Gujarat High Court
M/S Sushant Steel Through Proprietor ... vs State Of Gujarat on 21 February, 2023
Author: Sonia Gokani
Bench: Sonia Gokani
NEUTRAL CITATION
C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 7767 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 ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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M/S SUSHANT STEEL THROUGH PROPRIETOR VINODKUMAR NAGINA
GUPTA
Versus
STATE OF GUJARAT
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Appearance:
MR. HARDIK V VORA(7123) for the Petitioner(s) No. 1
for the Respondent(s) No. 3
DS AFF.NOT FILED (N) for the Respondent(s) No. 2
MS MAITHILI MEHTA ADDIL. GOVERNMENT PLEADER for the Respondent(s) No. 1
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CORAM:HONOURABLE THE CHIEF JUSTICE MS. JUSTICE
SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 21/02/2023
ORAL JUDGMENT
(PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE)
1. The petitioner herein is a proprietary firm trading in scrap of copper, brass, aluminum, plastic etc and having valid registration Page 1 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined under the Central Goods and Services Tax Act, 2017 ( in short, "CGST Act, 2017") . The petitioner (hereinafter referred as the 'Firm'), has invoked extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India and has prayed for following reliefs.
2. The summary of the facts are reproduced as under :
2.1 On 16.06.2020, the respondent No. 2 had issued summons thereby calling upon the petitioner firm to furnish the sales bill of dealer 'Nox Enterprise' ( hereinafter referred as 'dealer'). In response to the aforesaid notice, the petitioner firm had appeared before the respondent authority whereby his statement was recorded on 09.07.2020. On 23.07.2020, the petitioner firm submitted documents in the nature of purchase register and photocopies of invoices from Nox Enterprises.
2.2 On 23rd September, 2020, the proper officer had issued intimation Form GST DRC-01A under Section 74(5) of CGST Act, 2017 about the purchase transactions amounting to Rs.
2,83,77,650/- with Nox Enterprise was alleged to be entered Page 2 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined without receiving physical goods and ITC of Rs. 43,28,793 was wrongly availed along with interest at the rate of 24% amounting to Rs. 21,55,507:00 and penalty at the rate of 15% amounting to Rs. 6,49,319:00 was taken into consideration. Thus, liability of an amount of Rs 21,55,507/- along with penalty at the rate of 15 per cent amounting to Rs. 6,49,319/- was imposed on the petitioner firm.
2.3 The petitioner firm was thereafter served with show cause notice in the Form GST DRC-01 dated 05.10.2020 under Section 50(3) of the CGST Act, 2017 thereby calling upon the petitioner firm as to why the aforesaid levy of interest and penalty may not be imposed upon the petitioner firm. In response to the aforesaid show cause notice, the petitioner firm had submitted the details in the nature of FORM GST DRC-06 on 06.10.2020.
2.4 It is the case of the petitioner firm that without considering the aforesaid submissions, the respondent authority on the same day i.e. 06.10.2020 without intimating the petitioner firm, had issued notice to the Manager of Union Bank of India in exercise of power conferred under Section 83 of the CGST Act, 2017 thereby Page 3 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined informing about the provisional attachment of the bank account bearing No. 369801010029171. It is further alleged that the respondent authority had also issued a provisional attachment order in respect of the business and the residential property of the petitioner firm by issuing notice dated 08.10.2020. 2.5 The petitioner firm had raised objection vide letter dated 16.10.2020, however, by non-speaking order in the FORM GST DRC-07, the respondent ones again raised demand of tax of Rs. 43,28,794/- with interest of an amount Rs. 23,03,516/- and penalty of Rs. 43,28,794 - thereby totaling to an amount of Rs. 1,09,61,104/-.
2.6 The petitioner had once again vide letter dated 20.01.2021 requested the respondent authority to release the bank attachment in order to facilitate the petitioner firm to approach appellate authority by filing appeal as the petitioner firm was under obligation to deposit 10 percent of the aforesaid tax amount as predeposit. 2.7 The respondent authority permitted the petitioner firm for withdrawal of the 10% amount from the provisionally attached Page 4 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined bank account in order to enable the petitioner firm to pay 10 per cent of the predeposit amount of disputed tax to avail the remedy of appeal. The petitioner firm had approached the Appellant Authority by filing an appeal which was filed on 20.02.2021 and the same is pending consideration.
2.8 In view of the aforesaid facts and circumstances of the case, the petitioner firm had made repeated requests for the restoration of the provisional attachment, however the respondent authorities have failed to act or respond to the same and hence the petitioner firm having left with no remedy has approached this court by present petition under Article 226 read with Articles 14, 19(1)(g) of the Constitution of India.
