2020 (10) TMI 759 - HC - GST

Court quashes GST attachment order, allows department to act afresh

M/s. Meenakshi Trendz Through Its Partner Ratan Kumar Saraf Versus State of Gujarat

The court partly allowed the writ application by quashing the provisional attachment order in Form GST DRC-22 dated 27.07.2020 under Section 83 of the Act ... Provisional attachment of the immovable property - residential premises - Direction to respondent to transfer the proceedings to the CGST department - Section 83 of GST Act - HELD THAT:- Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a precondition to the formation of opinion. The use of the word “may” indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, though subjective, must be based on some credible material disclosing that is necessary to provisionally attach the goods or the bank account for the purpose of protecting the interest of the government revenue. The statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings. “Belief” is a mental operation of accepting a fact as true, so, without any fact, no belief can be formed. It is equally true that it is not necessary for the authority under the Act to state reasons for its belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed. In the case at hand, Ms. Mehta, the learned A.G.P. appearing for the respondents very fairly submitted that not only the impugned order of provisional attachment is bereft of any reason, but there is nothing on the original file on the basis of which this Court may be in a position to ascertain the genuineness of the belief formed by the authority. The word 'necessary' means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word 'necessary' must be construed in the connection in which it is used. The formation of the opinion by the authority should reflect intense application of mind with reference to the material available on record that it had become necessary to order provisional attachment of the goods or the bank account or other articles which may be useful or relevant to any proceedings under the Act. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. This writ application stands partly allowed - the relief with regard to the order in Form GST DRC-01A is not granted, whereas the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside. Issues Involved:1. Quashing of Form DRC-01A dated 24.07.2020.2. Quashing of the provisional attachment order in Form GST DRC-22 dated 27.07.2020.3. Direction to transfer proceedings to the CGST department.4. Interim reliefs including lifting the attachment of factory premises, staying the operation of Form GST DRC-01A, and preventing coercive action against the petitioner.Issue-wise Detailed Analysis:1. Quashing of Form DRC-01A dated 24.07.2020:The court examined the writ applicant's challenge against Form GST DRC-01A issued on 24th July 2020. The court concluded that it was not inclined to interfere with the order passed in Form GST DRC-01A. Thus, the relief sought by the petitioner to quash this form was not granted.2. Quashing of the provisional attachment order in Form GST DRC-22 dated 27.07.2020:The court scrutinized the provisional attachment order issued under Section 83 of the GST Act in Form GST DRC-22. It was observed that the order was a mechanical exercise of power without any credible material. The court emphasized that Section 83 requires the Commissioner to form an opinion based on material evidence to protect government revenue. The court cited various precedents to highlight that the formation of such an opinion must be based on credible material and not on imaginary grounds. The court concluded that the provisional attachment order lacked the necessary material and intense application of mind. Therefore, the order of provisional attachment of the immovable property was quashed and set aside.3. Direction to transfer proceedings to the CGST department:The writ applicant requested the court to direct the transfer of proceedings to the CGST department, which had already initiated the inquiry. However, the court did not provide a specific ruling on this issue within the judgment.4. Interim reliefs including lifting the attachment of factory premises, staying the operation of Form GST DRC-01A, and preventing coercive action against the petitioner:Given the quashing of the provisional attachment order, the interim reliefs sought by the petitioner regarding lifting the attachment of factory premises and preventing coercive action were rendered moot. The court clarified that the department could take appropriate action afresh, strictly in accordance with the law.Conclusion:The writ application was partly allowed. The order of provisional attachment of immovable property under Section 83 of the Act was quashed and set aside. The relief with regard to the order in Form GST DRC-01A was not granted. The court permitted the department to take appropriate action afresh in accordance with the law. The connected civil application for stay was disposed of accordingly.