TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 618
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.... total amount of Rs. 1,60,79,302/-; (B) Your Lordships may kindly be pleased to issue a writ of certiorari or an appropriate writ, orders, directions and thereby be pleased to quash and set aside the orders of provisional attachment of the stock of goods, amounting Rs. 1,60,00,000/- dated 27.11.2018 and the orders of provisional attachment of the petitioner's current account bearing A/C No. 01880200001055 and FD/RD CC A/c No.01880500000081, registered at Bank of Baroda, Alkapuri Branch, Vadodara dated 20.11.2018 and the blockage of Input Tax Credit dated 13.2.2019 passed by the respondent No.3 - State Tax Officer at Vadodara, Gujarat. (C) Pending hearing and final disposal of the present petition, Your Lordships may kindly be pleased to issue an appropriate writ, orders, directions and thereby be pleased to stay the operation and implementation of the orders dated 17.06.2019 passed by the respondent No.4 and the orders of provisional attachment dated 27.11.2018 dated 20.11.2018 and the orders of blockage of input tax credit of the petitioner. (D) Ex-parte ad-interim relief in terms of para 6(C) may kindly be granted. (E) To grant any other such relief in the nature ....
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....chased the copper scrap material from the Various firms/companies, which is volumed as 291538.38 kilograms, amounting Rs. 15,51,00,399/- in the tax year of 201718. That out of the said amount of volume, the following limited amount of material was purchased from the below mentioned firm: Name of the firm /company Amount of volume (In Rs.) Central and State GST Adideva Enterprize 64,88,624/- 11,67,954/- Laxmiraj Enterprize 1,42,84,362/- 25,71,183/- Radhesh Traders 33,87,911/- 06,09,823/- Raghav Traders 1,79,15,638/- 32,35,614/- Total 4,21,36,534/- 75,84,575/- Total 4,97,21,109/- 24. The petitioner respectfully states that the payment of Rs. 2,60,16,769/- for the aforementioned purchases was disbursed by the petitioner's firm by RTGS/cheque mode to the respective firms/companies into their bank account. Further, the goods and service tax was credited by the aforementioned firms into their GST/R2A and the same is reflected in it. 2.5 The petitioner respectfully states that the aforementioned firms/companies have not remitted the amount of GST tax though the tax amount is already credited into their GSTR2A. 2.6 The petitioner respectfully states....
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....e of the order as no order was served to him either personally or on his email, the same request is disrespected and kept unheard till today." 5 Mr. Deven Parikh, the learned senior counsel appearing for the writ applicant vehemently submitted that the order of provisional attachment of property under Section 83 of the GST Act, 2017 is without jurisdiction and not tenable in law. Mr. Parikh submitted that the power to order provisional attachment with a view to protect revenue under Section 83 of the Act has been conferred upon the Commissioner. Mr. Parikh pointed out that in case on hand, the impugned order of provisional attachment under Section 83 of the Act, 2017 has been passed by the State Tax Officer - 1, Unit 44, Vadodara. The same is per se illegal. Mr. Parikh submitted that the action on the part of the respondent No.3 in blocking the credit balance of Rs. 30,55,680/- ( Rupees Thirty Lakh Fifty Five Thousand Six Hundred Eighty only) by a computer entry could also be termed as absolutely illegal and not tenable in law. Mr. Parikh further submitted that the order passed by the respondent No.4 dated 17th June 2019 is also illegal, arbitrary, unjust and contrary to the prov....
