2020 (1) TMI 743 - HC - GST

Court quashes provisional attachment orders under CGST Act, stresses need for credible material.

The court allowed the writ application, quashing the provisional attachment orders passed under Section 83 of the CGST Act, 2017, and the order of ... Release of provisionally attached property and bank accounts - Jurisdiction - search and seizure - validity of prohibition order - scope of the powers of the concerned Officer under subsection(2) of section 67 of the Act - whether the order of provisional attachment passed by the Assistant Commissioner in exercise of powers under Section 83 of the GGST Act, 2017, is sustainable in law? HELD THAT:- The issue is no longer res integra, in view of the decision of this Court in VALERIUS INDUSTRIES VERSUS UNION OF INDIA [2019 (9) TMI 618 - GUJARAT HIGH COURT] - A Co-ordinate Bench of this Court, to which one of us, Mr.J.B.Pardiwala, J., is a party had the occasion to consider two questions, (i) the power of Commissioner of State Tax to delegate his powers under Section 83 of the Act to the Assistant Commissioner, and (ii) assuming for the moment that it is permissible for the Commissioner to delegate his powers to the Assistant Commissioner, what is expected of the Assistant Commissioner while exercising his delegated powers under Section 83 of the Act, for the purpose of provisional attachment. The dictum of law, as laid in the decision of this Court in the case of Valerius Industries, can straight way be made applicable to the case on hand. In the case on hand, we looked into the order passed by the Assistant Commissioner of State Tax under Section 83 of the Act - in the case on hand, the order of provisional attachment as well as the order of prohibition are not sustainable on two counts, i.e. (i) the order has been passed by the Assistant Commissioner, and (ii) the order has been passed without any credible materials, available for the purpose of passing such order of provisional attachment. The order of provisional attachment passed by the Assistant Commissioner, so far as the immovable property is concerned is set aside - application allowed. Issues Involved:1. Validity of the warrant of authorization and seizure under Section 67(2) of the CGST Act, 2017.2. Return of seized material.3. Validity of provisional attachment orders under Section 83 of the CGST Act, 2017.4. Quashing of the undated show cause notice issued under Section 74 of the CGST Act, 2017.5. Quashing of the order of prohibition under Rule 139(4) of the CGST Rules, 2017.6. Interim relief to stay the execution of provisional attachment orders and the order of prohibition.Detailed Analysis:1. Validity of the Warrant of Authorization and Seizure under Section 67(2) of the CGST Act, 2017:The writ applicant challenged the warrant of authorization issued under Section 67(2) of the CGST Act, 2017, and the subsequent search and seizure operations conducted on 29.07.2019. The court noted that the search and seizure were undertaken by the authorities in March and April 2019 at the office premises of the writ applicant situated in Ahmedabad and Baroda. The court found that the properties in respect of which the prohibition order was passed were not found at the premises searched, making the attachment beyond the scope of the powers under Section 67(2) of the Act.2. Return of Seized Material:The writ applicant sought the return of the seized material. The court did not specifically address this issue in detail but quashed the provisional attachment orders, which implicitly includes the return of seized material.3. Validity of Provisional Attachment Orders under Section 83 of the CGST Act, 2017:The main issue was the sustainability of the provisional attachment orders passed by the Assistant Commissioner under Section 83 of the CGST Act, 2017. The court referred to the decision in Valerius Industries Versus Union of India, which clarified that the power of provisional attachment under Section 83 is conferred upon the Commissioner and cannot be delegated to the Assistant Commissioner. The court emphasized that the subjective satisfaction required for provisional attachment must be based on credible material, which was lacking in this case. The court found that the order was passed without any credible material and thus quashed the provisional attachment orders for both the immovable property and the bank accounts.4. Quashing of the Undated Show Cause Notice Issued under Section 74 of the CGST Act, 2017:The writ applicant sought to quash the undated show cause notice issued on 01.08.2019 under Section 74 of the CGST Act, 2017. The court did not specifically address this issue in detail within the judgment provided.5. Quashing of the Order of Prohibition under Rule 139(4) of the CGST Rules, 2017:The writ applicant sought to quash the order of prohibition dated 30.07.2019 passed under Rule 139(4) of the CGST Rules, 2017. The court found that the prohibition order was beyond the scope of the powers under Section 67(2) of the Act and thus quashed the order of prohibition.6. Interim Relief to Stay the Execution of Provisional Attachment Orders and the Order of Prohibition:Pending the final disposal of the application, the writ applicant sought interim relief to stay the execution of the provisional attachment orders and the order of prohibition. The court had earlier granted interim relief by staying the execution of the order dated 30.07.2019 and the attachment of the bank accounts.Conclusion:The court allowed the writ application, quashing the provisional attachment orders passed by the Assistant Commissioner under Section 83 of the CGST Act, 2017, and the order of prohibition under Rule 139(4) of the CGST Rules, 2017. The court clarified that the proceedings under Section 73 of the Act are pending, and the writ applicant must not destroy or secrete any books of account or other documents until the conclusion of the inquiry. The court also noted that if credible material is gathered in the future, the authority may order provisional attachment in accordance with the law.