Gujarat High Court
Grabdeal International Through ... vs Union Of India on 24 February, 2023
Author: Sonia Gokani
Bench: Sonia Gokani
NEUTRAL CITATION
C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 3621 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ? YES
2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy
of the judgment ? NO
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution NO
of India or any order made thereunder ?
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GRABDEAL INTERNATIONAL THROUGH PROPRIETOR PUSHPABEN
BABULAL JAIN
Versus
UNION OF INDIA
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Appearance:
MS. KRUTI M SHAH(2428) for the Petitioner(s) No. 1,2,3,4,5,6,7,8,9
DS AFF.NOT FILED (N) for the Respondent(s) No. 1
MR NIKUNT K RAVAL(5558) for the Respondent(s) No. 2
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CORAM:HONOURABLE THE CHIEF JUSTICE MS. JUSTICE
SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 24/02/2023
CAV JUDGMENT
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1. By way of the present petition, the petitioners beg to challenge the action of the respondent no.2 directing the Branch Manager of (i) AU Small Finance Bank (ii) Kotak Mahindra Bank, and (iii) State Bank of India by communications dated 27.02.2020 and 02.03.2020 not to allow the petitioner to operate the bank account and further directed to stop the operation of the bank locker by exercising powers under Section 83(1) of the Central Goods and Service Tax, Act 2017 (hereinafter referred to as the 'CGST Act').
2. The brief facts leading to the present petition are as follows:-
2.1. On 25.02.2020, the Superintendent of Central Excise, Vadodara conducted a search and seizure at the premises of the petitioner located at 2/3 Dharamnagar Village- Bholav, Bharuch and thereafter investigation in respect of evasion of GST was conducted. The petitioner was summoned and his statement was recorded.Page 2 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023
NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 2.2. On 09.06.2020, the present petitioner was arrested and later he was sent to the judicial custody. Mr. Dilip Babulal Jain was a promoter and existing director of Glamox Solution Private Limited ('GSPL' for short) which is a registered company engaged in the business of finding angel investor for its customers. Mr. Jain is also a promoter and primary partner in Grabdeal Advertisement and Tourism LLP ('GATL' for short) and also a sole proprietor of M/s. Genesis Group which are engaged in the business of providing other financial services such as advisory and consulting services as also in relation to the investment and capital market, derivate market, money market, commodity market, insurance market, real estate market, infrastructure, mutual fund, systematic investment plan etc. 2.3. The company after obtaining funds from the venture capital investors, invests in business assets and the return of investment is refunded to such investors along with certain percentage of profit calculated on pro-rata basis or predetermined interest. No charge is collected in the form of any processing fees or any other charges for the said services from the investors.
Page 3 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 2.4. The nature of the business is such that the companies are extending financial assistance towards which consideration is received in the form of interest. Therefore, the same would qualify for exemption under GST as SI No. 27 of Notification No. 12/2017-CT(rate), exempts services by way of extending deposit, loan or advances in so far as the consideration is represented by way of interest of discount (other than interest involved in credit card services).
2.5. According to the petitioner, there would not arise any GST liability on the activities of the present company which enjoys the exemption under the GST and the Revenue Authority never disputed the same nor had it doubted the method adopted by the company of the petitioner. It is alleged that Mr. Jain was forced to make admission for the GST liability to the tune of Rs. 51 crores approximately inclusive of interest and penalty. Moreover, the records are seized without issuing authorization as prescribed under Rule 139(2) of the CGST Rules, 2017. During the investigation, the lockers of the petitioner were sealed. The details of bank lockers also had been provided in the memo of petition. They all are in the AU Page 4 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined Small Finance Bank, Kotak Mahindra Bank and State Bank of India.
2.6. The petitioner also has urged that by way of seizure order under Rule 139(2), the officer of the respondent no.2 had seized other documents, laptop, keys of the lockers etc. and by drawing panchnama the cash amount of Rs.
58,25,650/- had been seized. After recording criminal case against Mr. Jain being Criminal Case No. 9753 of 2020 culminated into the charge-sheet dated 07.08.2020, he was sent to judicial custody.
2.7. It is further urged that during the pendency of the proceedings, Mr. Jain and other family members came to be implicated in another FIR registered with the CID Crime Vadodara Police Station being I-CR No. 03 of 2020 on 01.08.2020 for the offence under Sections 406, 409, 420, 120(B) of the Indian Penal Code, Section 3 of the Gujarat Protection of Interest of Depositors Act and Sections 4, 5, 6 and 7 of the Prize Chits and Money Circulation Schemes (Prohibition) Act, 1978. Mr. Dilip Babulal Jain was released on regular bail in connection with the offences under the GST Act Page 5 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined by this Court by passing the order in Criminal Misc.
Application No. 16486 of 2020.
2.8. The grievance on the part of the petitioner, made emphatically is that the offence is registered although the GST department itself is not clear whether any offence actually occurred or not. The documentary evidences, according to Mr. Jain are such that he would be surely acquitted and hence, there are no logical reasons for implicating him in the matter.
The investigating agency is also acting highhandedly and in arbitrary manner.
2.9. According to the petitioner, the action of the respondent no.2 of freezing the bank account by exercising the powers under Section 83 of the CGST Act is arbitrary and illegal. It is a case where the provisions of CGST Act are not applicable at all and the department is not sure whether the provisions would apply against the petitioners. Because of the attachment of the bank accounts, the petitioners are not in a position to make any payments and as a result, they are not in a position to pay the statutory dues or taxes.
Page 6 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 2.10. Hence, the present petition with the following prayers:-
"(a) This Hon'ble Court may be pleased to admit and allow this petition;
(b) This Hon'ble Court may be pleased to issue appropriate writ of mandamus or any other appropriate writ directing the respondent no.2 to immediately remove attachment of following bank accounts belonging to the petitioners:
(i)AU Small Finance Bank Name of the Account Holder Account Number Grabdeal International 2021212926656126 Grabdeal Advertisement and 1921212926208015 Tourism LLP
(ii) Kotak Mahindra Bank Name of the Account Holder Account Number Ashish Babulal Shah 3412440426 Babulal Keshrimal Jain 7912905805 Pusphpaben Babulal Jain A/c. No. not known but freeze the account of the said account holder Dilip Babulal Jain 6612963405 Genesis Charitable Trust 6543211234 Page 7 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined Glamox Solution Pvt. Ltd. 5432112345 Genesis Group 3913049456 Grabdeal Advertisement and 1231231234 Tourism LLP Grabdeal International 3913049432
(iii) State Bank of India Name of the Account Holder Account Number Grabdeal Advertisement and 39107410000 Tourism LLP Glamox Solution Pvt. Ltd. 39107683114 Genesis Group 39107409367 Grabdeal International 39107548607 Pusphpaben Babulal Jain 20091452699 and, debit may be allowed to be made from the said accounts;
(c) This Hon'ble Court may be pleased to issue appropriate writ of mandamus or any other appropriate writ directing the respondent no.2 to release the articles and cash amount seized under seizure Panchnama which is at Annexure-B;
(d) Pending admission, final hearing and disposal of this petition, an ex-parte ad-interim order may be passed in terms of prayer clause (b);Page 8 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023
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(e) Grant such other and further relief as thought fit in the interest of justice."
