M/S Jai Shri Banke Bihari Traders vs Union Of India & Ors on 16 October, 2024

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Delhi High Court - Orders

M/S Jai Shri Banke Bihari Traders vs Union Of India & Ors on 16 October, 2024

1. Having heard learned counsels for parties at some length, we take note of the orders dated 04 March 2024 and 13 March 2024 and on the principal grievance which is addressed in the writ petitions, and which pertain to the passing of successive orders of provisional attachment in purported exercise of powers conferred by Section 83 of the Central Goods and Service Tax Act, 2017.

2. We, in this regard, bear in mind the following principles which This is a digitally signed order.

"30. The decision 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, by obtaining orders of attachment before judgment and forcing the defendants for out of court settlements, under threat of attachment.

6. A defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not a ground for granting attachment before judgment. A plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy the court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised under Order 38, Rule 5 CPC. Courts should also keep in view the principles relating to grant of attachment before judgment [internal citation omitted]."

31. A body of precedent has emerged in the High Courts on the exercise of the power under Section 83 of the CGST Act [akin to the State GST Act]. The shared learning which emerges from these decisions of the High Court needs recognition. In Valerius Industries v Union of India, the Gujarat High Court laid down the principles for the construction of Section 83 of the SGST/CGST Act. The High Court noted that a provisional attachment on the basis of a subjective satisfaction, absent any cogent or credible material, constitutes malice in law. It further outlined the principles for the exercise of the power:

"52. (1) The order of provisional attachment before the assessment order is This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/11/2024 at 21:18:36 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...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 exercised by the authority only if there is a reasonable apprehension 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 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." (emphasis supplied)

32. In the same vein, in Jai Ambey Filament Pvt Ltd v Union of India, the Gujarat High Court reiterated that the subjective satisfaction as to the need for This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/11/2024 at 21:18:36 provisional attachment must be based on credible information that the attachment is necessary. This opinion cannot be formed based on "imaginary grounds, wishful thinking, howsoever laudable that may be." The High Court further held, that on his opinion being challenged, the competent officer must be able to show the material on the basis of which the belief is formed.

33. In Patran Steel Rolling Mill v Assistant Commissioner of State Tax, the Gujarat High Court cited two instances in which provisional attachment would be apposite, these being where the assessee is a 'fly by night operator' and if the assessee will not be able to pay its dues after assessment.

34. Similar to the decisions of the Gujarat High Court, other High Courts have recognized the restrictive nature of the power of provisional attachment under Section 83 of the SGST Act and the need for it to be based on adequate substantive material. The High Courts have also underscored the extraordinary nature of this power, necessitating due caution in its exercise."

3. In order to effectively rule upon these writ petitions, we request Mr. Ojha, learned counsel for the respondents to produce the relevant record pertaining to the writ petitioners for our perusal on the next date of hearing.

4. Learned counsels for parties are accorded liberty to place Brief Synopsis of Submissions ensuring that they tally with the pdf page numbers of the digital record of the Court. The same be filed at least 48 hours prior to the next date fixed.

5. List again on 24.10.2024.

YASHWANT VARMA, J.

RAVINDER DUDEJA, J.

OCTOBER 16, 2024/vp This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/11/2024 at 21:18:36

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Delhi High Court - Orders