3. The petitioner Firm has prayed for following reliefs :
1. A writ of certiorari or any writ , order or direction in the nature of certiorari quashing the notice of provisional attachment under section 83 of the Act for provisional attachment and directing the respondents to release Bank account No. 3698010102917 with Union Bank of India and residential property located at 1408 Vrindavan Society, GIDC Antalia and business property at 24 B/h Rolastar, GIDC, Antalia.
2. Pending hearing and final disposal of this petition, may please direct the respondent to release Bank account no.
36980101002917 with Union Bank of India and residential property located at 1408 Vrindavan Society, GIDC, Antalia Page 5 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined and business property at 24, B/h Rolastar, GIDC, Antalia.
4. The petitioner firm has subsequently preferred draft amendment, which has been allowed vide oral order dated 25 August, 2021. The petitioner firm has placed on record the subsequent development whereby it is contended that the respondent has issued new notice in Form GST DRC-16 on 30.07.2021 for attachment and sale of the aforesaid 2 immovable properties of the petitioner firm. It is further contended that the respondent authorities action of continuing provisional attachment is without authority as they have failed to take into consideration the aspect of pending appeal and the statutory provisions more particularly Section 107(7) of the CGST Act, which otherwise raises the presumption of stay of the order in question upon pre- deposit of 10 percent of the disputed tax pending the statutory appeal. It is further submitted that the petitioner has responded to the said new notice by tendering a detailed reply vide letter dated 3.08.2021. The petitioner firm had further amended prayer seeking direction to quash and set aside the said impugned notice of final attachment dated 30.07.2021 issued under section 79 of the CGST Act, 2017 and by interim relief has sought for stay of the Page 6 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined said attachment notice as well as consequential notices from Talati, Antalia, GIDC, Navsari.
5. Considering the grounds raised in the petition by the petitioner firm, this Court had issued notice vide oral order dated 24.06.2021 and in response to the same, the respondent authorities have entered appearance through the office of the government pleader.
6. The respondent authorities more particularly the Assistant Commissioner of State Tax (4) (Enforcement), Div-8, Surat has filed an affidavit in reply. The respondent authority has placed on record the Communication dated 5.07.2021 addressed by the Deputy Collector, Stamp Duty Valuation Office, Navsari to the Assistant State Tax Commissioner, Enforcement, Division-8, Surat with regard to the valuation of properties. The respondent authority has vehemently objected the prayers sought for in the petition, and has further drawn attention of the Court that the respondent authority has duly complied with the procedure envisaged under the CGST Act, 2017 before passing the impugned order of attachment under Section 83 of the CGST Act. It is further submitted by the respondent authority that in spite of giving time of Page 7 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined 111 days from the date of issuance of summons dated 16.06.2020 given to the petitioner firm, the petitioner frim had failed to produce reliable proof of purchase made from M/s. Nox Enterprise. The petitioner firm was called upon by specifying the necessary documents to be furnished with regard to the purchase transactions with M/s Nox Enterprise (GSTIN:
24APCPK9004R1ZL). The petitioner firm had submitted limited documents which include purchase ledger, e-way bills, lorry receipt and photocopies of invoices from Nox enterprise, however, the petitioner firm had failed to furnish other relevant documents so sought for. In absence of the necessary details so called for, the respondent authority was convinced that the so called purchase transactions amounting to Rs. 2,83,77,650/- done with M/s Nox Enterprise was a fraudulent transaction without receiving physical goods from them and the petitioner firm had wrongly availed ITC of Rs. 43,28,793. Accordingly, the department had proceeded to issue DRC 01(show cause notice ) dated 05.10.2020 intimating the petitioner firm that tax liability of the petitioner firm was fixed along with interest and penalty.
7. The respondent authorities have further referred to the Page 8 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined provisions envisaged under Section 50(3) of the CGST Act along Section 74(5) of the CGST Act, 2017 and has further submitted that the petitioner firm was ones again provided with opportunity to furnish relevant documents by issuing DRC 01, dated 24 August, 2020, however, the petitioner firm has failed to produce relevant documents. As the tax liability of the petitioner firm was more than Rs. 1 crore, the respondent authorities were convinced to pass the impugned order of provisional attachment in exercise of power conferred under Section 83 of the CGST Act by issuing order in the Form of DRC-22. The properties of the petitioner firm were verified whereby for the reasons recorded in the impugned order of provisional attachment, the respondent authorities have passed the order of provisional attachment on two bank accounts of the petitioner firm along with two properties.
