TaxTMI 
TaxTMI 
2021 (1) TMI 795
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.... Savings Bank Account No.02371000038487 held by the Petitioner with the HDFC Bank Limited; (b) pending the admission, hearing and final disposal of this petition, direct the Respondent No.2 to lift the attachment over the CC/Current Bank Account No.066028304000013 with the AMCO Bank, Current Bank Account No.02372320002872 and Savings Bank Account No.02371000038487 with the HDFC Bank Limited and permit the Petitioner to operate such bank account; (c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition." 2. The facts giving rise to this writ-application may be summarised as under : 3. The writ-applicant is a proprietor of a proprietary concern running in the name of M/s.Chechani Trading Company. The concern is engaged in the business of trading of ferrous and non-ferrous metal scrap. The writ-applicant holds a valid registration certificate under the provisions of the CGST Act and the GGST Act respectively. 4. It appears from the materials on record that a spot visit was carried out by the flying squad of the department on 11th August 2020 at the premises of the wri....
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....f the bank accounts referred to above. 9. Being dissatisfied with the order of provisional attachment referred to above, the writ-applicant is here before this Court with the present writ-application. 10. On 9th December 2020, this Court passed the following order : "1. We have heard Mr. Tushar Hemani, the learned Sr. Counsel assisted by Ms. Vaibhavi Parikh, the learned counsel appearing for the writ applicant and Mr. Chintan Dave, the learned AGP appearing for the State - respondents on advance copy served upon him. 2. The challenge in this writ application is to the legality and validity of the order of provisional attachment of the bank accounts passed under Section 83 of the Gujarat Goods and Services Tax Act, ("GST Act" for short). There are two orders on record. The first order is dated 28.08.2020 (inadvertently mentioned as 28.08.2018, at Annexure-A) passed by the Additional Commissioner, CGST, Ahmedabad South for the provisional attachment of the Cash Credit/Current Account held by the writ applicant with the AMCO Bank. The second order is also of the provisional attachment under Section 83 of the GST Act of one Current Bank Account and one Savings B....
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....above are concerned. 12. Mr.Tushar Hemani, the learned senior counsel appearing for the writ-applicant, vehemently submitted that the impugned order is not sustainable in law as on the date of the passing of the order of provisional attachment, there were no proceedings pending under Section 67 of the Act. He would further submit that the proceedings under Section 67 of the Act are deemed to have come to an end once the process of inspection, search and seizure of the goods, documents, books or things is over and the authorized officer leaves the premises of the taxable person on whose premises the inspection and search is being conducted. 13. According to Mr.Hemani, as on 11th August 2020, i.e. the date of the impugned order of provisional attachment, no other proceedings were pending under any other provision of the CGST Act. 14. Mr.Hemani would submit that the impugned orders are very cryptic and those do not reflect any application of mind. He would submit that neither any assessment has been framed so far nor any demand has been raised in the case of the writ-applicant in accordance with the scheme of the Act. He would argue that in the absence of assessment, the quan....
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....is High Court in the case of Kushal Ltd. vs. Union of India (Special Civil Application No.19533 of 2019, decided on 17th December 2019). 21. On the other hand, this writ-application has been vehemently opposed by Ms.Kalpana Raval, the learned senior standing counsel appearing for the respondents. Ms.Raval would submit that the action in the form of provisional attachment of the two bank accounts in exercise of the powers under Section 83 of the Act is just and valid. It is on the basis of the materials on record that the Additional Commissioner, CGST, was convinced that in order to protect the interest of the Revenue it is essential to exercise the powers conferred under Section 83 of the Act for the purpose of provisional attachment of the bank accounts. He would argue that the principal contention on behalf of the writ-applicant that as the proceedings under Section 67 of the Act could be said to have come to an end, the power under Section 83 of the Act for the purpose of provisional attachment of the bank accounts could not have been exercised, is without any merit. 22. Ms.Raval would submit that the decision of this High Court in the case of Kushal Ltd. (supra) has been ....
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.... 73 and 74, the Commissioner can provisionally attach any property including the bank account belonging to the taxable person. For this purpose, the Commissioner has to form an opinion that it is necessary to do so for protecting the interest of the Government Revenue. These steps have to be taken in such manner as prescribed. Rule 159(1) of the CGST Rules, 2017, deals with the provisional attachment of the property. This rule reads thus :- "(1) Where the Commissioner decides to attach any property, including bank account in accordance with the provisions of section 83, he shall pass an order in FORM GST DRC-22 to that effect mentioning therein, the details of property which is attached." 30. Rule 159(1) states that when the Commissioner decides to attach any property including the bank account, he shall pass an order in form GST DRC-22. Various forms have been appended to the GST Rules 2017. Form GST DRC-22 lays down the format in which the order has to be issued provisionally attaching the property and the communication thereof to the financial institution. The form is reproduced hereinbelow for ready reference. "FORM GST DRC - 22 [See rule 159(1)] Date: ....