2.11 Draft amendment had been moved by the petitioner on 18.10.2021 where the challenge is made to the new order dated 09.02.2021 of provisional attachment of bank account under section 83 of the act on the ground that the same is illegal and against the facts and provisions of law and without following the due procedure prescribed under the Act and the Rules seeking the same to be quashed and set aside.
3. Affidavit-in-reply is filed for and on behalf of the respondent no.2 - Joint Commissioner having the office at the office of the Principal Commissioner, Central GST, GST Bhawan, Subhanpura, Vadodara which has denied all the allegations emphatically.
3.1. It is contended that information from the reliable sources was received that Mr. Dilip Jain, resident of Bharuch was running businesses in the name of Genesis Group, Grabdeal International, Grabdeal Advertisement and Tourism LLP, Glamox Solution Private Limited without obtaining Page 9 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined registration under the Service Tax / GST and evading the huge amount of Service Tax and GST.
3.2. Based on the inputs received, it appeared that this person was running either a pyramid scheme or a similar type of scheme. Based on the intelligence, investigation was initiated against Mr. Jain and his firms and a search was conducted under Section 67(2) of the CGST Act at the premises located at Bholav, Bharuch on 25.02.2020 under the authorization issued by the Joint Commissioner, Vadodara-II Commissionerate. The documents were seized under INS-02.
3.3. During the course of search, statement of Mr. Jain was recorded under Section 70 of the CGST Act on 25.02.2020 wherein he described the business activity practiced by its firms namely M/s. Genesis Group, M/s. Grabdeal Advertisement and Tourism LLP and M/s. Glamox Solutions Private Limited and also accepted the liability of Rs. 51 crores. He gave his statement on 26.02.2020, 28.02.2020, 06.03.2020, 02.06.2020 and 09.06.2020 where there was an admission of his Service Tax/GST liability and his failure to discharge the statutory dues.
Page 10 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 3.4. It is the say of the respondent that these companies were providing financial services to the subscribers and generating fund in furtherance of the business under the guise of name web solution, web advertisement or multi-level business but, are engaged in financial business illegally without obtaining any permission and this surely was the illegality and mischief with the public as well as the government revenue.
3.5. His four companies and the firms in the name of his family members like brother, sister, father, mother were for namesake and in fact, he exclusively handled all the activities.
He, in his various statements under Section 70 has accepted the tax liability to the tune of Rs. 51 crores. He has raised Total Rs. 430.10 crores from 5,06,000 subscriber IDs out of which trail of Rs. 264.62 crores have been received in the bank deposits and the balance appears to be in the cash. The companies addresses are the same and the bank accounts have been closed after a certain time and new accounts have been opened to hide the transactions and alleged illegal activities so as to escape from paying the government tax. The petitioner is engaged in the activity of financial business Page 11 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined without permission and without getting registered with the GST department and making evasion of the huge amount of service tax and GST. His family members have opened many bank accounts, the details of which have been provided.
3.6. On the basis of the huge transactions which have taken place in the bank accounts and his admission of Rs. 51 crores of tax liability, the revenue chose to attach the bank accounts of his under the powers vested on competent authority vide Section 83 of the CGST Act and the letters had been sent to the banks directing them to freeze the debit facility.
Provisional attachment is permitted including of the Bank Accounts under Section 83(1) of the CGST Act, 2017. The investigation is in progress and as Mr. Jain has no intention to pay government dues, the respondent department under the powers vested vide Section 83(2) had sent letters 09.02.2021 to the bank directing to freeze the debit facility/withdrawal from these bank accounts for one year.
3.7. It is further the say of the respondent that the transactions worth Rs. 430 crores have been entered into and he had evaded Rs. 74 crores of GST/ Service Tax. This huge Page 12 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined economic offence committed by him during his activities would make him liable to be punished under Section 132 of the CGST Act which are punishable under Sections 132(1)(i) and (iv) of the CGST Act, 2017 read with Section 132(5) of the CGST Act, 2017.
4. The rejoinder affidavit has been filed denying all these aspects and also further alleging that per-force he had been directed to admit the tax liability of Rs. 51 crores.
5. This Court has heard extensively learned Senior Advocate Mr. Nirupam Nanavati appearing with learned advocate Mr. Chetan Pandya for the petitioner and learned advocate Ms. Kruti Shah appearing for the respondent no. 1, 3 to 9 and learned Senior Standing Counsel Mr. Nikunt Raval for the respondent no.2.
5.1 In respect of admission of GST/ CGST liability of Rs.51,00,000, much reservation has been expressed by the petitioner emphasizing that the writing is executed under force and coercion by the officers of GST and there is no such admission of any tax liability. The thrust is on the officers or Page 13 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined the authorities not having taken any steps even after expiry of period of one year from the date of attachment/freezing of account on 27th February 2020/2nd March 2020 and even after the issuance of show cause notice on 23d March 2021.
Much has been said about the conduct of the respondents according to whom the investigation is in progress and at the same time the search and seizure of the premise of the petitioner was already conducted on 25th February 2020 and arrest was made of the petitioner on 9th June 2020. The chargesheet appears to have been already filed on 7th August 2020 vide criminal case No. 9753 of 2020, therefore, according to the petitioner, no investigation is being carried out at present in respect of any investors and hence, all averments are made on assumption and presumption and in fact, there is no legal basis for any case to be made out under CGST or GST against the petitioner.
5.2 Attempt is made to explain the nature of business and the business model as given in the statement of the petitioner, given to the respondent authority on 02.06.2020. Taxability of service tax on these transactions as clarified in Education guide 2021 by Central Board of Excise and Customs (CBEC) Page 14 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined has also been explained. Moreover, the CBEC circular no.
96/7/2007-ST dated 23.08.2007 which clarified the business chit funds where commission is charged and the same is taxable, has been reproduced. It is attempted to explain that gross amount received by chit could not be taxable. The taxability would arise only when the commission is charged or any amount is retained by foreman for operating the chit fund therefore, entire amount of deposit received from members when is charged to tax, according to the petitioner is unjustifiable.
5.3. It is also the say of the petitioner that a mere transaction in money cannot be considered as service under Section 65B(44) of Finance act,1994 and the services rendered by the foreman in the business chit fund is not liable to service tax.
