2022 (3) TMI 262 - HC - GST

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 ... Provisional attachment under section 83 of the CGST Act - formation of opinion by the Commissioner - exercise of power with circumspection - post-attachment objection and right to be heard under Rule 159(5) - duty to pass a reasoned order on objections - administrative circular as guidance to field formationsProvisional attachment under section 83 of the CGST Act - administrative circular as guidance to field formations - exercise of power with circumspection - Validity and effect of the circular dated 23rd February, 2021 vis-a -vis exercise of provisional attachment powers - HELD THAT: - The court held that the circular, which prescribes safeguards and requires the Commissioner to record on file the reasons forming the opinion for provisional attachment, does not impinge on the rights of the petitioner and is not ultra vires. The circular emphasises that the power of provisional attachment is extraordinary and must not be exercised routinely; the Commissioner must exercise due diligence by considering the nature of the offence, amount of revenue involved, business nature and other relevant facts and record the basis of the opinion on file. These safeguards supplement and reflect the statutory requirements and the principles laid down by the Supreme Court in Radha Krishan Industries; they do not negate the statutory scheme under section 83 read with Rule 159. [Paras 20, 21, 22]The circular dated 23rd February, 2021 is not ultra vires and its safeguards do not adversely affect the petitioner's rights; the Commissioner may record reasons on file but must exercise the power with care and in accordance with law.Formation of opinion by the Commissioner - post-attachment objection and right to be heard under Rule 159(5) - duty to pass a reasoned order on objections - Whether the person whose property is provisionally attached is entitled to be furnished the prima facie opinion/reasons formed by the Commissioner so as to effectively exercise the objection remedy under Rule 159 - HELD THAT: - The court determined that the objection remedy under Rule 159(5) can be effectively exercised only if the taxable person knows the prima facie opinion formed by the Commissioner at the stage of attachment. Absent communication of that opinion, the taxpayer cannot meaningfully challenge the basis for attachment. The court relied on the scheme of section 83 and Rule 159 and on the safeguards articulated in Radha Krishan Industries to hold that the petitioner is entitled to receive a certified copy of the reasons/opinion recorded by the Commissioner before filing objections. The court therefore directed the respondent to furnish the certified copy of the opinion, to permit the petitioner to file objections within the stipulated short period, to afford a hearing, and to decide the objection by a reasoned order (either releasing the attachment by FORM GST DRC-23 if satisfied or rejecting the objection), within the timelines fixed by the court. [Paras 27, 31]The petitioner is entitled to a certified copy of the prima facie opinion/reasons formed by the Commissioner before lodging objections under Rule 159(5); the Commissioner must afford a hearing and pass a reasoned order on the objection within the timelines directed.Remand for fresh consideration of objections - post-attachment procedural safeguards - Procedure to be followed after furnishing reasons to the petitioner - HELD THAT: - The court directed a specific course: respondent to furnish certified copy of the opinion within one week; petitioner to file objections within one week of receipt; respondent to grant an opportunity of hearing and decide the objection within two weeks of filing the objection; and to communicate the decision within one week of passing it. If satisfied that the bank accounts are no longer liable for attachment, the respondent shall release them by issuing FORM GST DRC-23; if not, the objection may be rejected. The court thereby remitted the factual/operative decision-making on the objections to the Commissioner for fresh consideration in accordance with law and the timelines set out. [Paras 31]Matter remitted to the Commissioner to consider the objections afresh and pass a reasoned order in accordance with Rule 159 and the directions of the court within the specified timeframe.Final Conclusion: Writ petition dismissed subject to directions: respondent to furnish certified copy of the Commissioner's prima facie opinion; petitioner may file objections and be afforded a hearing; Commissioner to decide objections by a reasoned order within the court-prescribed timelines and communicate the same; if attachment is found unwarranted, respondent to release the property by FORM GST DRC-23. 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.