2021 (8) TMI 519 - HC - GST

Invalid provisional attachment order voided under CGST Act due to jurisdictional error. Compliance emphasized.

The High Court declared the order of provisional attachment of a bank account under Section 83 of the CGST Act void ab initio due to a jurisdictional ... Release of freezed petitioner's bank account - rejection on the ground that condition precedent for provisional attachment of a bank account, as referred to in Section 83 of the CGST Act, was non-existent - Whether, having regard to the decision in M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH & ORS. [2021 (4) TMI 837 - SUPREME COURT], the order of provisional attachment dated December 1, 2020 can be kept alive? HELD THAT:- It matters little that proceedings initiated against the appellant in M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH & ORS. [2021 (4) TMI 837 - SUPREME COURT] were different from the provision under which proceedings have been initiated against the petitioner. Suffice it to note, proceedings having been initiated against the petitioner under Section 73 of the CGST Act and such proceedings having been terminated by a final order under sub-section (9) thereof, for all intents and purposes the proceedings do not survive and, a fortiori, such termination would have the effect of terminating the life of the order of provisional attachment. The order of provisional attachment, which is the subject matter of challenge in the writ petition, suffers from an error of jurisdictional fact. Proceedings under Section 73 had been initiated against the petitioner for reclaiming the erroneous refund, which was earlier effected on its prayer. The order of provisional attachment was made not during pendency of any proceedings under Sections 62 or 63 or 64 or 67 or 73 or 74 of the CGST Act but was made in view of contemplation of proceedings under Section 73 thereof - the proceedings under Section 73 of the CGST Act having been taken to its logical conclusion, the purpose for which the order of provisional attachment had been made has also ceased to survive and, therefore, the petitioner is justified in its claim that such order of provisional attachment ought to be set aside. The writ petition as well as the interim application stands disposed of. Issues:1. Validity of provisional attachment of bank account under Section 83 of the CGST Act.2. Interpretation of Section 107 of the CGST Act regarding provisional attachment.3. Applicability of the decision in Radha Krishan Industries case to the present case.4. Jurisdictional error in the order of provisional attachment dated December 1, 2020.Issue 1: Validity of provisional attachment of bank account under Section 83 of the CGST Act:The petitioner challenged an order dated December 1, 2020, which directed provisional attachment of their bank account under Section 83 of the CGST Act. The petitioner argued that the condition precedent for such attachment was non-existent as no proceedings were pending against them under relevant sections of the Act. The High Court noted that the order of attachment suffered from an error of jurisdictional fact as the order was made before any proceedings were initiated under the specified sections. Consequently, the Court declared the order void ab initio. The Court further held that since the proceedings under Section 73 had concluded, the purpose for the attachment had ceased to exist, justifying the setting aside of the attachment order.Issue 2: Interpretation of Section 107 of the CGST Act regarding provisional attachment:The petitioner invoked Section 107 of the CGST Act by filing an appeal against the order dated February 12, 2021, and pre-deposited the requisite amount for the appeal. The petitioner argued that under sub-section (7) of Section 107, the respondents were restrained from initiating recovery proceedings. The Court analyzed the provisions of Section 107 and observed that once the final order under Section 74 had been passed, the provisional attachment should cease to exist. The Court emphasized that compliance with the provisions of Section 107 was necessary, and the termination of proceedings under Section 73 effectively terminated the provisional attachment.Issue 3: Applicability of the decision in Radha Krishan Industries case to the present case:The Court compared the facts of the present case with the decision in Radha Krishan Industries case, where the Supreme Court had emphasized the strict fulfillment of conditions for a valid exercise of provisional attachment power. The Court noted that the legal provisions under consideration in Radha Krishan Industries were similar to the CGST Act provisions in the present case. The Court held that the termination of proceedings under Section 73 effectively terminated the provisional attachment, in line with the principles established in the Radha Krishan Industries case.Issue 4: Jurisdictional error in the order of provisional attachment dated December 1, 2020:The Court highlighted that the order of provisional attachment suffered from a jurisdictional error as it was made without the existence of proceedings under the relevant sections of the CGST Act. The Court declared the order void ab initio and emphasized that the termination of proceedings under Section 73 rendered the purpose of the attachment non-existent. Consequently, the Court set aside the order of provisional attachment and disposed of the writ petition and interim application without costs, allowing for future proceedings under Section 74 or other relevant provisions if circumstances warranted provisional attachment in accordance with the law.This detailed analysis of the judgment from the Bombay High Court addresses the key issues involved and the Court's findings on each issue, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Court.