According to the petitioner, even assuming without acceptance that service tax is payable, the gross amount shall be considered as inclusive of tax. Under Section 67(2) when new taxes are collected separately, the gross amount has to be considered to be inclusive of tax liability as value of taxable service plus service tax payable and this has been substantiated by the decision of the Apex court in case of Page 15 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined Commissioner vs. Advantage Media Consultant [2009 (14) S.T.R. J49 (S.C).] 5.4. The attachment of the bank accounts by the order for a further period of one year under Section 83 of CGST act passed on 09.02.2021 is also seriously challenged. Some of the decisions pressed into service to support this version of submissions are:-
I. JSK and Sons vs. State of Gujarat [2020 (43) G.S.T.L. 154 (Guj.) II. Radha Krishan Industries vs. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (S.C.)] III. Amazonite Steel Private Limited vs. Union of India [2020 (36) G.S.T.L. 184 (Cal.)]
6. According to the learned senior standing counsel Mr Raval, investigation is in progress and the petitioner till date has not come forward to discharge the government dues and he also does not appear to have any intention to pay the same. The department has powers under Section 83(2) of the CGST act 2017 and therefore, the banks have been directed to freeze the debit facility for the period of one year and the fresh Page 16 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined orders after the expiry of one year also have been already passed. It is to be exercised so that the money available in the bank accounts which have been generated during the activities which are under scanner, may not be utilized during the pendency of this process. There are thousands of investors and that the process is time-consuming and requires extensive investigation and therefore, at that stage, permitting utilization of the amount would amount to thwarting the very process. The CID Crime Gandhinagar, Gujarat Income Tax Department and Enforcement Directorate Ahmedabad have been reported this aspect and the charge-sheet has been filed by the CID Crime Gandhinagar. Therefore, it is urged that this is not the stage for this Court to interfere. It is also the say of the learned Senior Standing Counsel that during the process and the pendency of this petition, various documents have been returned to the petitioner when not required, however, the inquiry since is going on in relation to this entire business model and the same would still take time considering the nature of inquiry, no indulgence in the order of attachment is warranted.
7. At the outset, it needs to be made clear that this is a Page 17 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined petition preferred under Article 226 of the Constitution of India challenging the action of the respondent Authority and hence, the same shall need to be examined bearing in mind settled principles of law as petitioner would have various opportunities to question and challenge the outcome. This action of the respondent is questioned, at the stage, when the time period prescribed statutorily during the pendency of the petition is not yet over in making an inquiry and when the show cause notice has already been issued upon the petitioner on 23.03.2021 and the further attachment order for a period of one year is passed under Section 83 of the CGST Act, this Court shall need to decide maintainability as also the requirement of interference.
8. The moot question which has pained the petitioner and which would also require consideration is the question of attachment to the bank accounts during the pendency of investigation as also a fresh order of extension beyond the period of one year.
8.1. For appreciating this, apt would be to refer to the provision of law which needs its appreciation in the backdrop Page 18 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined of factual details of search and seizure as also of initiation of criminal prosecution against the petitioner.
8.2. Section 83 is reproduced herein under for the better appreciation of the controversy in question. This Section provides that for the purpose of protecting the interest of government revenue, the provisional attachment of any property including bank account belonging to the taxable person as prescribed in this provision, is permissible.
8.3. Apt would be to refer and reproduce Section 83 of the CGST Act 2017:-
"83. Provisional attachment to protect revenue in certain cases:-
(1) Where after the initiation during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, Chapter XII, Chapter XIV or Chapter XV 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 or any person specified in subsection (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 Page 19 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined from the date of the order made under sub-section (1)."
8.4. It is clear from the very provision of the act that during the pendency of any proceedings under Section 62, 63, 64, 67, 73, 74, the commissioner on a subjective satisfaction if finds it necessary for the purpose of protecting the interest of government revenue may, by an order, in writing attach provisionally any property which may include the bank account which should belong to the taxable person and this provisional attachment shall cease to have effect after expiry of period of one year from the date of order made under sub-
section (1). Here, according to the respondent, the petitioner has admitted his tax liability and promised to pay, but, he has not paid the government dues and therefore, the respondent according to its affidavit-in-reply by way of abundant precaution for protecting the revenue's interest has proceeded to attach and freeze the bank accounts on 27.02.2020 and 02.03.2020. According to the Respondent, more than Rs.1,00,00,000 is available in the State Bank Accounts and the respondent department exercising the powers vested under Section 83(2) of the CGST Act after obtaining the approval of the competent authority has again Page 20 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined sent the letter on 09.02.2021 to the banks directing them to freeze the facility of withdrawal of amount from these accounts for one more year in order to protect the government revenue.
8.5. From the version given by the respondent, the provisions of CGST Act would be applicable in the definition of 'services' under the CGST Act particularly Section 2(102) which defines the service as anything other than goods, money and securities but includes activities relating to money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
Respondent's version is that activities of the petitioner and the business model followed by the petitioner as also given in his statement relates to the activities relating to the money and the applicant is rendering financial services/ business support services for consideration, therefore, the GST liability would be applicable on the amount of consideration received by him in his individual capacity. There is a joint venture also between him and the subscribers and the CBEC circular on the subject matter of service tax on the joint-venture is also Page 21 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined said to have applied in case of the petitioner. Whereas according to the Petitioner, the business model of his is not attracting any service tax and the very initiation of process by the respondents is ill conceived.
9. Entertainment of the challenge to the merit is not desirable at this juncture at all as appropriate Authority would determine that aspect and statutory remedies would also demand address to such core issue at the relevant point of time. Therefore, this Court has chosen not to enter into the details of business model as explained in the statement of the petitioner and whether the transaction in money amounts to service attracting taxability under the Statute, except for the limited purpose of examining the apt exercise of powers under Section 83 of the Act prior to the finalization of assessment and raising of demand. Otherwise, let the same be agitated at an appropriate stage by the petitioner before the Authority prescribed statutorily, at the same time, for the limited purpose of addressing the issue of freezing of accounts, it shall need to be said that it is a discretion of the commissioner who would need to take a call bearing in mind the interest of Revenue during the pendency of proceedings under different Page 22 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined provisions of law.
10. This Court in case of Vinod Kumar Muralidhar Chechani Proprietor of M/s Chechani Trading Co. vs. State of Gujarat [Special Civil Application No. 12498/2020, decided on 04.01.2021] has considered extensively the question of order of provisional attachment in the form of GST DRC 22 of cash credit/ current bank account and saving bank account held by the petitioner with HDFC Bank Ltd. as the proceedings under Section 67 of the Act came to be initiated. The additional commissioner exercised his powers under Section 83 of the Act for the purpose of provisional attachment of bank account and dissatisfied by the said order, the applicant approached this court which examined entire material to hold that under the scheme of the Act, levy and collection of tax are provided in Chapter 3, assessment is under Chapter 12 and inspections search, seizure and arrest are dealt with under Chapter 14. Chapter 15 deals with the demand and recovery and that provides for provisional attachment under Section 83. Court also referred to Rule 159(1) which states that the commissioner can decide Page 23 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined to attach any property including the bank account, he shall pass an order to form GST DRC 22. Various forms have been appended to GST Rules 2017 and Form GST DRC 22 lays down the format in which the order has to be issued provisionally attaching the property and communication thereof to the financial institution. The form of the order also shows that it is to be addressed to the taxable person and directions to be issued for not allowing any debit.
