2020 (3) TMI 1179 - HC - GST

Court Allows Fresh Orders of Provisional Attachment Under Section 83

The court held that both the Principal Additional Director General and Additional Director General are competent to pass orders under Section 83 of the ... Provisional attachment to protect revenue - Competence of Principal Additional Director General and Additional Director General to exercise powers of Commissioner - Cessation of provisional attachment after one year and effect of lapse - Permissibility of fresh provisional attachment orders after expiry of prior order - Balancing protection of revenue and right to carry on business under Article 19(1) and Article 300ACompetence of Principal Additional Director General and Additional Director General to exercise powers of Commissioner - Powers of officers and delegation - Both the Principal Additional Director General, DGGI and the Additional Director General, DGGI are competent to pass orders under Section 83 of the CGST Act, 2017. - HELD THAT: - The Court proceeded from the statutory scheme in which Section 3 expressly equates classes of officers (including Principal Commissioners with Principal Additional Directors General and Commissioners with Additional Directors General) and Section 5 permits exercise of powers by officers in the hierarchical scheme and delegation subject to prescribed conditions. Given the plain and unambiguous wording of Section 3 read with Section 5, the officers who passed the provisional attachment orders fall within the classes authorised to exercise the relevant powers; consequently their orders under Section 83 are within competence of those officers. [Paras 7, 37]Issue answered in favour of the Revenue; the officers who passed the orders were competent.Cessation of provisional attachment after one year and effect of lapse - Balancing protection of revenue and right to carry on business under Article 19(1) and Article 300A - A provisional attachment under Section 83 ceases to have effect after one year; continuing the attachment beyond that period without release or a fresh order violated the petitioners' rights and was contrary to law, warranting costs. - HELD THAT: - Section 83(2) plainly provides that every provisional attachment shall cease after one year. The Court held that the authorities allowed a period of continuance between expiry of the first order and issuance of a subsequent order (from 5 June 2019 to 31 October 2019), during which the bank was not informed and the attachment effectively persisted; that conduct was arbitrary, breached the petitioners' rights to carry on business and deprived them of property without lawful authority. The Court condemned the respondent's failure to either release the attachment or validly reattach in time and imposed costs on the Revenue. The Court emphasised the statutory cessation and remedial protection of fundamental rights in light of the factual continuance of attachment. [Paras 11, 37]Issue answered in favour of the petitioners; the continuance beyond one year without lawful effect was contrary to law and costs were awarded.Permissibility of fresh provisional attachment orders after expiry of prior order - Provisional attachment to protect revenue - A fresh order of provisional attachment under Section 83 may be issued after the prior order has ceased to operate, provided the authority conducts a fresh review and satisfies the requirements of Section 83(1); Section 83(2) does not prohibit fresh orders. - HELD THAT: - The Court interpreted Section 83 literally and strictly but observed that nothing in subsection (2) expressly bars a fresh order after the prior attachment has lapsed. Comparing pari materia provisions and relevant precedents, the Court concluded that while provisional attachment is a drastic power to be exercised sparingly and only after fresh assessment of circumstances, the statutory scheme (including extended time-frames for investigation and adjudication) does not preclude the revenue from issuing a fresh provisional attachment order if the conditions in Section 83(1) are met. The Court clarified that any fresh order must result from an independent assessment and not be a mere mechanical extension of the earlier order; sufficiency of reasons for the particular fresh order was not adjudicated in these petitions. [Paras 31, 34, 36]Issue answered in favour of the Revenue subject to requirement of a fresh, independent satisfaction and review before issuing any fresh provisional attachment.Final Conclusion: The Court held that the officers who issued the provisional attachment orders were competent; that a provisional attachment ceases after one year and the Revenue's continuance of attachment without release or timely fresh order in these matters was unlawful and violated fundamental rights, for which costs were imposed; but a fresh provisional attachment may be lawfully issued after a prior order has lapsed provided a fresh assessment and satisfaction in terms of Section 83(1) is recorded. Issues Involved:1. Competence of the Principal Additional Director General, DGGI, and Additional Director General, DGGI to pass orders under Section 83 of the CGST Act, 2017.2. Validity of an order passed under Section 83 of the CGST Act, 2017, after the expiry of one year.3. Authority to issue fresh or multiple orders of provisional attachment under Section 83 of the CGST Act, 2017.Issue-wise Detailed Analysis:Issue A: Competence of Officers to Pass Orders under Section 83 of the CGST Act, 2017Arguments by Petitioners:- The petitioners argued that Section 83 of the CGST Act, 2017, read with Rule 159 of the CGST Rules, 2017, only empowers the 'Commissioner' to attach property provisionally.