7. The aforesaid submissions of the respondent authorities has been disputed by the petitioner firm by filing rejoinder affidavit dated 13th July, 2021. Subsequently, an affidavit in reply to the draft amendment has been responded by the State Tax Officer (2), Unit-71. The said respondent authority has drawn attention of this Court that the draft amendment challenging the issuance of DRC-Page 9 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023
NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined 16 was issued on two immovable properties of the petitioner firm which are described as follows:
1. Land bearing revenue survey No. 910(1005) situated at village Antalia, District Navsari.
2. Land bearing revenue survey No. 1119(1255) situated at village Antalia, District Navsari.
The attention of this Court was further drawn to the fact that so far as the order dated 16th July, 2021 passed by this Court regarding lifting of provisional attachment on the bank account is concerned, the respondent authority had in fact vide order dated 11th February, 2021 had already lifted attachment over the aforesaid two bank accounts by issuing order in Form DRC-23. However, the attachment qua two aforesaid immovable properties is concerned, the respondent authority had issued DRC-16 whereby charge is intimated to be created over the immovable property under Rule 142 read with section 79 of the CGST Act, 2017. The respondent authority had informed the Mamlatdar concerned to create charge over the aforesaid two properties vide communication dated 26.10.2020. It is further submitted that the tax liability as determined by the respondent authority qua the petitioner amounts to Rs. 1,09,61,102 as against that the value of the aforesaid two Page 10 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined immovable properties under provisional attachment which is worth Rs. 71,27,109. Thus, considering the aforesaid tax liability of the petitioner firm and coupled with the fact that the petitioner does not have any other immovable property, the respondent authority has issued DRC-7 by passing detailed order on 16th July, 2021, which is under challenge in the form of appeal under Section 107 of the GST Act. Thus, the respondent Authorities have objected to not to grant any of the reliefs as prayed for by the petitioner as removal of charge over the aforesaid two immovable properties would prejudicially affect the revenue of the State which is required to be protected pending appeal before the appellate forum.
8. It would be necessary to refer to the order dated 16.07.2021, passed by this Court pending the present petition which reads as under:
"1. Heard, the learned advocates for the parties for some time. Learned advocate Mr. Hardik Vora for the petitioner has relied upon the decision of the Supreme Court in the case of M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Others, AIR 2021 SC 2114 and submitted that the petitioner having filed the appeal under section 107 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "the said Act") against the order of assessment and also having paid the amount of predeposit as required under sub-section (6) of section 107 of the said Act, the provisional attachment made under section 83 of the said Act Page 11 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined cannot be continued in view of the said judgment of the Supreme Court, however, learned AGP Ms. Dhwani Tripathi with Mr. Utkarsh Sharma have drawn the attention of the Court that section 83 of the said Act has been amended and a new section 83 has been substituted in place of the present one by the Finance Act, 2021, however, they still have to verify the date of the notification of the said amendment. According to them, the newly substituted section 83 would have a wide repercussion and therefore, some time may be given to verify the position as to whether the said new provisions have come into force or not.
2. In view of the above, put up on 30th July 2021. 2.1 However, considering the affidavit-in-reply filed by the respondent to the effect that the petitioner firm is liable to pay the tax with interest and penalty, in aggregate Rs.1,09,61,102/- and the department has attached the movable and immovable properties to the tune of Rs.75,48,541/-, which include the attachment of two bank accounts i.e. of Union Bank of India account, having balance amount of Rs.4,16,050/- and Canara Bank account with balance of Rs.5,386/- and two other immovable properties worth Rs.55,37,123/- and Rs.15,89,982/- respectively, the Court is of the opinion that the interest of the Revenue would still remain substantially protected even if, at present, without going into the merits of the case, the provisional attachment in respect of two bank accounts is removed. It may be noted that the petitioner has already deposited the amount of deposit for filing the appeal under section 107 of the said Act.
3. In that view of the matter, without going into the merits of the other issues involved in the petition, at present, the provisional attachment in respect of the bank account No. 369801010029171 (Current Account) of the Union Bank of India and the bank Page 12 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined account No. 3809201000037 (Current Account) of the Canara Bank is removed. The provisional attachment in respect of the two immovable properties shall continue."
9. The petitioner firm has also filed an affidavit in rejoinder to draft amendment dated 14th October, 2021 thereby disputing the impugned order by contending that the petitioner firm is not liable towards tax liability. The petitioner firm has referred to the show cause notice dated 23rd September, 2020 and 5th October, 2021 issued by the respondent Authority and has further contended that the adjudicating authority was under obligation to specify the nature of documents, required from the petitioner firm, however, there is no mention about non submission of any document as contended by the respondent authority in their affidavit in reply. It is further contended that the petitioner firm has bonafidely entered into purchase transaction with M/s Nox Enterprise having found to be a genuine registered dealer under the GST and it was not possible for the petitioner firm to ascertain as to whether M/s Nox Enterprise had actually paid tax in respect of purchase made by the petitioner firm. It is therefore contended that the petitioner firm being bonafide purchaser and no material being found linking petitioner firm to be in collusion with the seller, the respondent Page 13 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined authority could not have imposed tax liability with interest and penalty. The petitioner firm has referred to and relied upon the decision of the Hon'ble Supreme Court in the case of M/s Radha Krishan Industries Vs. State of Himachal Pradesh and Ors. Reported in 2021 SCC online 334 and has thereby contended that the respondent authority is under legal obligation to form an opinion before passing provisional attachment order under Section 83 of the CGST Act and in absence of the communication of any opinion or reasons being recorded or communicated to the petitioner firm the order of provisional attachment gets vitiated. It is further contended that even otherwise the order in the Form GST DRC-07 is passed which is non speaking order and no proceedings under Section 74 of the CGST Act are pending. Further having deposited 10 per cent of the disputed tax liability as pre deposit in pending appeal the provisional attachment order under Section 83 has lived its life and the impugned order of provisional attachment passed by the respondent authority is required to be quashed and set aside.