10.1. Referring to the Coordinate Bench decision in case of Kushal Ltd. vs. Union of India [Special Civil Application No. 19533/2019 decided on 17.12.2019], it noticed the interim order of the Apex Court where it stayed those directions till the challenge before the Apex Court was finalized. It eventually held that Section 83 of the act is in pari materia with provisions of Section 281B of Income Tax Act, 1961.
Section 281B of the Act also provides for a provisional attachment of the property of an assessee pending that the assessment/reassessment proceedings with the income tax department when it believes that such attachment is necessary to protect the interest of the revenue. The provisions of Section 281B of the Act is extracted to Page 24 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined demonstrate that the provision of Section 83 has been framed along the identical line as Section 281B. The Court noticed that there are certain guidelines for making provisional attachment which are missing so far as Section 83 of the act is concerned and the balance in both the bank accounts being negligible, it did not continue the provisional attachment.
11. What has also been pressed into service before this Court is the decision of the Apex Court in case of Radha Krishan Industries vs. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (SC)] where the Apex court has held that the nature of provisional attachment being a draconian power, exercised before finalization of assessment or raising of the demand, the same has to be exercised with due caution. It is provisional as an aid of something else and its purpose is to protect revenue. Its validity depends on strict observance of statutory preconditions. Formation of commissioner's opinion must approximate and live nexus to protection of revenue interest and it is not left to unguided subjective discretion of the commissioner's opinion which must be based on tangible material regarding statutory requirement.
"C.1 Maintainability of writ petition before the High Page 25 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined Court 24 The High Court has dealt with the maintainability of the petition under Article 226 of the Constitution. Relying on the decision of this Court in Assistant Commissioner (CT) LTU, Kakinada and others v Glaxo Smith Kline Consumer Health Care Limited20, the High Court noted that although it can entertain a petition under Article 226 of the Constitution, it must not do so when AIR 2020 SC 2819 the aggrieved person has an effective alternate remedy available in law. However, certain exceptions to this "rule of alternate remedy" include where, the statutory authority has not acted in accordance with the provisions of the law or acted in defiance of the fundamental principles of judicial procedure; or has resorted to invoke provisions, which are repealed; or where an order has been passed in violation of the principles of natural justice. Applying this formulation, the High Court noted that the appellant has an alternate remedy available under the GST Act and thus, the petition was not maintainable.
25 In this background, it becomes necessary for this Court, to dwell on the "rule of alternate remedy" and its judicial exposition. In Whirlpool Corporation v Registrar of Trademarks, Mumbai21, a two judge Bench of this Court after reviewing the case law on this point, noted:
"14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose".Page 26 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023
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15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field." (emphasis supplied) 26 Following the dictum of this Court in Whirlpool (supra), in Harbanslal Sahnia v Indian Oil Corpn. Ltd.22, this court noted that "7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without Page 27 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined jurisdiction or the vires of an Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] .) The present case attracts applicability of the first two contingencies. Moreover, as noted, the appellants' dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings." (emphasis supplied) 27 The principles of law which emerge are that :
(i) The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well;
(ii) The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person; (2003) 2 SCC 107;
(iii) Exceptions to the rule of alternate remedy arise where (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged;
(iv) An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law;
(v) When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This Page 28 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion; and
(vi) In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with.
28 These principles have been consistently upheld by this Court in Seth Chand Ratan v Pandit Durga Prasad23, Babubhai Muljibhai Patel v Nandlal Khodidas Barot24 and Rajasthan SEB v. Union of India,25 among other decisions.
C.2 Provisional Attachment 29 At this stage, we will advert to relevant precedents outlining the contours of the power of provisional attachment and specifically, in the context of provisions worded similarly to Section 83 of the HPGST Act.
30 The decision of this Court in Raman Tech Process Engg Co and Anr v Solanki Traders26 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 Page 29 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 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 (2003) 5 SCC 399 (1974) 2 SCC 706 (2008) 5 SCC 632 2008(1) R.C.R.(Civil) 195attachment 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 Act27). The shared learning which emerges from these decisions of the High Court needs recognition. In Valerius Industries v Union of India28, the Gujarat High Court laid down the principles for the construction of Section 83 of the SGST/CGST Act. The High Court Page 30 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 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. [...] The order of provisional attachment before the assessment order is 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.
(1) The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very "SGST Act" 2019 (30) GSTL 15 (Gujarat) 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.
Page 31 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined (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 India29, the Gujarat High Court reiterated that the subjective satisfaction as to the need for 2021 (44) GSTL 41 (Gujarat) 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 Unit 230, the Gujarat High Court cited two instances in which provisional Page 32 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 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.
35 The Delhi High Court, in Proex Fashion Private Limited v Government of India32 outlined the following statutorily stipulated conditions for the invocation of Section 83 of the SGST Act:
"i) Order should be passed by Commissioner;
ii) Proceeding under Section 62 or 63 or 64 or 67 or 73 or 74 should be pending; 2019 (20) GSTL 732 (Gujarat) Bindal Smelting Private Limited v Addl.
Director General of GST Intelligence, 2020 (34 G.S.T.L 592 (P&H); Society for Integrated Development of Urban and Rural Areas v Commissioner of Income Tax, A.P. II, Hyd, 2001 (252) ITR 642; Vinod Kumar Murlidhar Prop. Of Chechani Trading Co v. State of Gujarat, Special Civil Application No. 12498 of 2020 dated 9 December 2020 WP(C) 11245 of 2020 dated 6 January 2021
iii) Commissioner must form an opinion;
iv) Order should be passed to protect interest of revenue;
v) It must be necessary to attach property."
Page 33 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 36 In UFV India Global Education v Union of India33, the Punjab and Haryana High Court held that pendency of proceedings under the sections mentioned in Section 83 viz. Sections 62 or 63 or 64 or 67 or 73 or 74 is the sine qua non for an order of provisional attachment to be issued under Section 83.
