2020 (10) TMI 760 - HC - GST

Court quashes property attachment but upholds tax order; stresses need for credible evidence.

M/s Anjani Impex Versus State of Gujarat

The court partly allowed the writ application, quashing the provisional attachment orders of immovable properties under Section 83 of the Act but not ... 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 23.07.2020.2. Quashing of provisional attachment order in Form GST DRC-22 dated 24.07.2020.3. Transfer of proceedings to the CGST department.4. Interim reliefs pending final disposal of the petition.Issue-wise Detailed Analysis:1. Quashing of Form DRC-01A dated 23.07.2020:The court did not interfere with the order passed in Form GST DRC-01A dated 23rd July 2020. The writ applicant's request to quash this form was not granted. The court found no substantial grounds to invalidate this order, thereby allowing it to stand.2. Quashing of provisional attachment order in Form GST DRC-22 dated 24.07.2020:The court found the provisional attachment of the immovable properties, including the industrial unit and residential premises under Section 83 of the Act, to be unsustainable in law. The court emphasized that the order was a result of a mechanical exercise of power without the necessary material to justify such action. The court highlighted that Section 83 requires the formation of an opinion based on credible material to protect the interest of government revenue. The court stated that the formation of opinion must be based on some credible material and not on imaginary grounds or wishful thinking. The court concluded that the impugned order lacked any reason and was bereft of the necessary material, thus quashing and setting aside the provisional attachment order.3. Transfer of proceedings to the CGST department:The court did not explicitly address the issue of transferring the proceedings to the CGST department in the judgment. The primary focus was on the validity of the provisional attachment orders and the Form DRC-01A.4. Interim reliefs pending final disposal of the petition:The court did not grant the interim reliefs requested by the writ applicant, which included lifting the attachment of factory premises, staying the operation of Form GST DRC-01A, and preventing any coercive action against the petitioner. The court's primary decision was to quash the provisional attachment orders, thereby addressing the core grievance of the writ applicant.Conclusion:The writ application was partly allowed. The court quashed and set aside the provisional attachment orders of the immovable properties under Section 83 of the Act. However, the relief regarding the order in Form GST DRC-01A was not granted. The court clarified that its order would not prevent the Department from taking appropriate action afresh in accordance with the law. The connected civil application for stay was also disposed of accordingly.