10. The learned advocate Mr. Hardik V Vora for the petitioner has drawn attention of this Court to the grounds raised in the memo of Page 14 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined petition as well as referred to the submissions made in the rejoinder affidavits filed on behalf of the petitioner firm. Mr. Hardik V Vora, learned advocate has vehemently submitted that the respondent authorities could not continue with the provisional attachment over two immovable properties more particularly when Section 107(7) of the CGST Act is explicitly clear in as much as that once the petitioner firm had deposited the pre deposit amount of disputed tax as required under section 107(6), the recovery proceedings for the balance amount shall be deemed to be stayed. The learned advocate for the petitioner has further taken this Court to the order passed by the Commissioner of Provisional Attachment and has further contended that no reason has been recorded by the Commissioner reflecting the opinion formed before passing the order of provisional attachment. The learned advocate for the petitioner has further referred to the notification dated 28th March, 2021 published in the gazette of India issued by the Ministry of Law and Justice. The attention of this Court is drawn to the amendment brought on the statute book by Finance Act, 2021 in respect of the relevant provisions of CGST Act. The learned advocate for the petitioner has also placed on record the guidelines issued by the Ministry of Finance, Department of Page 15 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined Revenue, Central Board of Indirect Taxes and Customs GST Policy Wing has envisaged vide circular dated 23rd February, 2021. By relying upon the aforesaid circular issued by the Government of India, the learned advocate has drawn attention of this Court about the modalities of implementation of the provisions of Section 83 of the CGST Act, 2017 by the Tax Officers and has thereby contended that the respondent authorities having failed to abide by their own instructions. It is therefore submitted that this being a cyclostyled order without any application of mind and provisional attachment and subsequent creation of charge by the respondent authorities over the business and the residential property of the petitioner firm is required to be quashed and set aside.
11. On the other side learned Assistant Government Pleader Ms. Maithili Mehta has vehemently opposed the grant of relief so sought for in the petition, more particularly with regard to the continuation of provisional attachment in respect of two immovable properties of the petitioner firm. The learned Assistant Government Pleader has referred to and relied upon the submissions made in the affidavit in reply filed by the Assistant Commissioner of State Page 16 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined Tax, Enforcement, Division-8, Surat as well as the State Tax Officer (2), Unit-71, Bilimora. By referring to the order impugned, it is mainly submitted by the learned Assistant Government Pleader that the respondent authorities have acted in terms of the powers provided under the statute and have duly complied with the procedure as contemplated under the relevant provisions of CGST Act. It is further submitted by the learned Assistant Government Pleader that sufficient opportunity was given to the petitioner firm and the petitioner firm was specifically asked to furnish total 11 documents in order to ascertain the bonafides of the purchase transaction with M/s Nox Enterprise, however, in the absence of the relevant documents and failure on the part of petitioner firm to produce the requested document, the respondent authority had reason to believe that the petitioner firm had deliberately entered into fraudulent transaction by receiving bogus bills without actual receipt of goods from dealer M/s Nox Enterprise and such transactions was entered upon with an intention to avoid payment of tax. It was further submitted that in spite of opportunity being given to the petitioner firm, only purchase bills were produced on record without showing any supporting documents as regards actual movement of goods and having availed tax credit on these Page 17 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined bogus bills, the government revenue had suffered drastically. Thus with this material being placed before the respondent authority, the offense under Section 74 of CGST Act, 2017 was committed by the respondent firm which has resulted into imposition of tax liability with 24 percent interest as per Section 50(3) of the CGST Act and 100 percent penalty as per 74(5) of CGST Act, 2017. It was further submitted that since the total tax liability having exceeded the amount of Rs. 1 crore, the respondent department was constrained to pass order of provisional attachment in terms of Section 83 of CGST Act. It is further submitted by the learned Assistant Government Pleader that sufficient opportunity was given to the dealer. In fact, the report of valuation was called for from the office of Deputy Collector (Stamp Duty), Navsari and having considered the same, the respondent authority had found that the total value of provisionally attached property was much less than the total tax liability as determined by the adjudicating authority. The learned Assistant Government Pleader has admitted that the dealer has preferred an appeal before the appellate forum and by order dated 15th February, 2021 had permitted the petitioner to withdraw 10 percent of the tax liability amount and thereafter by issuing DRC 22 under Section 83 of the CGST Act, Page 18 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined on 15th February, 2021 the provisional attachment over the properties in question had continued. The learned Assistant Government Pleader has further reiterated the provisions more particularly of Section 107(7) of the CGST Act. It is further emphasized by the learned Assistant Government Pleader that though the word "stay" means recovery of proceedings cannot be continued in terms of the ascertained tax liability, ones the appeal has been filed, however, the measures taken for protection of government tax revenue before the order is stayed deserves to remain the same. The learned Assistant Government Pleader has emphatically objected to the removal of charge over the immovable properties and has requested this Court to not to grant any relief to the petitioner firm.
