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TMI Blog2024 (7) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... building, plant and machineries and 2 residential flats; b. A writ of certiorari, or any other appropriate writ, order and/or directions in the nature of certiorari to quash the provisional attachment orders dated 14.09.2023 (Annexure A) and release the attachment over moveable properties including stock lying at the premises, 2 current bank accounts, fixed deposit and all the debtors' balances; c. A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus directing the respondent to refrain from resorting to any coercive measure against the petitioner; (cc) A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus directing the respondent to forthwith return 2 mobile phones being Apple i-phone 11 Pro Max (512 GB) and Infinixhot 30i (128 GB) seized during course of search; (cd) Pending the admission, hearing and final disposal of this petition, this Hon'ble Court may direct the Respondent authorities to release the attachment over immoveable properties including factory land, factory building, plant and machineries and 2 residential flats; and release the attachment over moveable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of stock was also conducted by the Respondent but no discrepancies were detected between the physical inventory and the stock recorded in the books of accounts which substantiates the authenticity and legitimacy of petitioner's business operations. During the course of search, statement of the proprietor was also recorded. 3.5. It was alleged that the petitioner had made bogus purchases from 39 firms amounting to Rs. 214.27 crores during the period from July 2017 to August 2023 and claimed fake input tax credit of Rs. 32.67 crores. Based on such accusations, the Respondent no. 3 prepared grounds for provisional attachment and passed orders in Form GST DRC-22 for provisional attachment of immovable properties including factory land, factory building, plant and machineries and two residential flats and movable properties including stock lying at the premises, two current bank accounts, fixed deposit and all the debtors' balances as on 14.09.2023. 3.6. Search continued till 16.09.2023 and the Respondent no. 3 seized 17 purchase files and one pocket diary as per Order of Seizure in Form GST INS-02 dated 16.09.2023 and attached stock amounting to Rs. 1,35,020/- as per Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provisional attachment over the immovable properties. 4. Learned Senior Advocate Mr. Saurabh Soparkar with learned advocate Mr. Hardik Vora for the petitioner submitted that the respondent authorities have committed an error in attaching the movable properties of the petitioner by the impugned provisional Attachment Order dated 14.09.2023 passed under Section 83 of the Goods Service Tax Act. 5. It was further submitted that the impugned provisional Attachment Order using the Bank accounts of the petitioner has affected both personal and business activities making it very difficult for the petitioner to manage daily finances, payment to employees, conduct necessary transactions, resulting into damage to the reputation of the petitioner by affecting relationship with debtors. 6. It was submitted that notices sent to the debtors regarding attachment of their outstanding balances have raised doubts about the stability of business jeopardizing future collaborations and trust. The petitioner is n affected by the provisional attachment of immovable properties. It was submitted that the petitioner is ready and willing to continue with the attachment over the immovable properties howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of this Court in Raman Tech Process Engg Co and Anr v Solanki Traders was concerned with the power of a civil court under Order 38 Rule 5 of the CPC to order an attachment before judgment. In that case, proceedings had been instituted by the respondent, for the recovery of moneys due for the supply of material to the appellant. The plaintiff moved an application under Order 38 Rule 5, for a direction to the defendants to furnish security for the suit claim and if they failed to do so, for attachment before judgment. This Court described the power of attachment before judgment in the following terms: "5. The power under Order 38, Rule 5 Civil Procedure Code is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38, Rule 5 not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realized by unscrupulous plaintiffs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution. (4) The power under Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner can levy a provisional attachment, there must be a formation of "the opinion" and that it is necessary "so to do" for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency of the proceedings under the stipulated statutory provisions noticed earlier. An attachment which is contemplated in Section 83 is, in other words, at a stage which is anterior to the finalization of an assessment or the raising of a demand. Conscious as the legislature 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 provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended to authorize Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. 50. These expressions in regard to both the purpose and necessity of provisional attachment implicate the doctrine of proportionality. Proportionality mandates the existence of a proximate or live link between the need for the attachment and the purpose which it is intended to secure. It also postulates the maintenance of a proportion between the nature and extent of the attachment and the purpose which is sought to be served by ordering it. Moreover, the words embodied in sub-Section (1) of Section 83, as interpreted above, would leave no manner of doubt that while ordering a provisional attachment the Commissioner must in the formation of the opinion act on the basis of tangible material on the basis of which the formation of opinion is based in regard to the existence of the statutory requirement. While dealing with a similar provision contained in Section 4536 of the Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the existence of "tangible material" and that "reasons must have a live link with the formation of the belief". This principle was followed subsequently in a two judge Bench decision in Income Tax Officer, Ward No. 162 (2) v Techspan India Private Limited. While adverting to these decisions we have noticed that Section 83 of the HPGST Act uses the expression "opinion" as distinguished from "reasons to believe". However for the reasons that we have indicated earlier we are clearly of the view that the formation of the opinion must be based on tangible material which indicates a live link to the necessity to order a provisional attachment to protect the interest of the government revenue. 