2023 (2) TMI 322 - HC - GST

Revenue department's provisional bank account attachment quashed for failing to follow section 83 procedures and CBEC guidelines

Gujarat HC quashed provisional attachment of petitioner's bank account, finding the revenue department failed to follow proper procedures under section 83 ... Provisional Attachment of Bank Account of petitioner - emphasis on the part of the petitioner is that the recourse to the powers of section 83 of the Act could be only in exception circumstances - HELD THAT:- The proper officer is always required to ensure that there are action of the provisional attachment may not hamper normal business activities of the taxable person. Of course, the summons had been issued against the petitioner after getting the inquiry made against M/s. Arsh Enterprise, the procedure that had been required to be followed as per the Circular and also on issuance of FORM DRC 01A had not been done before the provisional attachment of the Bank account had been made. There is no explanation as to why the FORM DRC-01A has been issued on 18.01.2023 could not have been done if, it was for ascertaining the preliminary details and for protecting the revenue. The guidelines issued by the Circular of CBEC on 23.02.2021 also make it amply clear that the remedy of attachment being by itself very extra ordinary needs to be resorted to with at most circumspection and maximum care and caution, which in the instant case appear to have been missing and hence, that order needs to be quashed and set aside - At the same time being aware of the inquiry which has been made against M/s. Arsh Enterprise and the purchase having been made by the present petitioner in 2018-19 from M/s. Arsh Enterprise for the goods worth Rs.37,21,420/-.However, striking the balance in wake of the details which have come on record of M/s. Arsh Enterprise it would be apt to release the Bank account by directing the Bank to not permit the petitioner to operate so far as the tax amount of Rs.3,95,568/- for the year 2018- 19 and tax amount of Rs.1,72,104/- for the year 2019-20. The amount of tax amount of Rs.3,95,568/- for the year 2018-19 and tax amount of Rs.1,72,104/- for the year 2019- 20 which the Bank is directed not to part with, let the said amount be parted once there is a direction subject to the crystallization of this liability of the petitioner and subject to the order of the Appellate Authority if any appeal is preferred within the time frame given under the statute. For the remaining amount of penalty and interest, the petitioner shall furnish the bond before the authority concerned. Petition allowed. Issues Involved:1. Provisional attachment of the bank account under Section 83 of the Gujarat Goods and Services Tax Act, 2017.2. Compliance with procedural requirements and guidelines for provisional attachment.3. Validity of the attachment in light of the petitioner's business activities and the status of M/s. Arsh Enterprise.Detailed Analysis:1. Provisional Attachment of the Bank Account under Section 83 of the Gujarat Goods and Services Tax Act, 2017:The petitioner challenged the provisional attachment of its bank account under Section 83 of the Gujarat Goods and Services Tax Act, 2017, issued by the respondent on 18.05.2022. The attachment was made due to alleged violations of the provisions of the Act. The petitioner argued that the attachment was an extreme measure and should be used only in exceptional circumstances. The respondent justified the attachment by citing the need to protect government revenue, as M/s. Arsh Enterprise, a supplier to the petitioner, was found to be involved in fraudulent activities, including wrongful availing and utilization of Input Tax Credit (ITC).2. Compliance with Procedural Requirements and Guidelines for Provisional Attachment:The court examined whether the respondent followed the procedural requirements and guidelines for provisional attachment as outlined in the CBEC Circular No. CBEC-20/16/05/2021-GST/359 dated 23.02.2021. The guidelines emphasize that the power of provisional attachment should be exercised with due diligence and not in a routine or mechanical manner. The court noted that the respondent had not issued FORM DRC-01A before the provisional attachment, which is a procedural requirement. The court also highlighted that the provisional attachment should not hamper the normal business activities of the taxable person.3. Validity of the Attachment in Light of the Petitioner's Business Activities and the Status of M/s. Arsh Enterprise:The court considered the petitioner's argument that the purchases from M/s. Arsh Enterprise were genuine and that the GST registration of M/s. Arsh Enterprise was valid at the time of purchase. The respondent's investigation revealed that M/s. Arsh Enterprise was involved in issuing bogus invoices without actual supply of goods and had availed ITC fraudulently. The court acknowledged the gravity of the matter but emphasized the need for the respondent to follow the prescribed procedures and guidelines.Judgment:The court quashed the order of provisional attachment dated 18.05.2022, noting that the respondent had not followed the necessary procedures and guidelines. The court directed the bank to release the petitioner's account but restricted the petitioner from operating the account for the tax amounts of Rs. 3,95,568/- for the year 2018-19 and Rs. 1,72,104/- for the year 2019-20. The court allowed the petitioner to furnish a bond for the remaining amount of penalty and interest. The court also permitted the respondent to proceed with the inquiry in accordance with the law.Conclusion:The court's decision underscores the importance of adhering to procedural requirements and guidelines when exercising the power of provisional attachment under Section 83 of the Gujarat Goods and Services Tax Act, 2017. The judgment balances the need to protect government revenue with the necessity of ensuring that such measures do not unduly hamper the business activities of the taxpayer.