Renewal of provisional bank account attachment under s.83 upheld over alleged bogus invoices, prima facie fraud and wrongful ITC

HC dismissed the petition and upheld renewal of provisional attachment of the petitioner's bank accounts under s.83 GST Act, finding prima facie fraudulent issuance of bogus invoices and wrongful availing of ITC. The court noted recorded admissions and an intimation under s.74(5) showing an estimated tax, penalty and interest liability of about Rs.12.33 crore and overall alleged revenue loss via ITC of over Rs.18.97 crore. The HC held the respondent lawfully applied its mind before renewing attachment to protect revenue during investigation and refused interference with the impugned orders.

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1. The core legal issues considered in this judgment revolve around the legality and jurisdiction of the provisional attachment orders issued under Section 83 of the Gujarat Goods and Services Tax Act, 2017 (GST Act). The primary questions include whether the renewal of the provisional attachment orders was justified, whether the respondent had the jurisdiction to issue such orders, and whether the procedural requirements, including the satisfaction note and hearing opportunities, were adhered to by the respondent.

2. The legal framework is grounded in Section 83 of the GST Act, which allows for the provisional attachment of property, including bank accounts, to protect government revenue. The court examined the procedural adherence to this section, particularly focusing on the duration of the attachment and the requirement for satisfaction notes. The precedents considered include the Supreme Court's decisions in Radha Krishan Industries v. State of Himachal Pradesh and RHC Global Exports Private Limited v. Union of India, which emphasize the necessity of a tangible link between the attachment and the protection of revenue.

The court interpreted Section 83 to mean that while the initial attachment lasts for one year, there is no prohibition against renewing the attachment if a new satisfaction note is recorded. The court found that the respondent recorded a new satisfaction note on 13.11.2024 and 18.12.2024, which justified the renewal of the attachment orders. The petitioner argued that the renewal was improper due to a lack of jurisdiction and procedural deficiencies, including insufficient time to respond to the satisfaction note. However, the court concluded that the respondent had jurisdiction based on authorization from the Additional Commissioner and that the procedural requirements were met, albeit minimally.

Key evidence included the satisfaction notes and the petitioner's statement acknowledging involvement in fraudulent activities. The court found that the petitioner's modus operandi involved using input tax credits from lower-value mobile phones to offset liabilities on higher-value phones, constituting a significant tax evasion scheme. The court considered competing arguments regarding jurisdiction and procedural fairness but ultimately sided with the respondent, emphasizing the ongoing investigation and the substantial evidence of fraud.

3. The significant holdings of the court include the affirmation of the respondent's jurisdiction and the procedural validity of the renewed attachment orders. The court held that the provisional attachment was necessary to protect government revenue, given the prima facie evidence of the petitioner's involvement in a large-scale tax evasion scheme. The judgment reinforced the principle that provisional attachments under Section 83 can be renewed with a new satisfaction note, provided there is a legitimate basis for protecting revenue.

The court concluded that the petitioner's objections regarding jurisdiction and procedural deficiencies were insufficient to invalidate the attachment orders. The petition was rejected, and the provisional attachment of the petitioner's bank accounts was upheld to continue during the ongoing investigation.

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