72. For the above reasons, we hold and conclude that (i) The Joint Commissioner while ordering a provisional attachment under section 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected under Section 5(3) and an appeal against the order of provisional attachment was not available under Section 107 (1); (ii) The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable; (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xii) The appellant having filed an appeal against the order under section 74 (9), the provisions of sub-Sections 6 and 7 of Section 107 will come into operation in regard to the payment of the tax and stay on the recovery of the balance as stipulated in those provisions, pending the disposal of the appeal." 11. Referring to the above decisions it was submitted by the learned Senior Advocate that the case of the petitioner is squarely covered by the conclusions arrived at by the Hon'ble Supreme Court and the respondent authorities are therefore required to be directed to lift provisional attachment over the immovable properties of the petitioner. 12. Reliance was also placed on the decision of this Court in case of Arya Metacast (P.) Ltd. Vs. State of Gujarat reported in [2022] 137 taxmann.com 173 (Gujarat) wherein it is held as under: "11. In the facts of the case, undisputedly, the respondent no. 2 has not only provisionally attached the stock of goods lying at the factory premise of the writ applicants, at the same time, the respondent No. 2 has also provisionally attached the demat account and current account of the writ applicants. These are the valuable assets of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat reported in [2022] 136 taxmann.com 1 (Gujarat), wherein the Hon'ble Court relying upon the decision of the Hon'ble Supreme Court in case of Radha Krishan Industries (Supra) as well as circular dated 23.02.2021 held as under: "38 What is relevant for our purpose is clause 3.4.5 of the guidelines referred to above. It says that as far as possible, the authority should ensure that the attachment does not hamper the normal activities of the taxable person. It has been clarified that the raw materials and input required for the production or finished goods should not normally be attached by the department. 39 In the case on hand, we do not approve the provisional attachment of the goods, stock and receivables, more particularly, when the entire stock and receivables have been pledged and a floating charge has been created in favour of the Kalupur Commercial Bank Limited for the purpose of availing the cash credit facility with the provisional attachment of the goods, stock and receivables the entire business will come to a standstill." 14. Reliance was placed upon the decision of this Court in case of Patran Steel Rolling Mill Vs. Assistant Commissioner of State Tax reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils input tax credit on the basis of the said tax invoices and further passes on the said input tax credit to another registered person by issuing invoices without underlying supply of goods or services or both, only shall be liable for penal action and not the third person who has received the input tax credit from the second person. It was submitted in the facts of the case of the petitioner also the issue of invoices by the petitioner, there is no allegation against the petitioner for passing on the ITC without underlying supply of the goods. It was therefore submitted that even on merits the petitioner has a very good case and there is no likelihood of any demand against the petitioner. 16. It was therefore submitted that considering the facts of the case the impugned provisional orders of attachment upon a immovable properties of the petitioners maybe ordered to be lifted. 17. On the other hand learned AGP Ms. Shrunjal Shah submitted that the petitioner has indulged in issuing the fraudulent invoices without underlying supply of the goods by entering into bogus billing transaction with 79 dealers and wrongly availed ITC of Rs. 76.68 crore and it was submitted that during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the satisfaction note dated 14.09.2023 and further relied upon the averments made in the affidavit-in-reply filed on behalf of the respondent no. 3 to submit that in the facts of the case when the petitioner has indulged into bogus billing which is further fortified from the statements of transport recorded in the investigation that there was no supply of the goods relating to the invoices generated by the petitioners, the respondent authority was justified in passing the impugned order of provisional attachment of movable properties of the petitioner in addition to the immovable properties to protect interest of the revenue. 23. It was submitted that as per Circular no. 171 dated 06.07.2022, the case of the petitioners would fall in second instance as the petitioners has availed and utilized the fraudulent ITC on the basis of the tax invoices, without receiving the goods or services or both in contravention of the provision of Section 16 (2) (b) of the CGST Act and the petitioners shall be liable for the demand and recovery of the ITC along with penal action under Section 74 of the Act along with applicable interest under the provision of Section 50 of the CGST Act. 24. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITC made during 2017-18 and 2018-19. By its letter dated 17 December 2018, the appellant contended that it had validly claimed ITC as it fulfilled the conditions under section 16 and other provisions of the HPGST Act and the CGST Act. 8. On 9 January 2019, a notice was issued to Fujikawa Power, Bagbania, BBN Baddi, one of the customers of the appellant, for provisionally attaching an amount of Rs. 5 crores due to the appellant, under Section 83 of the HPGST Act. On 19 January 2019, the third respondent passed an order of provisional attachment in respect of receivables worth Rs. 5 crores due from Fujikawa Power. This order inadvertently referred to Sarika Industries instead of the appellant. The appellant responded by a representation dated 29 January 2019, claiming inter alia, that the order of attachment was without affording a hearing. The appellant also claimed that on 26 December 2018, they had noticed that the ITC had been blocked without prior notice. On 30 January 2019, the notice of attachment was withdrawn by the third respondent. 