37 Another case which is relevant for our purposes is the decision of the Bombay High Court in Kaish Impex Private Limited v Union of India34. In this case, the taxation authorities were enquiring into fraudulent claiming of ITC on the basis of fictitious transactions by an export firm in Delhi, against whom proceedings under Section 67 of the CGST Act had been initiated. On tracing the money trail, the petitioner was summoned under Section 70 of the CGST Act and his bank accounts were provisionally attached under Section 83 of the CGST Act. On dealing with the question of whether the bank accounts of the petitioner could be attached, when there were no pending proceedings against him and proceedings were pending against another taxable entity, the High Court held that the proceedings referred to under Section 83 of the Act must be pending against the taxable entity whose property is being attached. The High Court noted that:
"18. [...] Section 83 though uses the phrase 'pendency of any proceedings', the proceedings are referable to section 62, 63, 64, 67, 73 and 74 of the Act and none other. The bank 2020 (43) GSTL 472 (2020) 6 AIR Bom R 122 account of the taxable person can be attached against whom the proceedings under the sections mentioned above are initiated. Section 83 does not provide for an automatic extension to any other taxable person from an inquiry specifically launched against a taxable person under these provisions. Section 83 read with section 159(2), and the form GST DRC-22 show that a proceeding has to be initiated against a specific taxable person, an opinion has to be formed that to protect the interest of Revenue an order of provisional Page 34 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined attachment is necessary. The format of the order, i.e. the form GST DRC-22 also specifies the particulars of a registered taxable person and which proceedings have been launched against the aforesaid taxable person indicating a nexus between the proceedings to be initiated against a taxable person and provisional attachment of bank account of such taxable person." (emphasis supplied) C.3 Delegation of authority under CGST Act
38 The learned counsel for the respondent State, during the course of his submissions, has also sought to justify the delegation of powers by the Commissioner to the Joint Commissioner by way of the impugned notification dated 21 October 2020 for the purpose of attachment of properties under Section 83 of the HPGST Act. In this regard, reliance was placed on Nathanlal Maganlal Chauhan v State of Gujarat,35 where the Gujarat High Court was considering the validity of a notification by which the Commissioner of State Tax had delegated all the functions under the SGST Act to the Special Commissioner and Additional Commissioners of State Tax. In rejecting a challenge to this notification, the High Court held that:
"39. As pointed out by the Supreme Court in the case of Sahni Silk Mills [internal citation omitted], the courts should normally be 2020 SCC Online Guj 1811 rigorous while requiring the power to be exercised by the persons or the bodies authorized by the statutes. As noted above, it is essential that the delegated power should be exercised by the authority upon whom it is conferred and by no one else. At the same time, in the present administrative setup, the extreme judicial aversion to delegation should not be carried to an extreme. There is only one Commissioner of State Tax in the State of Gujarat, and having regard to the enormous Page 35 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined functions and duties to be discharged under the new tax regime, he has been empowered to delegate his powers to the Special Commissioner of State Tax and the Additional Commissioners of State Tax.
40. We take notice of the fact that the delegation has been authorized expressly under Section 5(3) of the Act. We would have definitely interfered if the Special Commissioner or the Additional Commissioners would have further delegated the power to officers subordinate to them. Such is not the case over here.
41. In the impugned notification it has been stated that the functions delegated shall be under the overall supervision of the Commissioner. When the Commissioner stated that his functions were delegated subject to his overall supervision, it did not mean or should not be construed as if he reserved to himself the right to intervene to impose his own decision upon his delegate. The words in the last part of the impugned notification would mean that the Commissioner could control the exercise administratively as to the kinds of cases in which the delegate could take action. In other words, the administrative side of the delegate's duties were to be the subject of control and revision but not the essential power to decide, whether to take action or not in a particular case. Once the powers are delegated for the purpose of Section 69 of the Act, the subjective satisfaction, or rather, the reasonable belief should be that of the delegated authority." (emphasis supplied) D Analysis 39 The essence of the present case lies in how the power to order a provisional attachment under Section 83 of the HPGST Act is construed. Before Page 36 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined interpreting it, the provision is extracted below for convenience of reference:
"83. 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 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.
(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 sub-
section (1)."
40 The marginal note to Section 83 provides some indication of Parliamentary intent. Section 83 provides for "provisional attachment to protect revenue in certain cases". The first point to note is that the attachment is provisional - provisional in the sense that it is in aid of something else. The second point to note is that the purpose is to protect the revenue. The third point is the expression "in certain cases" which shows that in order to effect a provisional attachment, the conditions which have been spelt out in the statute must be fulfilled. Marginal notes, it is well-settled, do not control a statutory provision but provide some guidance in regard to content. Put differently, a marginal note indicates the drift of the provision. With these prefatory comments, the judgment must turn to the essential task of statutory construction. The language of the statute has to be interpreted bearing in mind that it is a taxing statute which comes up for interpretation. The provision must be construed on its plain terms. Equally, in interpreting the statute, Page 37 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined we must have regard to the purpose underlying the provision. An interpretation which effectuates the purpose must be preferred particularly when it is supported by the plain meaning of the words used.
41 Sub-Section (1) of Section 83 can be bifurcated into several parts. The first part provides an insight on when in point of time or at which stage the power can be exercised. The second part specifies the authority to whom the power to order a provisional attachment is entrusted. The third part defines the conditions which must be fulfilled to validate the power or ordering a provisional attachment. The fourth part indicates the manner in which an attachment is to be leveled. The final and the fifth part defines the nature of the property which can be attached. Each of these special divisions which have been explained above is for convenience of exposition. While they are not watertight compartments, ultimately and together they aid in validating an understanding of the statute. Each of the above five parts is now interpreted and explained below:
(i) The power to order a provisional attachment is entrusted during the pendency of proceedings under any one of six specified provisions: Sections 62, 63, 64, 67, 73 or 74. In other words, it is when a proceeding under any of these provisions is 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 Page 38 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined including a bank account belonging to the taxable person; and
(vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute.
42 Under sub-Section (2) of Section 83, a provisional attachment ceases to have effect upon the expiry of a period of one year of the order being passed under sub-Section (1). The power to levy a provisional attachment has been entrusted to the Commissioner during the pendency of proceedings under Sections 62, 63, 64, 67, 73 or as the case may be, Section 74. Section 62 contains provisions for assessment for non-filing of returns. Section 63 provides for assessment of unregistered persons. Section 64 contains provisions for summary assessment. Section 67 elucidates provisions for inspection, search and seizure. Before we dwell on Section 74, it would be material to note the provisions of Section 70 which are extracted below:
"70. Power to summon persons to give evidence and produce documents. - (1) The proper officer under this Act shall have powers to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908, (5 of 1908).
(2) Every such inquiry referred to in sub-section (1) shall be deemed to be a "judicial proceedings"
within the meaning of section 193 and section 228 of the Indian Penal Code, 1860, (45 of 1860)."
43 A power is conferred by Section 70 upon the proper officer to summon a person whose attendance is considered necessary to give evidence or produce a document or any other things in any enquiry in the Page 39 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined manner which is provided in the case of a civil court under the CPC.
