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TMI Blog2025 (2) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner that bullion was predominantly procured from M/s.LABH, Ahmedabad and a few other suppliers including M/s.SS Bullion, Chennai, M/s.Shiv Sahay Bullion, Chennai. The sales of such bullion was made primarily to M/s.Silver CZ Jewellers, Chennai, M/s.Vijay Bullion, M/s. Suresh Jewellery. The petitioner is registered as a taxable person under the GST Act. It is submitted that the petitioner had filed its returns and paid appropriate taxes under the GST Act. 2.2. While so, on 26.06.2023 the Senior Intelligence Officer, Directorate General of Goods and Service Tax, Intelligence (DGGI), attached to the 1st respondent issued summons to the petitioner under Section 70 of the CGST Act, calling upon the petitioner to be present at their office in connection with an investigation. Thereafter, the petitioner's place of business was searched on 30.06.2023. During the course of such search, certain documents such as purchase / sale invoices, mobile phone, pen drive along with files containing certain papers were seized. The Mahazar dated 30.06.2023 records the material seized. After about 6 months, thereafter there was another search of the petitioner's place of business on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epeated requests for lifting the provisional attachment, while also setting out the legal infirmities in the impugned proceedings, the respondent had failed to even consider the same thereby vitiating the impugned order of attachment under Section 83 of the Act, on the ground of non application of mind to material on record. 4. Case of the Respondent : a) On the basis of intelligence gathered by the office of DGGI, the respondents were prima facie of the view that petitioner was involved in clandestine removal of Gold Bullion without raising invoices and was involved in availment of ITC without actual receipt of goods. The petitioner had admitted to the clandestine removal and fraudulent availment of ITC in his statement dated 19.01.2024. File was produced before this court to demonstrate the same. b) Search conducted in the premises of the dealers with whom the petitioner is alleged to have engaged in buying and selling of Gold Bullion and Jewellery revealed that they were fictitious / non existent. A statement obtained from one such fictitious entity viz., M/s.Diva Trading revealed that they were mere name lenders without engaging in actual transactions of buying or selling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending that a provisional attachment can be ordered. (ii) The power to order a provisional attachment has been vested by the legislature in the Commissioner. (iii) Before exercising the power, the Commissioner must be "of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do". (iv) The order for attachment must be in writing. (v) The provisional attachment which is contemplated is of any property including a bank account belonging to the taxable person. (vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute." 7.1. The Supreme Court after finding that the power of provisional attachment conferred under Section 83 of the Act was a draconian measure and thus need to exercise restraint, proceeded to setout the condition precedent for invoking Section 83 of the Act as under: "49. Now in this backdrop, it becomes necessary to emphasise that before the Commissioner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... protected. The following observations are relevant in this regard: "50. By utilising the expression "it is necessary so to do" the legislature has evinced an intent that an attachment is authorised not merely because it is expedient to do so (or profitable or practicable for the Revenue to do so) but because it is necessary to do so in order to protect interest of the government revenue. Necessity postulates that the interest of the Revenue can be protected "only" by a provisional attachment without which the interest of the Revenue would stand defeated. Necessity in other words postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 of the Act, is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be stri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." ... 76.5. The exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the government revenue. Before ordering a provisional attachment the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting the interest of the government revenue." (emphasis supplied) 7.4. Having dealt with the law laid down by the Supreme Court with regard to Section 83 of the Act though the above decision was made while considering an order after objections were filed in terms of Rule 159 of the CGST Rules, the above decision has laid down parameters which needs to be satisfied before power under Section 83 of the Act can be invoked. It may also be relevant to refer to the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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) ................... (4) ..................... [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." (emphasis supplied) c) Madras High Court in the case of Sree Meenakshi Industries v. The Additional Chief Secretary / Commissioner of Commercial Tax and others in W.P. 3079 of 2022 : 7.6. This Court after referring to the Supreme Court at length after extracting the parameters laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent before which, whether the Commissioner has formed an opinion to do so, before forming such opinion, what are all the tangible material available before him or placed before him, so as to enable him to form such an opinion, all these aspects have not been even indicated in the order of provisional attachment. 