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TMI Blog2022 (3) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 23rd February, 2021 to make the recording of reasons or grounds of attachment mandatory in the attachment order or Form DRC-22 issued in terms of Rule 159(1) of the CGST Rules. 3. The petitioner also prays for writ of certiorari for quashing and setting aside the impugned freezing orders dated 7th December, 2021 issued by the respondent no.3 and further seeks writ of mandamus in terms of prayer clause (d) of the petition. 4. It is the case of the petitioner that the petitioner purchased the goods locally from wholesale traders which are consolidated at the level of the wholesale trader and thereafter are dispatched to the warehouse of the logistics company, from where the goods are sent to the CFS Terminals at the customs stations. The said goods are released from export only after due verification by the customs officers. On 18th February, 2021, the office of the respondent no.3 initiated investigation against the petitioner and conducted search at the petitioner's premises during which the original documents were seized. 5. Summons dated 18th February, 2021 were served by hand during the course of search. The statement of the petitioner's employees were recorded on the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e file but not communicated to the petitioner would not partake the character of the order and thus based on such opinion, if any, found by the Commissioner which only formed part of the file cannot be enforceable under section 83 of the CGST Act. It is submitted by the learned counsel for the petitioner that the respondents had already conducted search and the investigation is still going on against the petitioner. 9. Learned counsel for the petitioner submits that since the petitioner has impugned the validity of the circular issued by the respondents, the petitioner is not required to avail of the alternate remedy available against the order of provisional attachment passed by the Commissioner. He submits that if the respondents are ready and willing to furnish a copy of the reasons/opinion formed by the Commissioner before issuing the said impugned letter of provisional attachment, the petitioner would file objection contemplated under Rule 159(5) of the CGST Rules, 2017. 10. Mr.Mishra, learned counsel for the Revenue on the other hand invited our attention to paragraphs 48, 55 and 56 and would submit that the impugned circular has been issued by the respondents in compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on specified in sub-section (1A) of section 122, in such manner as may be prescribed. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under subsection (1). The said provision was amended on 1st July, 2017 and reads thus:- 1. Substituted by s.115 of The Finance Act, 2021 dated 28-03-2021 for "(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 for the purpose of protecting 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 manner as may be prescribed." This amendment shall be effective from a date to be notified. 16. A perusal of the said unamended provisions which are applicable when the said impugned order of provisional attachment was issued indicates that if the Commissioner was of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC-23. Under Rule 159(6), the Commissioner may, upon being satisfied that the property was, or is no longer liable for attachment, release such property by issuing an order in FORM GST DRC-23. 20. On conjoint reading of Rule 159 read with circular dated 23rd February, 2021 and more particularly clauses 3.1.3, 3.1.4 and 3.1.5 would clearly indicate that the Commissioner has to form an opinion and must exercise due diligence and duly consider as well as carefully examine all the facts of the case, including the nature of offence, amount of revenue involved, established nature of business and extent of investment in capital assets. He should have reasons to believe that the taxable person, against whom the proceedings refereed in section 83 are pending, may dispose of or remove the property, if not attached provisionally. The basis on which the Commissioner has formed such an opinion, should be duly recorded on file. 21. In our view the safeguard as provided in clause 3.1.5 in the said circular by providing that the power of provisional attachment must not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, it conditioned the exercise of the power by employing specific statutory language which conditions the exercise of the power. The language of the statute indicates first, the necessity of the formation of opinion by the Commissioner; second, the formation of opinion before ordering a provisional attachment; third the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourth, the issuance of an order in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory pre- conditions by the Commissioner. While conditioning the exercise of the power on the formation of an opinion by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n would be plainly contrary to sub-Rule 5 which contemplates both the submission of an objection to the attachment and an opportunity of being heard. The opportunity of being heard can be availed of as a matter of right by the person whose property is attached. Both the right to submit an objection and to be afforded an opportunity of being heard are valuable safeguards. The consequence of a provisional attachment is serious. It displaces the person whose property is attached from dealing with the property. Where a bank account is attached, it prevents the person from operating the account. A business entity whose bank account is attached is seriously prejudiced by the inability to utilize the proceeds of the account for the purpose of business. The dual procedural safeguards inserted in sub-Rule 5 of Rule 159 demand strict compliance. The Commissioner who hears the objections must pass a reasoned order either accepting or rejecting the objections. To allow the Commissioner to get by without passing a reasoned order will make his decision subjective and defeat the purpose of subjecting it to judicial scrutiny. The Commissioner must deal with the objections and pass a reasoned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and pass a reasoned order indicating whether, and if not, why the objections are not being accepted. Rule 159(6) allows for the release of a property which either was or is no longer liable for attachment. 26. The question that arises for the consideration of this Court is whether the remedy of the petitioner to lodge his objection to the order of provisional attachment under section 83 read with Rule 159(1) of the CGST Rules can be effectively exercised without communication of the opinion of the Commissioner atleast at that stage or not. 27. A perusal of the scheme of section 83 of CGST Act and Rule 159 clearly indicate that the remedy provided to an assessee to lodge the objection can be exercised effectively only if the petitioner knows the reasons or opinion prima facie formed by the Commissioner before exercising the power under section 83 of the CGST Act read with Rule 159(1) to enable the petitioner to record the objections to the prima facie opinion formed by the Commissioner. Unless such prima facie opinion atleast at this stage is communicated to the petitioner, the petitioner would not be able to lodge the objection and to canvass that the prima facie opinion formed ..... 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