2021 (10) TMI 523 - HC - GST

Petitioner succeeds as court sets aside bank account attachment under CGST Act

M/s. Mutharamman & Co. Versus The Principal Additional Director General, Directorate General of GST Intelligence (DGGI), Chennai Zonal unit, Chennai, The Senior Intelligence Officer, The Branch Manager

M/s. Mutharamman & Co. Versus The Principal Additional Director General, Directorate General of GST Intelligence (DGGI), Chennai Zonal unit, Chennai, The ... Issues Involved:1. Legality of the provisional attachment under Section 83 of the CGST Act.2. Validity of the Commissioner's opinion for attachment under Section 83.3. Procedural compliance in forming the opinion for attachment.4. Impact of premature conclusions on the attachment process.5. Judicial precedents on provisional attachment under GST laws.Detailed Analysis:1. Legality of the Provisional Attachment under Section 83 of the CGST Act:The petitioner, an assessee under the CGST Act, challenged the attachment of their bank accounts dated 23.11.2020, arguing it lacked statutory sanction. The attachment was consequent upon search and seizure actions under Section 67 of the CGST Act. The court noted that Section 83 allows for provisional attachment to protect revenue during the pendency of proceedings under several sections, including Section 67, based on the Commissioner's opinion.2. Validity of the Commissioner's Opinion for Attachment under Section 83:The court scrutinized whether the Commissioner's opinion, which justified the attachment, was based on a legitimate and legal apprehension that the interests of the revenue needed protection. The court found that the opinion was non-speaking and lacked references to the materials found during the investigation. It was noted that the opinion merely stated the attachment was to protect revenue without detailing the reasons or evidence supporting this conclusion.3. Procedural Compliance in Forming the Opinion for Attachment:The court emphasized that the formation of the Commissioner's opinion under Section 83 must be based on tangible material and must be reasoned. The court found that R2 (Senior Intelligence Officer) erred by concluding prematurely that the petitioner was availing fraudulent ITC from bogus units, without completing the necessary verification and hearings. R1 (Principal Additional Director General) perpetuated this error by approving the attachment based on the same flawed reasoning.4. Impact of Premature Conclusions on the Attachment Process:The court highlighted that the investigation process involves collecting material and verifying it in conjunction with the assessee. Premature conclusions by R2 and R1, without proper verification, led to an unjustified attachment. The court noted that the authorities should have completed the assessment process and verified the claims before arriving at such conclusions.5. Judicial Precedents on Provisional Attachment under GST Laws:The petitioner cited several judgments, including those from the Gujarat and Bombay High Courts, which stressed that the power under Section 83 should be exercised sparingly and based on credible material. The court referred to the Supreme Court's judgment in M/s. Radhakrishnan Industries, which held that the power to order provisional attachment is draconian and must be exercised with strict adherence to statutory conditions. The court found that the opinion in the present case was inadequate, similar to the deficiencies noted by the Supreme Court in Radhakrishnan Industries.Conclusion:The court allowed the writ petition, setting aside the impugned order of attachment. It directed the respondents to complete the assessment process within six weeks. The court clarified that this order only pertained to the bank attachment and did not preclude the revenue from invoking Section 83 again if warranted by future circumstances, in accordance with the law. No costs were awarded, and connected miscellaneous petitions were closed.