Court quashes GST bank account attachment lacking justification, emphasizes credible evidence

The court held that the provisional attachment of five bank accounts under Section 83 of the GST Act, 2017 was not sustainable as it lacked proper justification and material evidence. The court emphasized the need for credible material to form the opinion for provisional attachment, which should be based on substantive grounds and not used to harass the assessee. Consequently, the writ application was allowed, the attachment was quashed, and the Department was permitted to take appropriate action in compliance with the law.

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Issues Involved:
1. Legality of the provisional attachment of bank accounts under Section 83 of the GST Act, 2017.
2. Requirement of material evidence for forming an opinion under Section 83.
3. Judicial scrutiny of the subjective satisfaction of the authority.
4. Conditions for exercising the power of provisional attachment.
5. Impact of provisional attachment on the business of the assessee.

Issue-wise Detailed Analysis:

1. Legality of the Provisional Attachment of Bank Accounts:
The writ applicant challenged the provisional attachment of five bank accounts under Section 83 of the GST Act, 2017. The court held that the order of provisional attachment was not sustainable in law, as it was a result of a mechanical exercise of power without proper justification.

2. Requirement of Material Evidence for Forming an Opinion:
Section 83 requires the Commissioner to form an opinion that provisional attachment is necessary to protect the interest of government revenue. This opinion must be based on credible material. The court emphasized that the existence of relevant material is a precondition for forming such an opinion. The statutory requirement of reasonable belief is meant to safeguard citizens from vexatious proceedings.

3. Judicial Scrutiny of the Subjective Satisfaction of the Authority:
The court noted that while the formation of opinion under Section 83 is subjective, it must be based on credible material. The court can examine the materials to determine whether an honest and reasonable person could form such an opinion. In this case, the court found that the impugned order lacked any reason and there was no material on the original file to justify the belief formed by the authority.

4. Conditions for Exercising the Power of Provisional Attachment:
The court outlined that the power of provisional attachment should be used sparingly and only on substantive grounds. The authority must have a reasonable apprehension that the assessee may default on the ultimate collection of the demand. The power should be exercised with extreme care and caution, and there must be sufficient material to justify the satisfaction that the assessee is about to dispose of property to thwart the collection of demand.

5. Impact of Provisional Attachment on the Business of the Assessee:
The court highlighted that the power under Section 83 should not be used to harass the assessee or have an irreversible detrimental effect on the business. Attachment of bank accounts and trading assets should be a last resort. The court found that none of the conditions for exercising the power of provisional attachment were fulfilled in this case.

Conclusion:
The writ application was allowed, and the order of provisional attachment of the five bank accounts was quashed and set aside. The court ordered the removal of the attachment and clarified that this order would not prevent the Department from taking appropriate action afresh in accordance with the law.

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