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....llful mis-statement made on suppression of facts. Section 70 confers power on the proper officer to summon any person whose attendance he considers necessary to give evidence or to produce documents or any other thing in any inquiry. Such inquiry is deemed to be a judicial proceeding under the Indian Penal Code. 33. In Kushal Ltd. (supra), a Coordinate Bench of this Court held as under : "10. From the facts and contentions noted hereinabove, it emerges that a search came to be conducted under section 67 of the GST Acts on 27.9.2018, whereupon it was discovered that the petitioners had purchased goods and availed input tax credit thereon and had passed on input tax credit to various buyers by raising GST invoices without there being any actual movement of goods at their end either as recipient or as supplier. During the course of investigation, it was found that the petitioners were engaged in the business of trading of paper and electronics and had availed GST on the basis of only invoices and no goods were actually received by them. It appears that according to the respondents, investigation pursuant to the search conducted under section 67 of the GST Acts is still goi....
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....gs referred to in sub-section (2) or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice." 12. In the present case, since the premises of the petitioners came to be searched, the provisions of sub-section (2) of section 67 of the GST Acts would be attracted. In terms thereof, pursuant to an authorisation issued in this behalf, the proper officer may search the premises in respect of which the search is authorised and seize goods, documents or books or things and retain the documents or books or things so long as may be necessary for any inquiry or proceedings under the Act. In the present case, search proceedings were conducted at the premises of the petitioners on 27.9.2018. Thereafter, there was a visit by the respondents on 1.4.2019 which led to the arrest of the second petitioner. Thereafter, no search has been conducted at the premises of the petitioners. The search proceedings have, therefore, ended. It is the case of the respon....
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....law and are rendered unsustainable." 34. Thus, this Court took the view that the sine qua non for exercise of powers under Section 83 of the Act is that the proceedings should be pending under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74 of the GST Act. The Coordinate Bench, in the said case, took the view that as no proceedings under Section 67 of the Act were pending on the date of the passing of the order of provisional attachment, the same would render the order illegal and contrary to the provisions of the Act, more particularly, Section 83 of the Act. 35. We shall now look into the order passed by the Supreme Court referred to above. The order reads thus : "Heard learned counsel for the parties. On the question of interim relief, we agree with the apprehension expressed by the petitioner-Union of India that the impugned judgment being followed in other similar cases cannot be ruled out. That ought not to be permitted as the issue is pending consideration before this court. In other words, the view expressed in the impugned judgment is kept in abeyance and it cannot be followed in other cases till the issue i....
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....petition, 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 reasons for its belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed, as it has been held by the Supreme Court in Sheonath Singh's case [AIR 1971 SC 2451], that the Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court. In the case at hand, Ms. Mehta, the learned A.G.P. appearing for the respondents very fairly submitted that not only the impugned order of provisional attachment is ....
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....an 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 Com panies 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 fraudulent or an unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted S.637(i)(a) it knew that government would entrust to the Board its power under S. 237 (b). Could the legislature have left without any restraints or limitations the entire power of ordering an in....
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....ays 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 sub-clauses (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 challengeable on the ground of non-application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute." 39 The Supreme Court while expressly referring to the expressions such as "reason to believe", "in the opinion" of observed : "Therefore, the words, "reason to believe" or "in the opinion of do not always lead to the construction that the process of entertaining "reason to believe" or "the opinion" is an altogether subjective to process not lending itself even to a limited scrutiny by the court that such "a re....
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....thorities 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 is to be drawn. For this purpose everything depends upon the true intent and meaning of the empowering Act. The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependents, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his ....
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....ce 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 relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the I.T.O. and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and subst....
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.... 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 to put it in other words, just because, a search has been undertaken resulting in seizure of goods by itself may not be sufficient to arrive at the subjective satisfaction that it is necessary to pass an order of provisional attachment to protect government revenue." 40. This Court summarised its final conclusion in paragraph 52 of the said order as under : "[1] The order of provisional attachment before the assessment order is made, may be jus....
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.... may not be justified in invoking its power under Section 83 of the Act for the purpose of provisional attachment. " 41. In the course of the hearing of this matter, we inquired with Mr.Hemani as regards the balance in the two bank accounts ordered to be provisionally attached. The details furnished by Mr.Hemani are as under : Sr. No. Account No. Account Type Balance 1 02372320002872 Current 17,065=00 2 02371000038487 Saving 5,000=00 42. Thus, the amount as on date in the two bank accounts aggregates to Rs. 22,065=00. What good purpose the department is going to achieve by provisionally attaching the two bank accounts with balance of a paltry amount of Rs. 22,065=00. 43. Let us try to take a practical view of the matter. The avowed object of exercise of power under Section 83 of the Act for the purpose of provisional attachment of any property is to protect the interest of the Revenue. Say for instance, tomorrow an order of assessment is passed and liability of the assessee to pay a particular amount is fixed. It is at that stage that the department may consider recovering the amount determined towards the tax liability from the amount l....