12. We have heard advocate Mr. Hardik Vora for the petitioner and Ms. Maithili Mehta, learned Assistant Government Pleader who has appeared on behalf of respondent State authorities, at length.
13. At the outset, we take notice of a few undisputed facts as emerged from the record. The writ jurisdiction of this court was invoked at the stage challenging provisional attachment order Page 19 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined issued in the month of October, 2020 which was passed by the Assistant Commissioner of State Tax(4), Enforcement, Div.-8, Surat. The captioned writ petition was filed on 3rd June, 2021. It transpires from the record that simultaneously proceedings against the petitioner firm were initiated by the proper officer under section 74(1) of the CGST Act for determination of tax credit wrongly availed or utilized by the petitioner firm by fraud. The show cause notice was issued upon the petitioner firm on 23.09.2020. The order of provisional attachment qua the immovable properties was passed on 06/08.10.2020. The petitioner firm was served with GST DRC-07 vide order dated 16.01.2021. Initially, the representation was made on 20.01.2021 to the respondent authorities to lift provisional attachment qua bank accounts in order to deposit the amount 10% as required to be furnished as predeposit at the stage of filing of appeal under section 107(7) of the Act. The Appeal has been preferred on 20.02.2021 before the Appellate authority in FORM GST APL-01. In the appeal, the petitioner firm has claimed to have done bonafide transaction with the NOX enterprise and has claimed to have maintained documents as required under Rule 56(1) and 56(2) and has contended that there is no difference between credit availed in Form GSTR-3B and credit made Page 20 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined available by supplier and auto-populated in Form GSTR-2A. In absence of any documents witnessing default of tax by NOX enterprise, it is submitted that no demand would lie against the petitioner firm. The petitioner firm had approached the respondent authority to lift attachment as no proceedings of any nature as referred under section 83 were pending and in fact final order had been passed under section 79 of the Act on 30.07.2021. The attention of the authorities was drawn to the status of appeal reflecting payment of Rs. 4,32,880 towards predeposit to be made at the stage of filing of appeal as per section 107(6) of the Act.
13. In light of the aforesaid facts, the question which arises for our consideration is whether the provisional attachment in respect of the immovable properties of the petitioner firm can be continued, once the show cause notice issued under section 74 of the Act has culminated into final order of assessment and is pending adjudication in appeal, where requisite pre deposit amount of the tax dues in terms of section 107(6) has been deposited by the petitioner firm.
14. In this regard, if one looks at the statutory provisions of the Act, Page 21 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined Section 83 confers power on the tax authorities to provisionally attach the properties of the assessee, including bank accounts. The bare reading of section 83 gives a brief indication of the scope of the said section. The heading of the said section provides for "provisional attachment", "to protect revenue", "in certain cases". The said provision of section 83 reads thus :
"SECTION 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)."
The object of the said provision is to secure / protect the interest of the revenue. In a way it is a drastic power as it confers discretion upon the authority to proceed ex-parte to provisionally attach the property of the assessee, merely on prima facie case where the conclusion as to main proceedings is likely to be decided in near future. Thus, the powers conferred under section Page 22 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined 83 has to be sparingly exercised and it puts stringent conditions of opinion to be formed by the authority based on tangible material.