44 Section 74 is extracted below:
"74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful mis-statement or suppression of facts. -
(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful mis-statement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice alongwith interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.
(2) The proper officer shall issue the notice under sub-section (1) at least six months prior to the time limit specified in sub- section (10) for issuance of order.
(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1), on the person chargeable with tax.
(4) The service of statement under sub-section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any Page 40 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined wilful mis-statement or suppression of facts to evade tax, for periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.
(5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax alongwith interest payable under section 50 and a penalty equivalent to fifteen per cent of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.
(6) The proper officer, on receipt of such information, shall not serve any notice under sub- section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.
(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.
(8) Where any person chargeable with tax under sub-section (1) pays the said tax alongwith interest payable under section 50 and a penalty equivalent to twenty five per cent of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.
(9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.
(10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or Page 41 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund.
(11) Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent of such tax within thirty days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded. Explanation-1. - For the purposes of section 73 and this section,-
(i) the expression "all proceedings in respect of the said notice"
shall not include proceedings under section 132; and
(ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded.
Explanation-2. - For the purpose of this Act, the expression "suppression" shall mean non- declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer."
45 Sub- Section (1) of Section 74 empowers the proper officer to serve a notice on a person chargeable with tax where it appears that
(i) Any tax has not been paid;
(ii) Tax has been short paid; Page 42 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined
(iii) Tax has been erroneously refunded; or
(iv) Input tax credit has been wrongly availed or utilized by reason of fraud, willful statement or suppression of fact to evade tax.
46 Sub-Section (1) enables the proper officer to issue a notice to show cause for the recovery of tax, interest payable under Section 50 and the penalty equivalent to the amount of tax specified in the notice. Sub-Sections (2), (3) and (4) lay down procedural provisions which are to be followed by the proper officer. Secondly, under sub-Section (5) of Section 74, before the service of a notice under sub- Section (1), the person who is chargeable with tax may pay the tax together with interest and a penalty equivalent to fifteen per cent of the tax on the basis of their own ascertainment of the tax or as ascertained by the proper officer and inform the proper officer of the payment having been made upon receipt of the information. Sub-Section (6) stipulates that the proper officer shall not serve any notice under sub-Section (1) in respect of the tax so paid or any penalty payable under the provisions of the Act or the Rules.
47 On the other hand, when the proper officer is of the opinion that the amount which has been paid under sub-Section (5) falls short of the amount which is actually payable, a notice under sub-Section (1) is to issue for the amount which falls short of what is actually payable. Sub-Section (8) contains a stipulation that where a person who is chargeable with tax under sub-Section (1) pays the tax together with interest and a penalty of twenty-five per cent of the tax within thirty days of the issuance of the notice, all proceedings in respect of the notice shall be deemed to be concluded. Under sub-Section (9), the proper officer after considering the representation of the person chargeable to tax is authorized to determine the amount of tax, interest and penalty due and to issue an order. A period of five years is stipulated by sub-Section (10) for the Page 43 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined issuance of an order in sub-Section (9). Sub-Section (11) stipulates that upon service of an order under sub-Section (9), all proceedings in respect of the notice shall be deemed to be concluded upon the person paying the tax with interest under Section 50 and a penalty equivalent to 50 per cent of the tax within thirty days of the communication of an order. These provisions indicate how sub-Sections (5), (8) and (11) operate at different stages of the process.
48 Now in this backdrop, it becomes necessary to emphasize 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 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 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 Page 44 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 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 Commissioner that "for the purpose of protecting the interest of the government revenue, it is necessary so to do", it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue.
49 By utilizing the expression "it is necessary so to do" the legislature has evinced an intent that an attachment is authorized 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 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 strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make preemptive strikes Page 45 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 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 Gujarat Value Added Tax Act 2003 , one of us (Hon'ble Mr Justice MR Shah) speaking for a Division Bench of the Gujarat High Court in Vishwanath Realtor v State of Gujarat37 observed:
"8.3. Section 45 of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, the order of provisional attachment can be passed by the Commissioner when the Commissioner is of the opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary so to do. Therefore, before passing the order of provisional attachment, there must be an opinion formed by the Commissioner that for the purpose of protecting the interest of the Page 46 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined Government Revenue during the pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally any property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale and/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the Revenue may not be in a position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers under Section 45 of the VAT Act." (emphasis supplied)
51 We adopt the test of the existence of "tangible material". In this context, reference may be made to the decision of this Court in the Commissioner of Income Tax v Kelvinator of India Limited38. Mr Justice SH Kapadia (as the learned Chief Justice then was) while considering the expression "reason to believe" in Section 147 of the Income Tax Act 1961 that income chargeable to tax has escaped assessment inter alia by the omission or failure of the assessee to disclose fully and truly all material facts necessary for the assessment of that year, held that the power to reopen an assessment must be conditioned on 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 Limited39. While adverting to these decisions we have noticed that Section 83 of the Page 47 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 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.
52 Rule 159 prescribes modalities for effecting a provisional attachment of property. Rule 159 provides thus :
"159. Publication of information in respect of persons in certain cases. - (1) If the Commissioner, or any other officer authorised by him in this behalf, is of the opinion that it is necessary or expedient in the public interest to publish the name of any person and any other particulars relating to any (2010) 2 SCC 723 (2018) 6 SCC 685 proceedings or prosecution under this Act in respect of such person, it may cause to be published such name and particulars in such manner as it thinks fit.
(2) No publication under this section shall be made in relation to any penalty imposed under this Act until the time for presenting an appeal to the Appellate Authority under section 107 has expired without an appeal having been presented or the appeal, if presented, has been disposed of.
Explanation. - In the case of firm, company or other association of persons, the names of the partners of the firm, directors, managing agents, secretaries and treasurers or managers of the company, or the members of the association, as the case may be, may also be published if, in the opinion of the Commissioner, or any other officer authorised by him in this behalf, circumstances of the case justify it."
Page 48 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 53 Under sub-Rule (1) of Rule 159, an attachment of property by the Commissioner under Section 83 is effected by passing an order mentioning the details of the property which is attached. The form in which the order is to be made is prescribed in form GST DRC-
22. This form is extracted below:
FORM GST DRC - 22 [See rule 159(1)7] Reference No.:
To Date:
.........................Name ........................Address (Bank/ Post Office/Financial Institution/Immovable property registering authority) Provisional attachment of property under section 83 It is to inform that M/s .................. (name) having principal place of business at -......................... (address) bearing registration number as............... (GSTIN/ID), PAN -........ is a registered taxable person under the <<SGST/CGST>> Act. Proceedings have been launched against the aforesaid taxable person under section << --->> 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/post office/financial institution>> having account no. << A/c no.>>; or property located at << property ID & location>>.Page 49 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023
NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined In order to protect the interests of revenue and in exercise of the powers conferred under section 83 of the Act, I ______________(name), _____________(designation), 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.