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....titled to determine whether the formation of opinion is arbitrary, capricious or whimsical. The expression 'necessary' must also be taken care of. From the order and record, it must come out that actually it was necessary to take drastic action of provisional attachment. 45. We may remind the respondents once again of the observations made by a Coordinate Bench of this Court in the case of M/s.Patran Steel Rolling Mill vs. Assistant Commissioner of State Tax, Unit 2, rendered in the Special Civil Application No.16931 of 2018, decided on 20th December 2018. We quote the relevant observations thus : "7. Sub-section (1) of Section 83 of the GGST Act provides that where the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person. On a plain reading of the said provision, it is evident that before resorting to such drastic action, the Commissioner is required to form an opinion that it is necessary to do so to protect the interest of the revenue. For the purpose of arriving a....
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....s financial position to ascertain as to whether or not he would otherwise be in a position to pay the dues that may be assessed upon the culmination of any assessment proceedings that may be initiated. If the dealer is a fly by night operator or a habitual offender or does not have sufficient means to pay the dues that may arise upon assessment, such action may be justified. Such drastic powers under Section 83 of the Act should not be exercised as a matter of course, but only after due application of mind to the relevant factors." 46. We may also remind the respondents of the observations made by a Division Bench of the Punjab and Haryana High Court in the case of Bindal Smelting Private Limited vs. Additional Director General (CWP No.31382 of 2019, decided on 20th December 2019). We quote the relevant observations thus : "We are of the opinion that Respondent can attach an account only if there is some balance in the form of FDR or savings. The power of attachment of bank account cannot be exercised as per whims and caprices of the Authority. The Commissioner is bound to ensure that by attachment of property or bank account, interest of revenue is going to be protecte....
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....orded in writing extend the aforesaid period by such further period or periods as he thinks fit so, however, that the total period of extension shall not in any case exceed two years or sixty days after the date of order of assessment or reassessment, whichever is later. (3) Where the assessee furnishes a guarantee from a scheduled bank for an amount not less than the fair market value of the property provisionally attached under head (1) the Assessing Officer shall, by an order in writing, revoke such attachment. However where the Assessing Officer is satisfied that a guarantee from a scheduled bank for an amount lower than the fair market value of the property is sufficient to protect the interests of the revenue, he may accept such guarantee and revoke the attachment. (4) The Assessing Officer may, for the purposes of determining the value of the property provisionally attached under head (1), make a reference to the Valuation Officer referred to in the provision of the Income-Tax Act, 1961 who shall estimate the fair market value of the property in the manner provided under that provision and submit a report of the estimate to the Assessing Officer wi....
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.... protect interests of revenue and same is supported by supervening factor. It gives guidelines for making provisional attachment and is, thus, constitutionally valid. The power conferred upon the Assessing Officer under this provision is a very drastic far-reaching power and that power has to be used sparingly and only on substantive weighty grounds and reasons. To ensure that this power is not misused, a number of safeguards have been provided in the provision itself. This power should be exercised by the Assessing Officer only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should therefore be exercised with extreme care and caution. Moreover, power under this provision is to be exercised only if there is sufficient material on record to justify satisfaction that assessee is about to dispose of whole or any part of his property with a view to thwarting ultimate collection of demand and in order to achieve said objective attachment should be of properties and to extent it is required to achieve this object. It should neither be used as a tool to harass the asse....
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....chment would only be passed upon satisfaction of the criteria listed out. An injunction/stay order passed during pendency of assessment proceedings does not on its own or by deeming fiction extend period stipulated in order. Upon the expiry of the period stipulated in the order demanding provisional attachment, assessee is entitled to encash his money minus any tax due. An extension of provisional attachment without recording any reasons, such order must be taken to be illegal and non est. When assessee has filed an appeal challenging order of assessment within time period prescribed under the provision of the Income-Tax Act, 1961 dealing with appealable orders along with a stay application, Assessing Officer cannot not pass an order of attachment in terms of this provision during pendency of said appeal. When property, which' is subject matter of provisional attachment, is sufficient to satisfy tax liability and safeguard interest of revenue, petitioner can seek release of provisional attachment in respect of other properties and amounts due from debtors and depositors." 49. Thus, although the provisions of Section 281B of the Income Tax Act is pari materia to Sect....