- They contended that 'Commissioner' as defined in Section 2(24) of the CGST Act, 2017, does not include the Principal Additional Director General or Additional Director General.Arguments by Respondents:- The respondents argued that Section 3(c) and 3(d) of the CGST Act, 2017, equate the 'Principal Commissioner of Central Tax' with the 'Principal Additional Director General of Central Tax' and the 'Commissioner of Central Tax' with the 'Additional Director General of Central Tax'.- They further argued that Section 5(2) allows an officer of central tax to exercise the powers conferred on any other officer subordinate to him.Court's Analysis:- The court found that Section 3 of the CGST Act, 2017, clearly equates the positions of the Principal Commissioner and Principal Additional Director General, as well as the Commissioner and Additional Director General.- Section 5(2) allows the superior officer to exercise the powers of a subordinate officer, thus validating the orders passed by the Principal Additional Director General and Additional Director General.Conclusion:- The court held that both officers are competent to pass orders under Section 83 of the CGST Act, 2017, and the issue was decided in favor of the Revenue.Issue B: Validity of an Order Passed under Section 83 of the CGST Act, 2017, After the Expiry of One YearArguments by Petitioners:- The petitioners argued that the provisional attachment order dated 5th June 2018 ceased to have any effect after one year, as per Section 83(2) of the CGST Act, 2017.- They contended that the authorities acted illegally by not de-freezing the accounts after one year and by issuing a fresh order on 31st October 2019 without proper service.Arguments by Respondents:- The respondents admitted the error of not issuing fresh orders within time but argued that the investigation was ongoing, and the delay was inadvertent.Court's Analysis:- The court found that the authorities acted illegally by keeping the provisional attachments in effect beyond the one-year period without issuing a fresh order or informing the bank.- Such actions violated the petitioners' rights under Article 19(1) and Article 300A of the Constitution of India.Conclusion:- The court held that the actions of the authorities were illegal and imposed costs of Rs. 5 lakhs on the respondent authorities to be paid to each of the three petitioner companies.Issue C: Authority to Issue Fresh or Multiple Orders of Provisional Attachment under Section 83 of the CGST Act, 2017Arguments by Petitioners:- The petitioners argued that Section 83 does not provide for the issuance of fresh orders of provisional attachment after the expiry of one year.- They relied on various judgments to support the argument that fiscal statutes should be strictly interpreted.Arguments by Respondents:- The respondents argued that there is no bar under Section 83 preventing the issuance of fresh orders of provisional attachment.- They cited judgments from the Gujarat High Court, which allowed fresh orders of provisional attachment under similar provisions of the Gujarat Value Added Tax Act, 2003.Court's Analysis:- The court distinguished the judgments cited by the petitioners, noting that they did not address the issue of fresh orders of provisional attachment.- The court agreed with the respondents' interpretation, noting that Section 83 does not explicitly prohibit fresh orders after the expiry of one year.- The court emphasized that a fresh order should be issued only after a fresh review and assessment of the circumstances.Conclusion:- The court held that fresh orders of provisional attachment could be issued under Section 83 of the CGST Act, 2017, and the issue was decided in favor of the Revenue.Summary of Court's Findings:1. The Principal Additional Director General and Additional Director General are competent to pass orders under Section 83 of the CGST Act, 2017.2. The provisional attachment order ceases to be effective after one year, and the authorities' failure to de-freeze the accounts or issue a fresh order within this period was illegal.3. Fresh orders of provisional attachment can be issued under Section 83 of the CGST Act, 2017, after the expiry of the initial one-year period, provided there is a fresh review and assessment of the circumstances.Epilogue:The court emphasized the importance of balancing the drastic measures under the GST Act, 2017, with the rights of the taxpayers, and highlighted the responsibility of government officials to act within the bounds of the law.