54 Under sub-Rule (5) of Rule 159, the person whose property is attached is allowed seven days' time to file an objection that the property attached "was or is not liable to attachment". Sub-Rule (5) stipulates that the Commissioner may "after affording an opportunity of being heard to the person filing the objection" release the property by an order in form GSTDRC-23. Similarly, under sub-Rule (6) upon being satisfied that the property was or is no longer liable to be attached, the Commissioner is empowered to release the property by issuing an order in Form GST DRC- 23 for the releasing of the property under attachment. The Form is extracted below :
FORM GST DRC - 23 [See rule 159(3), 159(5) & 159(6)| Reference No.:Page 50 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023
NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined To Date:
................. Name .................Address (Bank/ Post Office/Financial Institution/Immovable property registering authority) Order reference No. -
Date -
Restoration of provisionally attached property / bank account under section 83 Please refer to the attachment of << saving / current / FD/RD>> account in your << bank/post office/financial institution>> having account no. ‹<..........>>, attached vide above referred order, to safeguard the interest of revenue in the proceedings launched against the person. Now, there is no such proceedings pending against the defaulting person which warrants the attachment of the said accounts. Therefore, the said account may now be restored to the person concerned.
or Please refer to the attachment of property << ID /Locality>> attached vide above referred order to safeguard the interest of revenue in the proceedings launched against the person. Now, there is no such proceedings pending against the defaulting person which warrants the attachment of the said property. Therefore, the said property may be restored to the person concerned.
Signature Name Designation Copy to -Page 51 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023
NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined 55 A significant aspect of Rule 159(5) is that upon the levy of a provisional attachment, the person whose property is attached is empowered to file an objection within seven days on the ground that the property was or is not liable to attachment. In using the expression "was or is no longer liable for attachment",the delegate of the legislature has comprehended two alternative situations. The first, evidenced by the use of the words "was" indicates that the property was on the date of the attachment in the past not liable to be attached. That is the reason for the use of the past tense "was". The expression "is not liable to attachment indicates a situation in praesenti. Even if the property, arguably, was validly attached in the past, the person whose property has been attached may demonstrate to the Commissioner that it is not liable to be attached in the present.
56 The second significant aspect of sub-Rule (5) is the mandatory requirement of furnishing an opportunity of being heard to the person whose property is attached. This is in consonance with the principles of natural justice and ensures that a fair procedure is observed. Sub-Rule (5) provides for a post- provisional attachment right of:
(i) Submitting an objection to the attachment;
(ii) An opportunity of being heard.
Sub - Rule (5) contains clear language to the effect that a person whose property is attached is entitled to two procedural entitlements: first, the right to submit an objection on the ground that the property was not or is not liable to be attached; and second, an opportunity of being heard to the person filing an objection. This is a clear indicator that in addition the filing of an objection, the person whose property is attached is entitled to an opportunity of being heard. It is not open to the Commissioner, as has been stated in the present case, to hold the view that the only safeguard under sub-Rule 5 is to submit an objection without an opportunity of a personal Page 52 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined hearing. Such a construction 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 order indicating whether, and if not, why the objections are not being accepted. Sub- Rule 6 of Rule 159 allows for the release of a property which either was or is no longer liable for attachment. The form in which such an order has to be passed, namely form GST DRC-23, states that "now there is no such proceeding pending against the defaulting person which warrants attachment" of the account or as the case may be, the property. Sub- Rules 5 and 6 do not expressly contemplate a situation in which the person whose property is attached can object on the ground that the attachment is in excess of the amount likely to be due for which proceedings have been launched under the Act. Nor does it provide for a specific opportunity to the taxable person to offer any alternative form of security in lieu of the attachment. Such an opportunity must be read in to the provision Page 53 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined to allow for a fair working in practice. Whether any alternative security that is furnished by the taxable person should be accepted and if so, its sufficiency, is a matter for the Commissioner to determine. Undoubtedly, the taxable person may not have a right to demand that only a particular form of security must be accepted. The Commissioner has to decide whether the form of security offered would secure the interest of the revenue. Where the taxable person sets up the plea that the extent of the attachment is excessive or where the taxable person offers an alternative form of security, these are also matters which ought to be determined by the Commissioner in the exercise of powers under Rule 159(5). The scope of objection can also extend to the nature of the property which is being provisionally attached. Now, it is in this backdrop that we proceed to a determination of whether the petition under Article 226 was maintainable and if it was, whether Commissioner exercised the powers under Section 83 read with Rule 159 in accordance with law.
57 The material facts for making this determination need to be recapitulated. On 3 October 2018, a memo was issued under Section 70 (incorrectly referring to the provisions of Section 74) by the Joint Commissioner of State Taxes and Excise directing the appellant to appear on 9 October 2018 along with specific documents pertaining to the years 2017-18 and 2018-19. The notice stated that in the event that the appellant failed to appear, the Commissioner would be constrained to issue a notice to show cause under Section 74(1). On 9 October 2018, two partners of the appellant attended the hearing. On 10 October 2018, a 'detection case' under Section 74 of the HPGST Act and CGST Act read with Section 20 of the IGST Act was initiated against a supplier of the appellant, GM Power Tech by a search and seizure operation conducted under Section 67. On 15 October 2018, the partners of the appellant attended the case hearing and provided certain documents which were required by the department. The Page 54 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined partners of GM Powertech were arrested under the provisions of Sections 69 and 132 of the HPGST Act on 3 December 2018, on the allegation that they had made fraudulent claims of ITC from fake/fictitious firms of Delhi and Kanpur. On 15 December 2018, the representatives of the appellant were directed to remain present on 17 December 2018 for explaining the allegedly illegal claim of ITC for 2017-18 and 2018-19. A representative of the appellant attended the enquiry on 17 December 2018. On 9 January 2019, an order of provisional attachment was issued under Section 83 by the Joint Commissioner of State Taxes and Excise by which a payment of Rs 5 crores due to the appellant from M/s Fujikawa Power was attached on the ground that the appellant had availed of ITC of Rs 3.25 crores against the purchase of goods valued at about Rs 21 crores from GM Powertech for 2017-18 and 2018-19 and a case of GST fraud had been instituted against the alleged supplier. On 19 January 2019, Form GST DRC-22 was issued to Fujikawa Power regarding the attachment of Rs 5 crores. On 29 January 2019, the appellant made a representation under Rule 159(5) for unblocking the credit and releasing the amount which was provisionally attached. On 30 January 2019, the order of provisional attachment was withdrawn completely with immediate effect. On 9 April 2019 and 5 July 2019 a representative of the appellant attended the case hearing. On 4 July 2020, an intimation was furnished to the appellant of the tax ascertained as payable under Section 74(5). According to the intimation, the appellant received among other items, lead ingots from GM Powertech during FY 2017-18 and 2018-19 and investigation had revealed that ITC had been fraudulently availed of by the supplier on the basis of the invoices of fake firms. The appellant had also availed of ITC due to inward supplies from GM Powertech. On 3 and 5 August 2020, the appellant filed its submissions under Rule 142(2) (a) against the proposed liability. On 6 October 2020, an order was passed under Section 74(9) against GM Powertech confirming a demand of Page 55 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined Rs 39.48 crores for 2017-18 and 2018-19. The proceedings concluded that GM Powertech had
(i) No business establishment or property in Himachal Pradesh; and
(ii) No security or surety.
