Commissioner must communicate prima facie opinion to assessee before provisional attachment under section 83 CGST Act

The Bombay HC upheld the validity of a circular dated 23rd February 2021 regarding provisional attachment under section 83 of the CGST Act, 2017. The court ruled that while the circular allows the Commissioner to record reasons in file, it includes adequate safeguards requiring careful examination of facts and prohibiting routine/mechanical exercise of power. The HC determined that an assessee's right to object under section 83 read with Rule 159(1) can only be effectively exercised if the Commissioner's prima facie opinion is communicated to enable meaningful objection. The petition challenging the circular's validity was dismissed.

---

---

Issues Involved:
1. Validity of the circular dated 23rd February 2021.
2. Compliance with Section 83 of the CGST Act, 2017.
3. Provisional attachment procedure under Rule 159 of the CGST Rules.
4. Communication of the Commissioner's opinion.
5. Availability of alternate remedies.

Detailed Analysis:

1. Validity of the Circular Dated 23rd February 2021:
The petitioner challenged the circular dated 23rd February 2021, claiming it was ultra vires the CGST Act, 2017. The petitioner sought either a declaration of invalidity or a reading down of the circular to mandate the recording of reasons or grounds of attachment in the attachment order or Form DRC-22.

2. Compliance with Section 83 of the CGST Act, 2017:
The petitioner argued that the attachment order under Section 83 must be in writing and issued in FORM GST DRC-22 as prescribed by Rule 159(1). The attachment order was addressed to the bank manager, not the petitioner, which the petitioner claimed was non-compliant with Section 83.

3. Provisional Attachment Procedure under Rule 159 of the CGST Rules:
The petitioner contended that the Commissioner's opinion must be communicated to the petitioner to enable them to raise objections. The circular's clauses 3.1.2, 3.1.4, and 3.1.5 were cited, arguing that the opinion formed by the Commissioner must be communicated to the taxable person.

4. Communication of the Commissioner's Opinion:
The court examined whether the Commissioner's opinion must be communicated to the petitioner to enable the effective exercise of the right to lodge objections under Rule 159(5). It was concluded that the opinion must be communicated to the petitioner to allow them to file objections effectively.

5. Availability of Alternate Remedies:
The respondent argued that the petitioner should have availed the alternate remedy of appeal against the provisional attachment order. The court held that since the petitioner challenged the validity of the circular, the writ petition was maintainable, and the alternate remedy was not a bar.

Conclusion:
The court directed the respondent to furnish a certified copy of the Commissioner's opinion to the petitioner within one week. The petitioner was allowed to raise objections within one week of receiving the opinion. The respondent was to grant a hearing and decide on the objections within two weeks. If the bank accounts were no longer liable for attachment, the provisional attachment would be withdrawn; otherwise, the objections would be rejected. The writ petition was dismissed with these directions, and no costs were awarded.

---