15. From the events mentioned earlier, it is found that the proceedings under section 74 of the Act were initiated against the dealer NOX enterprise wherein initially summons were issued upon the petitioner firm on 16.06.2020. The petitioner firm had responded to such summons and thereafter, proceedings against the petitioner firm were initiated under section 74 of the CGST Act by issuing show cause notice dated 23.09.2020. The order of provisional attachment under section 83 was passed pending such proceedings under section 74 ie. on 6/8.10.2020. However, so far as condition precedent for exercising such powers by the authority ie. the opinion formed by the authority based on tangible material is concerned, it is evident that various opportunities were given to the assessee firm to produce relevant documents during adjudication proceedings under section 74 of the Act. While issuing show cause notice dated 23.09.2020 in the form of DRC 01A, followed by FORM GST DRC-01 dated 05.10.2020 the proper officer has in detail given a summary of grounds. It transpires that during the investigation, search was conducted at Page 23 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined the premises of NOX enterprise. The documents collected revealed transactions with the present petitioner firm, whereby summons were issued upon the petitioner firm to submit supporting documents regarding the purchase made from said dealer. The petitioner had appeared before the respondent authority, however, had failed to lead direct evidence like sales register, payment made to transporter, purchase order copy, gate pass, payment made to dealer, bank statement. The affidavit filed by the Assistant Commissioner of State Tax has referred to DRC- 01A to indicate the reasons to believe that deliberately fraudulently the petitioner firm had received bogus bills without actual receipt of goods from M/s. NOX enterprise with an intention to avoid payment of tax and has intentionally set off this wrongly availed ITC against the tax liability, resultantly causing loss to government exchequer. During investigation, it has transpired that no business activity is actually carried out by M/s. NOX enterprise. Thus, the proper officer has formed an opinion based on the material which has emerged during the preliminary proceedings conducted at the stage of DRC-01A. In our opinion, prima facie it appears that in absence of clarification by producing sufficient documents, the authority had valid reasons to believe that the petitioner firm has Page 24 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined acted prejudicial to the interest of revenue by involving in bogus billing of sale / purchase without physical movements of goods and fraudulently availed ITC credit. The reliance placed upon by the learned advocate on the legal principles laid down in the case of M/s. Radha Krishan Industries (supra), deals with a situation where the Hon'ble Supreme Court took notice of the facts that the third respondent under delegated powers of the Commissioner of Sales and Tax , under GST Act, had issued order of provisional attachment under section 83 on 20.10.2020, even before the initiation of proceedings pursuant to the show cause notice dated 27.11.2020, under section 74 of the Act. The relevant observations of the Hon'ble Supreme Court as recorded in para 67 and 68 are reproduced as under :
"67. The order of provisional attachment under Section 83(1) is to be issued "during the pendency of any proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74". In the present case, the notice to show cause under Section 74(1) of the HPGST Act was issued to the appellant on 27 November 2020. After the High Court dismissed the writ petition, this Court was moved under Article 136 of the Constitution. Notice was issued in the Special Leave Petition on 4 February 2021 returnable on 19 February 2021. A day before the case was listed, on 18 February 2021, an ex parte order was passed by the Joint Commissioner under Section 74 (9) of the HPGST Act confirming the demand of Rs 8,30,27,218 in the notice to show cause.Page 25 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023
NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined 68 It is evident from the facts noted above that the order of provisional attachment was passed before the proceedings against the appellant were PART D 56 initiated under Section 74 of the HPGST Act. Section 83 of the Act requires that there must be pendency of proceedings under the relevant provisions mentioned above against the taxable person whose property is sought to be attached. We are unable to accept the contention of the respondent that merely because proceedings were pending/concluded against another taxable entity, that is GM Powertech, the powers of Sections 83 could also be attracted against the appellant. This interpretation would be an expansion of a draconian power such as that contained in Section 83, which must necessarily be interpreted restrictively. Given that there were no pending proceedings against the appellant, the mere fact that proceedings under Section 74 had concluded against GM Powertech, would not satisfy the requirements of Section 83. Thus, the order of provisional attachment was ultra vires Section 83 of the Act."
In the present case as noticed earlier, the powers have been exercised by the proper officer pending the proceedings under section 74(1) of the Act against the petitioner firm. Thus, the exercise of power of provisional attachment exercised by the respondent authority to protect the interest of revenue under section 83 of the Act cannot be termed as invalid or without authority.
15. It further transpired from the record that the proper officer has issued show cause notice upon the petitioner firm in compliance of Rule 159 whereby the petitioner firm had submitted objections Page 26 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined dated 16.10.2020 to FORM GST DRC-22. The petitioner firm had out-rightly disputed their involvement with defaulting dealer M/s. NOX enterprise and had submitted to go for appeal, for which request was made to lift the attachment on bank accounts to comply with the mandatory provision of 10% pre-deposit. The authority claims that the attachment qua bank account was lifted vide DRC-23 dated 11.02.2021, which facilitated pre-deposit of 10% amount viz. Rs.4,32,879 before the Appellate Forum. However, the fact remains that pursuant to the order dated 16.07.2021 passed by this Court, the provisional attachment qua bank accounts stands lifted.
