2023 (7) TMI 101 - HC - GST

Bank account attachment orders quashed due to expired provisional attachment under Section 83 CGST Act

Bharat Parihar, Kishan Lal Bunkar, Sunbright Designers Pvt. Ltd. Versus State of Maharashtra Thr. PP Office And Ors.

The Bombay HC quashed provisional attachment orders of petitioner's bank account under Section 83 CGST Act. The original attachment dated April 21, 2022 ... Provisional attachment of bank account of the Petitioner - Extension of one year, which has already expired - fresh order to attach the bank account - Non-communication of order to the petitioner - Section 83 of the CGST Act - HELD THAT:- The order sheet records the date of the noting as 21st April 2022, wherein after narrating the facts it is stated that same is submitted for necessary orders under Section 83 of the MGST Act. It further states that “we may consider taking action of provisional attachment under Section 83 in respect of this bank account and, thereafter, the Joint Commissioner (Investigation) has opined that this bank account is required to be attached. The said order sheet is dated 21st April 2022 and formed the basis for issue of first provisional attachment on 21st April 2022 and which, as observed above, has ceased to expire by operation of sub-section (2) of Section 83 - there are no fresh order having being passed by the Respondents to attach the bank account on 19th April 2023. In any view of the matter, mere notings in the file of the concerned Officer cannot constitute an order without a formal order as the law may mandate being passed and most importantly such order being communicated to the affected person, whose bank account is attached. The Respondents have not shown that such order was passed and served on the Petitioner much less prior to the provisional attachment order ceasing to operate by virtue of the provisions of Section 83(2) and/or the communication dated on 19th April 2023. Thus, it is held that the communication dated 21st April 2022 (Exhibit “B” to the petition) provisionally attaching the Petitioner’s bank account is rendered illegal and invalid by virtue of the provisions of Section 83(2) of the CGST Act. The extension of the provisional attachment by communication dated 19th April 2023 (Exhibit “G-1” to the petition) is hereby quashed and set aside. Parties, including the bank, to act on authenticated copy of this order - writ petition stands allowed. Provisional attachment - jurisdiction to pass the provisional attachment order - Petitioner is in Chennai and the bank account, in respect of which the provisional attachment order is communicated, is also in Chennai - HELD THAT:- Section 122(1-A), refers to “any person”, who has retained benefit of a transaction and in whose presence transaction is conducted. It does not contemplate of a situation where the person should be located within the State in which the transaction is carried out. Therefore, the Respondents have the jurisdiction to resort to the provisions of Section 83 of the Act with respect to the Petitioner located in Chennai. The provisions of Section 83, which are to be read with Section 122(1-A), would be required to be read in the context of the legislation itself namely the CGST Act. As Section 1(2) would mandate, the CGST Act is operational throughout the country. This would have relevance in construing the jurisdiction of the Commissioner who has been defined under Section 2(24) of the CGST Act, for the purposes of Section 83(2) of the Act. A cumulative reading of the provisions of Section 83(1) read with Section 122(1-A) of the Act makes it manifest that the Commissioner for the purposes of exercising power under Section 83 read with Section 122(1-A) of the CGST Act, would have a power to take action against “any person” as Section 122(1-A) mandates, even if such a person is outside his jurisdiction. However, as it is held that the communication dated 21st April 2022 (Exhibit “C” to the petition), provisionally attaching the Petitioner’s bank account is rendered illegal and invalid by virtue of the provisions of Section 83(2) of the CGST Act. The extension of the provisional attachment by communication dated 19th April 2023 (Exhibit “H-1” to the petition) is hereby quashed and set aside. ISSUES PRESENTED AND CONSIDERED 1. Whether an order provisionally attaching a bank account under Section 83(1) of the CGST Act ceases to have effect by operation of law after one year under Section 83(2), and whether continuation by subsequent communication is valid. 2. Whether an order disposing of objections to provisional attachment under Rule 159(5) of the CGST Rules is an appealable order or whether writ jurisdiction under Article 226 is the appropriate remedy. 3. Whether a communication to a banker (dated 19 April 2023) can be treated as a fresh provisional attachment order under Section 83(1) when no formal written order has been passed and served on the affected person before expiry of the one-year period. 4. Whether the revenue authorities have jurisdiction under Section 83 read with Section 122(1-A) and Section 2(24) to provisionally attach property/bank accounts of a person situated outside the State where the transaction occurred. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of Section 83(2): one-year limit on provisional attachment Legal framework: Section 83(1) authorises provisional attachment of property, including bank accounts, where the Commissioner deems it necessary to protect government revenue; Section 83(2) provides that every such provisional attachment shall cease to have effect after expiry of one year from the date of the order under subsection (1). Precedent treatment: The Court relied on its earlier decision (cited in the judgment) taking a similar view that provisional attachment ceases after one year. The Supreme Court decision relied on in related contexts (see analysis under Issue 2) was applied to restrict alternative remedy arguments, not to alter the statutory one-year rule. Interpretation and reasoning: The Court held that the one-year period in Section 83(2) is self-executing and causes the provisional attachment to cease by operation of law on expiry of that period. Where the attachment order was dated 21 April 2022, the Court found it expired on 21 April 2023. The statute's clear temporal limit was treated as determinative irrespective of subsequent administrative notings or communications unless a fresh valid order is shown to have been lawfully passed and served prior to expiry. Ratio vs. Obiter: Ratio - provisional attachments under Section 83(1) terminate after one year by virtue of Section 83(2); absence of a valid fresh order means no continuing attachment beyond that period. Conclusion: The original provisional attachment ceased to operate on expiry of one year; continuation beyond that date is invalid unless a valid fresh order preceded expiry. Issue 2 - Nature of order disposing objections under Rule 159(5): appealability vs. writ remedy Legal framework: Rule 159(5) prescribes disposal of objections to provisional attachment; Section 107 deals with appeals from certain orders under the Act (issue framed as preliminary objection by Respondents). Precedent treatment: The Court followed the Supreme Court decision (referred to as Radha Krishan Industries) which held that an order disposing of objections to provisional attachment of bank account is not an appealable order and that the remedy lies in writ jurisdiction under Article 226. Interpretation and reasoning: The Court concluded that the Respondents' contention that the order was appealable under Section 107 was foreclosed by the Supreme Court's authoritative ruling. Consequently, the High Court's writ jurisdiction remained available to challenge the disposal of objections and provisional attachment, making the petition maintainable. Ratio vs. Obiter: Ratio - order disposing objections to provisional attachment under Rule 159(5) is not an appealable order; writ under Article 226 is competent. Conclusion: The writ petition is maintainable; alternative remedy by appeal is not available in view of the Supreme Court precedent. Issue 3 - Whether the communication dated 19 April 2023 constituted a fresh provisional attachment order Legal framework: Section 83(1) requires an order in writing to attach provisionally; such order must be passed in the manner prescribed and communicated to the affected person. Precedent treatment: The Court distinguished a Gujarat High Court decision relied upon by Respondents where a fresh order had been passed; that precedent was thus inapplicable because, in the present facts, no fresh formal order was shown. Interpretation and reasoning: The Court examined the file notings and the order sheet and found those notings dated 21 April 2022 forming the basis of the first provisional attachment. The communication dated 19 April 2023 was held to be merely a communication to bankers to retain the attachment and a copy marked to the petitioner; the Respondents failed to demonstrate any formal fresh order passed and served on the petitioner before expiry of the statutory one-year period. The Court emphasised that file notings alone cannot substitute for a formal order as required by law, nor for proper service on the affected person. Ratio vs. Obiter: Ratio - a mere communication to a bank or internal notings do not constitute a valid fresh order under Section 83(1); absence of a formal, served order prior to expiry means no extension of attachment. Conclusion: The communication dated 19 April 2023 did not amount to a fresh provisional attachment order; the extension was invalid and is quashed. Issue 4 - Jurisdiction to attach accounts of persons located outside the State (Section 83 read with Section 122(1-A) and Section 2(24)) Legal framework: Section 83(1) permits provisional attachment of property of a taxable person or any person specified in Section 122(1-A); Section 122(1-A) makes liable any person who retains benefit of certain transactions; Section 2(24) defines Commissioner; Section 1(2) notes the Act's operation throughout the country. Precedent treatment: The Court analysed statutory scheme and legislative intent rather than relying on contradictory precedents; no precedent was held to oust the centralised territorial operation of CGST provisions. Interpretation and reasoning: The Court concluded that the phrase 'any person' in Section 83(1) (as amplified by Section 122(1-A)) includes non-taxable persons and persons outside the territorial limits of the assessing State. Reading Section 83 with Section 122(1-A) and Section 1(2) (nationwide operation) leads to the view that a Commissioner may exercise provisional attachment powers against a person situated in another State where that person is alleged to have retained the benefit of a transaction involving tax evasion. The Court rejected the submission that territorial location of the person immunises them from action, reasoning that such an interpretation would frustrate investigation into cross-jurisdictional tax evasion and defeat legislative intent. Ratio vs. Obiter: Ratio - authorities may exercise Section 83 powers against persons located outside the State where the transaction occurred when such persons are covered by Section 122(1-A); territorial location alone does not oust jurisdiction. Conclusion: The revenue had jurisdiction to provisionally attach the petitioner's bank account despite the petitioner and account being located in another State; however, because the provisional attachment admittedly ceased by operation of Section 83(2) and no valid fresh order was shown, the attachment had to be quashed for expiry reasons (see cross-reference to Issues 1 and 3). Final Disposition (cross-references) Cross-reference: Issues 1 and 3 determine the operative outcome - although the authorities had jurisdiction under Issue 4, the provisional attachment dated 21 April 2022 ceased by operation of Section 83(2) and no valid fresh order was demonstrated (Issue 3); accordingly the communication extending the attachment was quashed. Issue 2 supports maintainability of the writ petition challenging those acts.