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....No.3 duly affirmed by one Devendrakumar Dahyabhai Chauhan, State Tax Officer 1, Unit 6, Vadodara: "6 It is submitted that, raid was carried on the premises of the present petitioner being & factory premises on 20.11.2018 thereafter, on 20.11.2018 during the raid it was found that the petitioner herein had entered into bogus billing transaction/only papers trails from four enterprises namely Adideva Enterprise, Laxmiraj Enterprise, Raghav Traders, Radhesh Traders. 7 It is respectfully submitted that, the raid was carried on for a period of seven days from 20.11.2018 to 27.11.2018 and the summon was issued on 27.11.2018 and the hearing was kept on 18.12.2018, the authority issued herewith and marked as ANNEXURER-I (Colly) are the copies of the INSO1 and INSO2. The said INSO1 and INS02 was issued as prescribed under rule 139(1) of the GGST/CGST Act. It is respectfully submitted that, upon perusal of the Rule 139 which reads as nomenclature as inspection search and seizure. Where it is mentioned that for the purpose of inspection, search or seizure in accordance with the provision of section 67 INSO1 is required to be issued authorizing any other Officer subordinate to him i.e. j....
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....said fourteen fictitious entities/dealers. Annexed herewith and marked as AnnexureRIII is the copy of such statement dated 23.01.2019. 10 It is respectfully submitted that, the bank account was provisionally attached under rule 159(1) of the GGST/CGST rule, on 20.11.2018 and the ITC Input Tax Credit was blocked on 11.02.2019 under section 17 (5) of the GGST/CGST Act. Annexed herewith and marked as ANNEXURERIV is the copy of the letter dated 11.02.2019. 11 It is respectfully submitted that, the order Passed under DRC, 07 has attained finality and the petitioner has alternative statutory remedy and the petitioner may be relegated to prefer appeal under section 107 of GGST/CGST Act." 8 Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the State Tax Officer 1, Unit 44, Vadodara could have exercised powers under Section 83 of the GST Act, 2017 for the purpose of provisional attachment of the property owned by the writ applicant. 9 Before adverting to the rival submissions canvassed on either side, we must look into the few relevant provisions of the Act, 2017....
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....hat where the taxable person to whom the liability pertains is not ascertainable and such liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and liable to pay tax and any other amount due under this section. (2) On an application made by the taxable person within thirty days from the date of receipt of order passed under subsection (1) or on his own motion, if the Additional Commissioner or Joint Commissioner considers that such order is erroneous, he may withdraw such order and follow the procedure laid down in section 73 or section 74." 12 Section 67 of the Act, 2017 reads as follows: "67. Power of inspection, search and seizure. (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-- (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or (b) any person en....
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....led to make copies thereof or take extracts therefrom in the presence of an authorised officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation. (6) The goods so seized under subsection (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be. (7) Where any goods are seized under subsection (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months. (8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any othe....
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.... has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. (2) The proper officer shall issue the notice under subsection (1) at least three months prior to the time limit specified in subsection (10) for issuance of order. (3) Where a notice has been issued for any period under subsection (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1), on the person chargeable with tax. (4) The service of such statement shall be deemed to be service of notice on such person under subsection (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under subsection (1) are the same as are mentioned in the earlier notice. (5) The pe....
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....s to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice. (2) The proper officer shall issue the notice under subsection (1) at least six months prior to the time limit specified in subsection (10) for issuance of order. (3) Where a notice has been issued for any period under subsection (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1), on the person chargeable with tax. (4) The service of stat....
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....ce shall be deemed to be concluded. Explanation 1.- For the purposes of section 73 and this section, ( i) the expression "all proceedings in respect of the said notice" shall not include proceedings under section 132; (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded. Explanation 2.--For the purposes of this Act, the expression "suppression" shall mean nondeclaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer." 15 Section 83 of the Act, 2017, which is relevant for our purpose, reads as under: "83. Provisional attachment to protect revenue in certain cases. (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or s....