9. According to the respondents, after the case of GM Powertech was investigated, tax evasion was detected. GM Powertech was found to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cie, the above order passed by the Joint Commissioner does not indicate any basis for the formation of the opinion that the levy of a provisional attachment was necessary to protect the interest of the government revenue. The order in the file noting refers to the fact that the case of GM Powertech had been decided under Section 74 resulting in an additional demand of Rs. 39 crores on account of a fraudulent claim of ITC for FY 2017-18 and 2018-19. GM Powertech is alleged to have passed on the ITC to various Registered Tax Persons situated in Himachal Pradesh by issuing invoices inter alia to the appellant during 2018-19 for which a case under Section 74 had been initiated. The order records "RTP" that the appellant had claimed ITC of Rs 3.25 crores on the strength of the invoices issued by GM Powertech. The order merely records that the submissions which were urged by the appellant on 5 August 2020 "are not sustainable". "In view of the facts involved in the case", the Joint Commissioner concluded that it is necessary at this stage to safeguard the government revenue and since the appellant had sold goods to Fujikawa the payment due to it was being attached provisionally. The orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t considered this aspect. Both the earlier and the subsequent orders of provisional attachment are on the same grounds. Therefore, unless there was a change in the circumstances, it was not open for the Joint Commissioner to pass another order of provisional attachment, after the earlier order of provisional attachment was withdrawn after considering the representations made by the petitioner. This is an additional ground to set aside the subsequent order of provisional attachment." 27. Referring to the above findings it was submitted that the Hon'ble Supreme Court in case of Radha Krishan Industries (Supra) in favour of the appellant in view of the facts of the said case, whereas in the facts of the case of the petitioners, it is found that the petitioner has indulged in business of bogus billings without underlying supply of goods and materials and availed the ITC of more than Rs. 76 crores. It was therefore submitted that the order passed by the respondent authority exercising powers under Section 83 of the Act to protect the interest of the revenue may not be interfered. No interference may be made in the impugned order. 28. Having heard learned advocates for the respective p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as well as the field formations seeking clarification on the issues relating to applicability of demand and penalty provisions under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "CGST Act"), in respect of such transactions involving fake invoices. In order to clarify these issues and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues detailed hereunder. Sl.No. Issues Clarification 1. In case where a registered person "A" has issued tax invoice to another registered person "B" without any underlying supply of goods or services or both, whether such transaction will be covered as "supply" under section 7 of CGST Act and whether any demand and recovery can be made from 'A' in respect of the said transaction under the provisions of section 73 or section 74 of CGST Act. Also, whether any penal action can be taken against registered person 'A' in such cases. Since there is only been an issuance of tax invoice by the registered person 'A' to registered person 'B' without the underlying supply of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or services or both. 'B' avails input tax credit on the basis of the said tax invoice and further passes on the said input tax credit to another registered person 'C' by issuing invoices without underlying supply of goods or services or both. Whether 'B' will be liable for the demand and recovery and penal action, under the provisions of section 73 or section 74 or any other provisions of the CGST Act. In this case, the input tax credit availed by 'B' in his electronic credit ledger on the basis of tax invoice issued by 'A', without actual receipt of goods or services or both, has been utilized by 'B' for passing on of input tax credit by issuing tax invoice to 'C' without any underlying supply of goods or services or both. As there was no supply of goods or services or both by 'B' to 'C' in respect of the said transaction, no tax was required to be paid by 'B' in respect of the same. The input tax credit availed by 'B' in his electronic credit ledger on the basis of tax invoice issued by 'A', without actual receipt of goods or services or both, is ineligible in terms of section 16 (2) (b) of the CGST Act. In this case, there was no supply of goods or services or both by 'B' to 'C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued invoices along with underlying supply of goods or services to its buyers and utilized the ITC availed on the basis of the bogus invoices for payment of his tax liability in respect of outward supplies and hence the petitioner would be liable for the demand and recovery of the ITC along with penal actions, interest and penalty under the provisions of Section 74 of the CGST Act. Therefore, the facts of the case clearly shows that the facts emerging from the material on record are different than that of the facts before the Hon'ble Supreme Court in case of Radha Krishan Industries (Supra) where the appellant before the Hon'ble Supreme Court was the person who has received tax invoices along with goods whereas in facts of the present case the petitioner is the person who has issued the tax invoice availed ITC fraudulently on the basis of the bogus bills without supply of the goods. Therefore the facts of the case before the Hon'ble Supreme Court are similar to that of the third instance whereas facts of the present case are similar to second instance as per the aforesaid circular. 31. Considering the facts of the case, it cannot be said that the respondents have committed breach ..... X X X X Extracts X X X X X X X X Extracts X X X X
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