32. This kind of exercise of power under Section 83, which, in the words of the Hon'ble Supreme Court, is a draconian one, cannot be approved as it does not meet the requirement of fair play and strict adherence of the provisions of the Act as interpreted by the Hon'ble Supreme Court in the judgment cited supra in Radhakrishnan case. 33. The said judgment in the Radhakrishnan case (cited supra) has been taken into account by the writ Court in M/s.Mutharamman & Co., case (cited supra) dated 05.10.2021, where the learned Judge after having allowed the said writ petition by setting aside the similar order under Section 83, directed the Revenue to complete the process of assessment within a time frame of six weeks. 34. When Intra-court appeal was filed, the Hon'ble Division Bench of this Court by order dated 21.12.2021, while affirming the said order of the wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue cannot be protected without ordering a provisional attachment. 76.7. The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue. 76.8. In the facts of the present case, there was a clear nonapplication of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal. 76.9. Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards: (a) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and (b) An opportunity of being heard. There has been a breach of the mandatory requirement of Rule 159(5) and the Commissioner was clearly misconceived in law in coming into conclusion that he had a discretion on whether or not to grant an opportunity of being heard. 76.10. The Commissioner is duty-bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attache ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of protecting the interest of the revenue. 7.10. From a reading of the impugned order under Section 83 of the Act, this court is of the view that the impugned proceeding under Section 83 of the Act, does not disclose any tangible material which led to the formation of opinon that the provisional attachment is necessary for the purpose of protecting the interest of the revenue. The impugned order merely states that proceedings are initiated under Section 67 of the Act to determine the libaility of the petitioner. The only information it refers to is with reference to the account held by the petitioner with the said Bank. The order then proceeds to state that provisional attachment is necessary for the purpose of protecting the interest of the revenue, i.e., a mere reproduction of Section 83 of the Act. It appears that the respondent was under the misconception that inititiation of proceedings under Chapter XII,XIV and XV of the Act, by itself would enable or rather warrant exercise of power under Section 83 of the Act. There appears to be a complete misdirection in understanding the scope of Section 83 of the Act, for while pendency of proceedings under the above Chapters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich must exist before a court can properly assume jurisdiction of a particular case. Mistake of fact in relation to jurisdiction is an error of jurisdictional fact. No statutory authority or tribunal can assume jurisdiction in respect of subject matter which the statute does not confer on it and if by deciding erroneously the fact on which jurisdiction depends the court or tribunal exercises the jurisdiction then the order is vitiated. Error of jurisdictional fact renders the order ultra vires and bad. [Wade, Administrative Law] In Raza Textiles [Raza Textiles Ltd. v. ITO, (1973) 1 SCC 633 : 1973 SCC (Tax) 327 : AIR 1973 SC 1362] it was held that a court or tribunal cannot confer jurisdiction on itself by deciding a jurisdictional fact wrongly." b. Arun Kumar v. Union of India, reported in (2007) 1 SCC 732: "74. A 'jurisdictional fact' is a fact which must exist before a court, Tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a Tribunal or an authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d principles. Exercise of power without disclosing reasons leave the party in the dark on the reasons which led the authority to initiating a proceeding. More important, permitting action without reasons is an open invitation to arbitrary action. Reasons must not be accompanied by obscure and unsatisfactory reasons. The need to give reasons cannot be discharged by the use of vague general words. What the decision-making authority must do is to state his reasons in sufficient detail to enable the reader to know the reasons which prompted the exercise of power. The extent and substance of the reasons must depend upon the circumstances. They need not be elaborate or lengthy. But they should be such as to tell the parties in broad terms why the power is exercised. 11. With this in background we must state that Section 83 of the Act is designed to provide for dealing with situations where it could brook no delay and immediacy of action is necessary to protect the interest of the revenue. In view of the above legislative intent and object, Section 83 of the Act, does not provide for pre-decisional hearing which is normally in compliance with natural justice but instead only provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justification. I say so, for the cardinal principle of 'giving reason' as condition for decision-making cannot be martyred for the cause of immediacy nor inadequacy of provision in the form / portal to enabling disclosure of reasons. In any view, if the contention of the respondent were to be accepted, nevertheless, nothing prevented the respondent from serving the notice containing reasons by other modes provided under Section 169 of the Act, such as tendering, sending by post etc. Thus the impugned proceedings stands vitiated for not furnishing reasons which led to the formation of opinion that the provisonal attachment is necessary in the interest of protecting the interest of the revenue. 14. From the above discussion it leaves no room for any doubt that the impugned proceedings under Section 83 of the Act miserably fails to satisfy the parameters laid down by the Apex Court for exercise of power under Section 83 of the Act for the following reasons: a. The impugned order does not disclose any material muchless tangible material which led to the formation of opinion that provisional attachment in exercise of power under Section 83 of the Act is necessary to protect t ..... 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