2021 (1) TMI 329 - HC - GST

Communication of notice key in tax proceedings initiation under CGST Act

The court examined whether the mere decision to issue a notice or form an opinion on tax payment is sufficient to initiate proceedings under Section 74 of ... Release of attached Bank Accounts of petitioner - Section 74 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- We have enquired from the counsel for the petitioners, whether for a proceeding under Section 74 to be said to have been initiated or launched, a mere decision to issue notice or mere formation of a opinion that tax due has not been paid or has been short paid, is sufficient or the service of the notice on the notice is essential, before proceeding under Section 74 can be said to have been initiated/launched/instituted and pending, within the meaning of Section 83(1) of the Act, for the power of attachment thereunder to be exercised. In the prima-facie opinion, communication of the notice under Section 74 to the noticee is essential, before a proceeding under Section 74 can be said to be pending within the meaning of Section 83(1) of the Act. List on 15th January, 2021. Issues:Challenge to orders directing attachment of bank accounts under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act).Analysis:The petitions challenge the orders directing the attachment of the petitioners' bank accounts under Section 74 of the CGST Act. The counsel for the petitioners argues that despite the launch of proceedings under Section 74, the petitioners have not received any notice even after more than eight months. The contention is that the freezing of the accounts is erroneous due to the lack of notice to the petitioners.Section 74 of the CGST Act mandates the service of a notice on the person liable to pay tax, specifying the amount due along with interest and penalty. Sub Section (2) of Section 74 requires the notice to be issued at least six months before the time limit specified for issuance of notice, which is within five years from the due date for furnishing the annual return for the relevant financial year.The court inquires whether the mere decision to issue a notice or form an opinion on tax payment suffices to initiate proceedings under Section 74, or if the actual service of notice on the person is essential before such proceedings can be deemed initiated or pending. The court opines that communication of the notice to the concerned person is crucial before proceedings under Section 74 can be considered pending for the purpose of exercising the power of attachment under Section 83(1) of the Act.The counsel for the petitioners requests time to respond, while the respondents' counsel mentions receiving the writ petitions recently and seeks a week's time to prepare. The matter is listed for further hearing on 15th January 2021.