16. Now, in this backdrop so far as contention raised with regard to stay of demand pending the appeal under section 107 of the CGST Act is concerned, indisputably the petitioner firm has made pre pre-deposit before the Appellate Authority representing 10% of the tax dues. At this stage, apt would be to refer to relevant subsection of section 107 of the CGST Act, which reads as under :
"SECTION 107 :
"107. Appeals to Appellate Authority.--(1) Any person aggrieved by any decision or order passed under this Act or the Central Goods and Services Tax Act, 2017 (No.12 of 2017) by an adjudicating authority may appeal to such Page 27 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person."
Sub section (6) stipulates : "(6) No appeal shall be filed under sub-section (1), unless the appellant has paid-- (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
(b) a sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed."
Sub-Section (7) stipulates that : "(7) Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed."
Thus, on plain reading of the clause (a) of sub-section (6) of section 107 provides that no appeal shall be filed without the payment in full, of such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order as is admitted. In addition under clause (b), ten percent of the remaining amount of tax in dispute arising from the order has to be paid in relation to which appeal has been filed. subsection (7) stipulates that where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed.
17. The issue on hand in the present case with regard to effect of Page 28 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined finalization of section 74 and pending appeal under section 107 on provisional attachment is no more res integra in view of the ratio laid down by the Hon'ble Supreme Court in the case of Radha Krishnan Industries ( supra ). The relevant observations of the Hon'ble supreme court reads thus :
"72. For the above reasons, we hold and conclude that
(i) The Joint Commissioner while ordering a provisional attachment under section 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected under Section 5(3) and an appeal against the order of provisional attachment was not available under Section 107 (1);
(ii) The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable;
(iii) The High Court has erred in dismissing the writ petition on the ground that it was not maintainable;
(iv) The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled;
(v) The exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the government revenue.
Before ordering a provisional attachment the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting Page 29 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined the interest of the government revenue.
(vi) The expression "necessary so to do for protecting the government revenue" implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment;
(vii) The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue;
(viii) In the facts of the present case, there was a clear non- application of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal;
(ix) Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards:
(a) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and
(b) An opportunity of being heard; There has been a breach of the mandatory requirement of Rule 159(5) and the Commissioner was clearly misconceived in law in coming into conclusion that he had a discretion on whether or not to grant an opportunity of being heard;
(x) The Commissioner is duty bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attached;
(xi) A final order having been passed under Section 74(9), the proceedings under Section 74 are no longer pending as a result of which the provisional attachment must come to an end; and Page 30 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined
(xii) The appellant having filed an appeal against the order under section 74(9), the provisions of sub-Sections 6 and 7 of Section 107 will come into operation in regard to the payment of the tax and stay on the recovery of the balance as stipulated in those provisions, pending the disposal of the appeal.
73. For the above reasons, we allow the appeal and set aside the impugned judgment and order of the High Court dated 1 January 2021."
In facts of the present case the question arises as to what would be the status of provisional attachment dated 06/ 08.10.2020 as ultimately the proceedings initiated under section 74 of the CGST Act, 2017 has ended in demand order issued in FORM GST DRC- 07, dated 16.01.2021. As held by the Hon'ble Supreme Court, the provisional attachment comes to an end once the final order of assessment is passed under section 74(9) of the Act, 2017. In facts of the case, before the period of one year could have expired of provisional attachment ie. from order dated 08.10.2020, the order of assessment came to be passed on 16.01.2021, however the attachment order in the form of notice DRC-16 raising demand of Rs. 1,09,61,102 : 00, came to be issued on 19,07,2021, which is pending the appeal. The question then arises for consideration is to safeguard the interest of the revenue, once there is an Page 31 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined adjudication on the fraudulent availment of input tax credit and an order of assessment, pending consideration in appeal. In our view, the legislation has provided an inbuilt mechanism under the Act itself. Section 84 of the CGST Act, 2017 pertains to Continuation and validation of certain recovery proceedings. The same reads as under :
"SECTION 84 : Continuation and validation of certain recovery proceedings : Where any notice of demand in respect of any tax, penalty, interest or any other amount payable under this Act, (hereafter in this section referred to as "Government dues"), is served upon any taxable person or any other person and any appeal or revision application is filed or any other proceedings is initiated in respect of such Government dues, then--
(a) where such Government dues are enhanced in such appeal, revision or other proceedings, the Commissioner shall serve upon the taxable person or any other person another notice of demand in respect of the amount by which such Government dues are enhanced and any recovery proceedings in relation to such Government dues as are covered by the notice of demand served upon him before the disposal of such appeal, revision or other proceedings may, without the service of any fresh notice of demand, be continued from the stage at which such proceedings stood immediately before such disposal;
(b) where such Government dues are reduced in such appeal, revision or in other proceedings--
(i) it shall not be necessary for the Commissioner to serve upon the taxable person a fresh notice of demand;
(ii) the Commissioner shall give intimation of such reduction Page 32 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined to him and to the appropriate authority with whom recovery proceedings is pending;
(iii) any recovery proceedings initiated on the basis of the demand served upon him prior to the disposal of such appeal, revision or other proceedings may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal."