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.... exercise of the powers conferred under section 83 of the Act, R R Bhatiya, State Tax Officer 1, Unit44, Vadodara, hereby provisionally attach the aforesaid account / property. No debit shall be allowed to be made from the said account or any other account operated by the aforesaid person on the same PAN without the prior permission of this department. The property mentioned above shall not be allowed to be disposed of without the prior permission of this department. Sd/- (R.R. Bhatiya) State Tax Officer 1, Unit 44, Vadodara." 18 The order of provisional attachment of the goods valued at Rs. 1,60,00,000/- reads as under: "Details of goods seized: M/s Valerius Industries 26/1 G.I.D.C. Industrial Estate, Kalol, Dist: Panchamahal GSTN:24AANFV4191N1ZH The process of site inspection was held at your business premises from 20/11/18. In this connection, it has come to the notice during this inspection and the site inspection of the business premises of the other dealers conducted by the concerned officers that, out of the purchases shown in the books of accounts by you, following dealers have been prima facie found to be engaged only in the billing activity. ST....
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....istant Commissioner, State Tax Officer Sd/- (P D Vaghela) Commissioner of State Tax Gujarat State, Ahmedabad." 20 The first and the foremost question that needs to be answered is whether the Commissioner could have delegated his power by virtue of the aforesaid order. Ms. Mehta, the learned A.G.P. seeks to rely upon Section 5 of the Act, 2017. Section 5 of the State GST Act reads as under: "5. Powers of Officers (1) Subject to such conditions and limitations as the Commissioner may impose, an officer of State tax may exercise the powers and discharge the duties conferred or imposed on him under this Act and discharge the duties conferred or imposed on him under this Act. (2) An Officer of State tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other Officer of State tax who is subordinate to him. (3) The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other Officer who is subordinate to him. (4) Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge the duties conf....
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....sioner of State tax appointed under section 3 and includes the Chief Commissioner or Principal Commissioner of State tax appointed under section 3;" 27 Section 2(25) of the CGST Act defines "Commissioner in the Board" as under: "2(25) "Commissioner in the Board" means the Commissioner referred to in section 168;" 28 Section 83 of the CGST Act is pari materia to Section 83 of the State GST Act. Section 167 of the CGST Act with regard to the delegation of powers reads as under: "167. Delegation of powers.The Commissioner may, by notification, direct that subject to such conditions, if any, as may be specified in the notification, any power exercisable by any authority or officer under this Act may be exercisable also by another authority or officer as may be specified in such notification." 29 Section 168 of the CGST Act, 2017 reads as under: " 168. (1) The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the central tax officers as it may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act....
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.... another with authority by the empowering another to act as an agent or representative". In P. Ramanatha Aiyar's, The Law Lexicon, "delegation is the act of making or commissioning a delegate. Delegation generally means parting of powers by the person who grants the delegation, but it also means conferring of an authority to do things which otherwise that person would have to do himself". Justice Mathew in Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. v. The Assistant Commissioner of Sales Tax and Others [1974 (4) SCC 98], has succinctly discussed the concept of delegation. Paragraph 37 reads as follows: "37. ... Delegation is not the complete handing over or transference of a power from one person or body of persons to another. Delegation may be defined as the entrusting, by a person or body of persons, of the exercise of a power residing in that person or body of persons, to another person or body of persons, with complete power of revocation or amendment remaining in the grantor or delegator. It is important to grasp the implications of this, for, much confusion of thought has unfortunately resulted from assuming that delegation involves or may involve, the complete abdica....
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....ovisions of the Act or the rules made thereunder to evade tax under the Act 2017, then such proper officer not below the rank of Joint Commissioner may authorize in writing any other officer of the State Tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place. According Ms. Mehta, if, ultimately, the entire exercise of inspection, search and seizure is undertaken by an authorized person, then such authorized officer can always be delegated with the power to pass an order of provisional attachment under Section 83 if the authorized officer who is of the opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue. We are afraid we are not in a position to accept this argument. 34 The first and the foremost thing which needs to be noted is that even for the purpose of Section 67, the satisfaction has to be of the proper officer not below the rank of the Joint Commissioner. If the proper officer not below the rank of the Joint Commissioner has reasons to believe that a taxable person has indulged in cont....