58 On 21 October 2020, the Commissioner of State Taxes and Excise, Himachal Pradesh delegated, in pursuance of the provisions of Section 5(3) the powers vested under Section 83(1) inter alia to the Joint Commissioner of State Taxes and Excise. On 28 October 2020, a fresh order was issued under Section 83 stating that proceedings were initiated against the appellant under Section 74 since it was found to be involved in an ITC fraud of Rs 5.03 crores during 2017- 18 and 2018-19. Since a GST fraud case had been initiated against GM Powertech on whom a demand had been raised, the ITC claimed by the appellant against supplies effected by GM Powertech was held to be inadmissible resulting in a provisional attachment of the payments due to the appellant to the extent of Rs 5,03,82,554/-. A similar order was issued on 28 October 2020 under Section 83 to M/s Deepak International Limited. The appellant submitted a detailed representation under Rule 159 (5) to the Joint Commissioner. The representation was rejected on 6 November 2020 without affording an opportunity of being heard. Thereafter, on 27 November 2020, a notice to show cause was issued to the appellant under Section 74(1) recording that the appellant had shown inward supplies of lead ingots from GM Powertech and had claimed and utilized ITC on that basis. However, all suppliers from whom GM Powertech had shown inward supplies of goods were found to be fictitious, fake and non-existent. The GST registration of GM Powertech had been cancelled and by an order under Section 74(9), an additional demand of Rs 39.48 crores was confirmed. The appellant was called upon to show cause as to why interest, tax and penalty should not be imposed. The appellant instituted writ proceedings before the Himachal Pradesh High Court inter alia for Page 56 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined
(i) Challenging the delegation by the Commissioner on 21 October 2020;
(ii) The proceedings initiated under Section 83; and
(iii) Revocation of the provisional attachment. The writ petition was dismissed by the High Court on the ground that the appellant had an alternative remedy available in law.
59 The sole ground which has weighed with the High Court in holding that the writ proceedings were not maintainable is that "the writ petitioner has not only (an) efficacious remedy, rather alternative remedy under the GST Act". In addition, the High Court has observed that the writ petition filed by GM Powertech against whom similar allegations have been leveled had been dismissed by relegating it to the pursuit of an alternative remedy. The learned senior counsel appearing on behalf of the appellant submitted that GM Powertech had been relegated to the pursuit of an alternative remedy since an order of assessment had been passed against it. However, insofar as the appellant is concerned, the writ proceedings were instituted to challenge the levy of a provisional attachment under Section 83 and there is no alternative remedy provided under the Act for challenging an order under Section 83."
12. This makes it quite clear that as per the decision of the Apex court that the Court shall need to examine whether the commissioner exercised the powers under Section 83 read with Rule 159 in accordance with law and the material fact for making determination needs to be kept in mind where this Court also needs to bear in mind the necessity of provisional attachment which implicates the doctrine of proportionality Page 57 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined which mandates the existence of approximate or live link between the need for attachment and the purpose which it is intends to secure. It postulates the maintenance of proportionality between the nature and extent of attachment and the purpose which is sought to be served. The mandatory requirement of furnishing the opportunity to the person whose property is attached is in consonance with the principle of natural justice which ensures a fair procedure.
12.1. Rule 159(5) provides for post-provisional attachment right of submitting objections to the attachment and opportunity of being heard. This well laid down principles when applied to the facts in the instant case, it can be said that the subsequent extension of provisional attachment on 09.02.2021 after the first order of 27.02.2020 appears to be because the investigation against the petitioner in respect of the taxation of service tax and GST continued. There are different accounts referred to in the said order and the branch manager IndusInd Bank, Vadodara has been directed to allow only credit/deposit into the account and not to allow any debit or withdrawal exercising the powers under Section 83.
Likewise, the Yes Bank and other banks, by similarly worded directions of the self same dates' letters, have been intimated Page 58 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined and directed to provisionally attach bank accounts. There is no whisper on the part of the petitioner of non-availment of the opportunity in the post provisional attachment period, at the same time, this Court notices that investigation is continuing for a long time. The charge-sheet is also late in case of the present petitioner and his release on regular bail also is following the part of the record while holding that this petition is maintainable and also holding that there appears to be prima facie material for passing an order of provisional attachment exercising the powers under Section 83 of the Act, the score of the opinion that entire investigation since is continued for a long time, let the same be wound up in three (03) months' period. If the opportunity of hearing has been missed the second time in post provisional attachment order let the same be effected to the petitioner and if the same has been allowed, the investigation be completed in three months period while not interfering with the attachment provisionally made the score of the opinion that if investigation is not completed within the said period, attachment shall need to go thereafter.
13. Provisional attachment of bank account without passing Page 59 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined any fresh order after expiry of statutory period that too without compliance of necessary formalities would not be endorseable. The attachment of the bank account after expiry of prescribed period without passing fresh orders would surely be illegal in violation of rights of Assessee for carrying on business under article 19 of the Constitution of India as was held by the Calcutta High Court in case of Amazonite Steel Private Limited vs. union of India (supra). However, even after expiry of one-year period as prescribed under the law, it is incumbent upon the authorities to release the provisional attachment by informing the bank on issuance of a fresh order of provisional attachment since the very purpose for which this exercise of provisional attachment was done is not completed. Here one finds that after the expiry of one year period, the authority has issued the fresh order of provisional attachment, such action of the authority, therefore, when challenged though shall need to be looked at cautiously for this being draconian powers, while directing the authority to complete and wind up its Proceedings of investigation in three months as the charge-sheet also has been filed against the petitioner within a specific time period, extension since has come by a specific order, the very action Page 60 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023 NEUTRAL CITATION C/SCA/3621/2021 CAV JUDGMENT DATED: 24/02/2023 undefined of attachment cannot be interfered with.
14. The petition accordingly stands disposed of.
(SONIA GOKANI,CJ) (NISHA M. THAKORE,J) Bhoomi Page 61 of 61 Downloaded on : Sun Sep 17 22:10:54 IST 2023