At this stage, it would be equally important to refer to section 81 of the CGST Act, 2017. The same reads thus :
"SECTION 81 : Transfer of property to be void in certain cases :
Where a person, after any amount has become due from him, creates a charge on or parts with the property belonging to him or in his possession by way of sale, mortgage, exchange, or any other mode of transfer whatsoever of any of his properties in favour of any other person with the intention of defrauding the Government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the said person: Provided that, such charge or transfer shall not be void if it is made for adequate consideration, in good faith and without notice of the pendency of such proceedings under this Act or without notice of such tax or other sum Page 33 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined payable by the said person, or with the previous permission of the proper officer."
The legislation has also provided further safeguard by incorporating section 82 which provides priority of charge of tax dues over the property of the assessee. The same reads thus :
"Section 82- Tax to be first charge on property Notwithstanding anything to the contrary contained in any law for the time being in force save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, any amount payable by a taxable person or any other person on account of tax, interest or penalty which he is liable to pay to the Government shall be a first charge on the property of such taxable person or such person."
In light of the aforesaid provisions, we are of the view that the amount determined by the respondent authorities by raising demand in respect of tax, penalty and interest under section 74(9) of the Act, has now qualified as "Government dues". The aforesaid provisions ie. section 81, 82 and 84 shall come into play and shall apply to a taxable person or any other person who is liable to pay tax, interest or penalty to the Government. Any liability to be paid to the Government would be given priority in the matter of effecting recovery by placing a first charge on the property of the taxable Page 34 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined person or any other person. This provision also covers any other person since there are other provisions in the Act, which provide for creating a liability or recovery from a person other than the taxable person like a legal representative, member of partitioned HUF etc. However, once the appeal is filed with pre-deposit of the 10% of the amount of tax disputed, the recovery of the balance amount is stayed by virtue of subsection (7) of section 107 of the Act, 2017 but at the same time mere stay of the recovery shall not be treated as "NIL Demand" which otherwise so determined has already qualified as "Government dues". In fact, the adjudication of "Government dues" is at large under consideration in appeal. The object of provisions like provisional attachment pending assessment or creation of charge at the end of determination of assessment at the end of proceedings, over the properties of assessee, has been incorporated to safeguard the interest of revenue and has been annexed with the rights of the assessee to his properties. In such circumstances, the outcome of appeal governs the ultimate realization of the "Government dues" vis-a-vis the rights of the assessee annexed with it's properties. At this stage, apt would be to refer to provisions of section 52 of the Transfer of Property Act. The doctrine of Lis Pendens is strictly Page 35 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined based on the theory of necessity rather than on the theory of notice governed by the principles enshrined in common law, namely Justice, Equity and Good Conscience. The same principle is embedded in section 107 of the Act, 2017, on one hand legislation provides for stay against recovery by providing right of appeal to the assessee on pre-deposit of the amount of tax but at the same time sections 81, 82 and 84 makes the right of the assessee annexed with his property subject to such proceedings, thereby securing the interest of the revenue without causing injuries to either parties. Thus, in our opinion though the provisional attachment ceases to apply over the properties but at the same time the principle of lis pendens will always apply to the properties of the assessee, once the "Government dues" stands crystallized.
18. In view of the aforesaid legal position, we are of the view that the petitioner firm on filing of appeal under section 107 with the pre deposit of the part of tax amount as required under sub section (6) of section 107, the deeming fiction provided under sub section (7) of the section 107 shall come into play. Thus, the recovery of the balance is deemed to be stayed under the provisions of sub section (7). Also, as observed herein above the proper officer has Page 36 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023 NEUTRAL CITATION C/SCA/7767/2021 JUDGMENT DATED: 21/02/2023 undefined rightly invoked jurisdiction under section 83 of the Act by provisional attachment of the property at relevant stage, however, the proceedings initiated under section 74 of the Act has resulted into final order of assessment which is under consideration in pending appeal. We are of the view that appeal is a continuation of the original proceedings. Our attention was invited by the petitioner to the notice for attachment and sale of immovable property being issued by the authority in FORM GST DRC-16 on 30.07.2021, which is passed pending the appeal which was filed on 20.02.2021. Thus, in the facts of the case considering sub section (7) of section 107 of the act, there shall be stay against the aforesaid notice dated 30.07.2021 under section 79 pending the adjudication of appeal. For the reasons recorded, the petition partly succeeds and is allowed in the aforesaid terms.
(SONIA GOKANI,CJ) (NISHA M. THAKORE,J) Y.N. VYAS Page 37 of 37 Downloaded on : Sun Sep 17 22:04:56 IST 2023