. 165(b) of the English Act observes that the Board of Trade will always exercise its discretionary power in the light of specified grounds fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bhai Vithalabhai Patel (supra), the Supreme Court observed in paras 32 and 33 as under: 32. We are of the view that the construction placed on the expression reason to believe will equally be applicable to the expression is of opinion employed in the proviso to Section 17 (1) (a) (ii) of the Act. The expression 'is of opinion', that substantial modifications in the draft development plan and regulations, are necessary , in our considered opinion, does not confer any unlimited discretion on the Government. The discretion, if any, conferred upon the State Government to make substantial modifications in the draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory powers. The basic principles in this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in the chapter entitled 'abuse of discretion' and under the general heading the principle of reasonableness' which read as under : The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. In the aforesaid context, we may refer to and rely upon a decision of the Supreme Court in the case of Smt. S.R. Venkatraman vs. Union of India reported in (1979) ILLJ 25(SC) where it had been held: There will be an error of fact when a public body is prompted by a mistaken belief in the existence of a non-existing fact or circumstances. This is so clearly unreasonable that what is done under such a mistaken belief might almost be said to have been done in bad faith; and in actual experience and as things go, they may well be said to run into one another. The influence of extraneous matters will be undoubted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Five only). 44 We would like to add something more to what we have stated above. It would be a big mistake on the part of the respondents to understand that the reasons to believe necessary for the purpose of carrying out inspection, search and seizure under Section 67 of the Act, 2017 would be sufficient enough for the purpose of formation of the opinion that it is necessary to provisionally attach the goods or other articles for the purpose of protecting the interest of the government revenue. In our opinion, Section 83 of the Act stands altogether on a different footing. The considerations also are quite different for the purpose of exercising the power of provisional attachment under Section 83 of the Act. Just because, some proceedings are initiated under Section 67 by itself would not be sufficient to arrive at the satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of the government revenue. The power has been specifically conferred upon the Commissioner to form such an opinion. The legislature was quite alive to the fact that an order of provisional attachment cannot be as a matter of course. It is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 reversing the input tax credit if the interest of the revenue is sufficiently secured, then the authority may not be justified in invoking its power under Section 83 of the Act for the purpose of provisional attachment. 41. In the course of the hearing of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings are initiated under Section 67 of the Act by itself may not be sufficient to arrive at the subjective satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of the Government Revenue. An order of provisional attachment cannot be as a matter of course. It is one of the drastic measures which the authority may be compelled to take if the situation demands for the purpose of protecting the interest of the Government Revenue. 44. The expression 'is of the opinion' or 'has reason to believe' as noted above are of the same connotation and are indicative of the subjective satisfaction of the Commissioner, which depends upon the facts and circumstances of each case. It is settled law that 'opinion' must have a rational connection with or relevant bearing on the formation of the opinion. The rational connection postulates that there must be a direct nexus or live link between the protection of interest and available property which might not be available at the time of recovery of taxes after the final adjudication of the dispute. The opinion must be formed in good faith and should not be a mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the search proceedings shall not be construed as an admission of such dues on the part of the petitioner. 8. Before parting, the court deems it fit to caution the concerned authorities that while exercising powers under Section 83 of the GGST Act, the authorities should try to balance the interest of the Government revenue as well as a dealer to ensure that while the interest of the revenue is safeguarded, the dealer is also in a position to continue with his business, because it is only if the dealer continues with the business that he would generate more revenue. The authorities should keep in mind that bringing the business of a dealer to a halt does not in any manner serve the interest of the revenue. Therefore, while taking action under Section 83 or 67(2) of the GGST Act, the concerned authorities should take care to ensure that equities are maintained and while securing the interest of the revenue, they should attempt to see that the dealer is in a position to continue with the business. This court does not intend to lay down any absolute proposition that in no case drastic action should be taken, but that the respondents should consider the background and history o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 281B of the Act 1961 is extracted below for the sake of completion and to demonstrate that the provisions of Section 83 have been framed along identical lines as Section 281B: 1) Where during the pendency of any proceeding (or the assessment of any income or for the assessment or reassessment of any income which has escaped assessment, the Assessing Officer is of the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Income-Tax Act, 1961. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under head (1). However, the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director may, for reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of the Reserve Bank of India or the State Bank of India or of its subsidiaries or any bank as may be appointed by the Reserve Bank of India as its agent under the provisions of sub-section (1) of section 45 of the Reserve Bank of India Act, 1934 at the place where the office of the Principal Commissioner or Commissioner is situate. (9) Where the Assessing Officer is satisfied that the guarantee referred to in head (3) is not required anymore to protect the interests of the revenue, he shall release that guarantee forthwith. For the purposes of this provision 13, the expression scheduled bank shall mean a bank included in the Second Schedule to the Reserve Bank of India Act, 1934. 48 . In the aforesaid context, we may quote Halbury's Laws of India (Direct Tax II, Vol 32), 2nd Edn : Halbury's Laws of India (Direct Tax II, Vol 32), 2nd Edn. 7. Miscellaneous This provision relating to making an attachment before judgment, i.e, before assessment order is made, is legal if assessing authority is of opinion that it is necessary to protect interests of revenue an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisional attachment, order passed under this provision in respect of certain properties of assessee would not warrant judicial review. It is for assessing authority to decide as to which of assets could be liquidated without difficulty for realization of tax assessed. Moreover, an assessee cannot compel Assessing Officer to attach any particular property. Since this provision provides for attachment of property of assessee only and, therefore, an order directing attachment of fixed deposits of assessee would be illegal. However this provision does not contain requirement of hearing before passing order of provisional attachment of assessee's bank account. Application of the assessee pending before Assistant Commissioner for release of assets attached must be disposed of the earliest for the ends of justice. An order for provisional attachment passed under this provision is valid only for a period of six months and ceases to have effect after the expiry of six months from the date of the order. However, time can be extended for a further period of six month. Appropriate order for extension of period of provisional attachment would only be passed upon satisfaction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power to provisionally attach the property of the assessee in the hope that such power is not exercised casually but, only after due and proper application of mind. A mechanical or casual exercise of such power will dilute the very efficacy of the provisions of Section 83 of the Act. Every day there are not less than ten matters on the subject of Section 83 of the Act in the cause-list. When there are plethora of judgments explaining Section 83 of the Act in details, then why so much of litigation in the High Court. The only reason that can be attributed is the mechanical exercise of power under Section 83 of the Act. This should stop at the earliest. So much judicial time is wasted in all such matters wherein the law is so well settled. 54. The registry is directed to forward one copy each of this judgment to the Principal Secretary, Finance Department, Union of India, New Delhi, and also to the Chairman of the CBDT, New Delhi, at the earliest. 55. We request the Union of India as well as the CBDT to read this judgment thoroughly and consider issuing appropriate instructions or guidelines at the earliest with respect to the exercise of power under Section 83 of the Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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