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....provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a precondition to the formation of opinion. The use of the word "may" indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, though subjective, must be based on some credible material disclosing that is necessary to provisionally attach the goods or the bank account for the purpose of protecting the interest of the government revenue. The statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings. "Belief" is a mental operation of accepting a fact as true, so, without any fact, no belief can be formed. It is equally true that it is not necessary for the authority under the Act to state reas....
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....xcept the guidance of "necessity". It is really for that reason that the legislature while conferring discretion upon the Government has provided that the Government shall appoint as many Special Judges as may be necessary. The words "as may be necessary" in our opinion is the guideline according to which the Government has to exercise its discretion to achieve the object of speedy trial. The term "necessary" means what is indispensable, needful or essential." 38 In Barium Chemicals Ltd. vs. Company Law Board [AIR 1967 SC 295], the Supreme Court pointed out, on consideration of several English and Indian authorities that the expressions "is satisfied", "is of the opinion" and "has reason to believe" are indicative of subjective satisfaction, though it is true that the nature of the power has to be determined on a totality of consideration of all the relevant provisions. The Supreme Court while construing Section 237 of the Companies Act, 1956 held : "64. The object of S. 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the management is so conducted as to jeopardize those interests or where a company is floated for a f....
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....nt to defraud or a fraudulent or unlawful purpose. It is equally unreasonable to think that the legislature could have abandoned even the small safeguard of requiring the opinion to be founded on existent circumstances which suggest the things for which an investigation can be ordered and left the opinion and even the existence of circumstances from which it is to be formed to a subjective process. These analysis finds support in Gower's Modern Company Law (2nd Ed.) p. 547 where the learned author, while dealing with S. 165(b) of the English Act observes that "the Board of Trade will always exercise its discretionary power in the light of specified grounds for an appointment on their own motion" and that "they may be trusted not to appoint unless the circumstances warrant it but they will test the need on the basis of public and commercial morality." There must therefore exist circumstances which in the opinion of the Authority suggest what has been set out in subclauses (i), (ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is cha....
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....ed upon the State Government to make substantial modifications in the draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory powers. The basic principles in this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in the chapter entitled 'abuse of discretion' and under the general heading the principle of reasonableness' which read as under : "The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended. Although the Crown's lawyers have argued in numerous cases that unrestricted permissive language confers unfettered discretion, the truth is that, in a system based on the rule of law, unfettered governmental discretion is a contradiction in terms. The real question is whether the discretion is wide or narrow, and where the legal line i....
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....h. In the aforesaid context, we may refer to and rely upon a decision of the Supreme Court in the case of Smt. S.R. Venkatraman vs. Union of India reported in (1979) ILLJ 25(SC) where it had been held: "There will be an error of fact when a public body is prompted by a mistaken belief in the existence of a nonexisting fact or circumstances. This is so clearly unreasonable that what is done under such a mistaken belief might almost be said to have been done in bad faith; and in actual experience and as things go, they may well be said to run into one another. The influence of extraneous matters will be undoubtedly there where the authority making the order has admitted their influence. An administrative order which is based on reasons of fact which do not exist must be held to be infected with an abuse of power." We may also refer to and rely upon a decision of the Supreme Court in the case of ITO Calcutta vs. Lakhmani Mewal Das reported in [(1976) 103 ITR 437 (SC)] wherein it had been held as under: "The reasons for the formation of the belief contemplated by Section 147(a) of the Income-tax Act, 1961, for the reopening of an assessment must have a rational connection or....
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.... also are quite different for the purpose of exercising the power of provisional attachment under Section 83 of the Act. Just because, some proceedings are initiated under Section 67 by itself would not be sufficient to arrive at the satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of the government revenue. The power has been specifically conferred upon the Commissioner to form such an opinion. The legislature was quite alive to the fact that an order of provisional attachment cannot be as a matter of course. It is one of the drastic measures which the authority may be compelled to take if the situation demands for the purpose of protecting the interest of the government revenue. Under Section 67 of the Act, 2017, the legislature has thought fit to use the words "proper officer not below the rank of Joint Commissioner". In Section 83, even that discretion is taken away and it is only the Commissioner who has been empowered to act under Section 83 of the Act. In our opinion, therefore, the subjective satisfaction, which is required for the purpose of Section 83 of the Act, is not dependent on Section 67 of the Act or ....
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.... tax may, before service of notice under subsection (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. (6) The proper officer, on receipt of such information, shall not serve any notice under subsection (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder. (7) Where the proper officer is of the opinion that the amount paid under subsection (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in subsection (1) in respect of such amount which falls short of the amount actually payable. (8) Where any person chargeable with tax under subsection (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty five per cent. of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded. (9) The proper officer shall, after cons....
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....lity came to be determined under Section 74 of the Act. Section 74 makes it abundantly clear that the defaulter should be called upon to show cause as to why he should not be paid the amount specified in the notice along with the interest payable thereon. There could not have been any assessment under Section 74 of the Act without giving any opportunity of hearing to the writ applicant. In such circumstances, the order is not tenable in law and deserves to be quashed and set aside. We also fail to understand as to on what basis the input tax credit could have been blocked by way of computer entry. At the most, the same could have been ordered to be provisionally attached, but how could the same have been blocked. Such action is also not sustainable in law. 49 Section 83 of the Act, 2017 is in pari materia with the provisions of Section 281B of the Income Tax Act, 1961. Section 281B of the Act, 1961 also provides for a provisional attachment of the property of an assessee pending the adjudication an assessment / reassessment proceedings where the income tax department believes that such attachment is necessary to protect the interest of the revenue. The provisions of Section 281B ....
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....ys from the date of receipt of such reference. (5) An order revoking the provisional attachment under head (3) shall be made (a) within forty five days from the date of receipt of the guarantee, where a reference to the Valuation Officer has been made under head (4); or (b) within fifteen days from the date of receipt of guarantee in any other cases. (6) Where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay that sum within the time specified In the notice of demand, the Assessing Officer may invoke the guarantee furnished under head (3) wholly or in part, to recover the amount. (7) The Assessmg Officer shall. In the interests of the revenue. invoke the bank guarantee, if the assessee falls to renew the guarantee referred to in head (3), or falls to furnish a new guarantee from & scheduled bank for an equal amount. fifteen days before the expiry of the guarantee referred to in head (3). (8) The amount realised by invoking the guarantee referred to ln head (3) shall be adjusted against the existing demand which is payable by the assessee and the balance amount, if any, shall be deposited in the Personal Deposit Acco....
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....ntal effect on the business of the assessee. Attachment of bank accounts and trading assets should be resorted to only as a last resort. In any event, attachment under this provision should not be equated with attachment in the course of recovery proceedings. In the event the revenue is adequately protected by attachment, there is no justification for Assessing Officer for making an order of demand directing assessee to deposit entire demand within seven days of order of assessment. Further, provisional attachment can be levied even in cases where proceedings under provisions of the IncomeTax Act, 1961 dealing with search and Seizure are yet to be initiated. Therefore, invoking this provision and issuing notice under the provision of the lncomeTax Act, 1961 dealing with assessment in case of search or requisition on same day would not effect validity of order passed under this provision. Where on facts Assessing Officer was satisfied that it was necessary to attach properties of assessee in order to protect interest of revenue and due approval was taken from concerned Commissioner who opined that it was üt case for provisional attachment, order passed under this provision i....
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....making the provisional attachment. Such guidelines are missing so far as Section 83 of the State GST Act is concerned. 52 Our final conclusions may be summarized as under: [1] The order of provisional attachment before the assessment order is made, may be justified if the assessing authority or any other authority empowered in law is of the opinion that it is necessary to protect the interest of revenue. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant the formation of the belief. [2] The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. [3] The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be rai....