TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 371
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....es including factory land, factory building, plant and machineries and 2 residential flats; b. A writ of certiorari, or any other appropriate writ, order and/or directions in the nature of certiorari to quash the provisional attachment orders dated 14.09.2023 (Annexure A) and release the attachment over moveable properties including stock lying at the premises, 2 current bank accounts, fixed deposit and all the debtors' balances; c. A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus directing the respondent to refrain from resorting to any coercive measure against the petitioner; (cc) A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus directing the respondent to forthwith return 2 mobile phones being Apple i-phone 11 Pro Max (512 GB) and Infinixhot 30i (128 GB) seized during course of search; (cd) Pending the admission, hearing and final disposal of this petition, this Hon'ble Court may direct the Respondent authorities to release the attachment over immoveable properties including factory land, factory building, plant and machineries and 2....
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....iscovered at any of the premises. Moreover, during the course of the investigation, physical verification of stock was also conducted by the Respondent but no discrepancies were detected between the physical inventory and the stock recorded in the books of accounts which substantiates the authenticity and legitimacy of petitioner's business operations. During the course of search, statement of the proprietor was also recorded. 3.5. It was alleged that the petitioner had made bogus purchases from 39 firms amounting to Rs. 214.27 crores during the period from July 2017 to August 2023 and claimed fake input tax credit of Rs. 32.67 crores. Based on such accusations, the Respondent no. 3 prepared grounds for provisional attachment and passed orders in Form GST DRC-22 for provisional attachment of immovable properties including factory land, factory building, plant and machineries and two residential flats and movable properties including stock lying at the premises, two current bank accounts, fixed deposit and all the debtors' balances as on 14.09.2023. 3.6. Search continued till 16.09.2023 and the Respondent no. 3 seized 17 purchase files and one pocket diary as per Order....
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....vide the security in form of bank guarantee to protect the interest of the revenue and insisted upon the lifting of provisional attachment over the immovable properties. 4. Learned Senior Advocate Mr. Saurabh Soparkar with learned advocate Mr. Hardik Vora for the petitioner submitted that the respondent authorities have committed an error in attaching the movable properties of the petitioner by the impugned provisional Attachment Order dated 14.09.2023 passed under Section 83 of the Goods Service Tax Act. 5. It was further submitted that the impugned provisional Attachment Order using the Bank accounts of the petitioner has affected both personal and business activities making it very difficult for the petitioner to manage daily finances, payment to employees, conduct necessary transactions, resulting into damage to the reputation of the petitioner by affecting relationship with debtors. 6. It was submitted that notices sent to the debtors regarding attachment of their outstanding balances have raised doubts about the stability of business jeopardizing future collaborations and trust. The petitioner is n affected by the provisional attachment of immovable properties. It wa....
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....ower of provisional attachment and specifically, in the context of provisions worded similarly to Section 83 of the HPGST Act. 30. The decision of this Court in Raman Tech Process Engg Co and Anr v Solanki Traders was concerned with the power of a civil court under Order 38 Rule 5 of the CPC to order an attachment before judgment. In that case, proceedings had been instituted by the respondent, for the recovery of moneys due for the supply of material to the appellant. The plaintiff moved an application under Order 38 Rule 5, for a direction to the defendants to furnish security for the suit claim and if they failed to do so, for attachment before judgment. This Court described the power of attachment before judgment in the following terms: "5. The power under Order 38, Rule 5 Civil Procedure Code is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38, Rule 5 not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5 as a leverage for coercing the de....
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....y 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 raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution. (4) The power under Section 83 of the Act for provisional attachment should be exercised only if there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of wholly or any part of his/her property with a view to thwarting the ultimate collection of demand and in order to achieve the said objective, the attachment should be of the properties and to that extent, it is required to achieve this objective. (5) The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (6) The attachment of bank account and trading assets should be resorted to only as a last resort or measure....
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....uding a bank account belonging to the taxable person; and (vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute. 48. Now in this backdrop, it becomes necessary to emphasize that before the Commissioner can levy a provisional attachment, there must be a formation of "the opinion" and that it is necessary "so to do" for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency of the proceedings under the stipulated statutory provisions noticed earlier. An attachment which is contemplated in Section 83 is, in other words, at a stage which is anterior to the finalization of an assessment or the raising of a demand. Conscious as the legislature was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable p....
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....use it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. 50. These expressions in regard to both the purpose and necessity of provisional attachment implicate the doctrine of proportionality. Proportionality mandates the existence of a proximate or live link between the need for the attachment and the purpose which it is intended to secure. It also postulates the maintenance of a proportion between the nature and extent of the attachment and the purpose which is sought to be served by ordering it. Moreover, the words embodied in sub-Section (1) of Section 83, as interpreted above, would leave no manner of doubt that while or....
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.... "reason to believe" in Section 147 of the Income Tax Act 1961 that income chargeable to tax has escaped assessment inter alia by the omission or failure of the assessee to disclose fully and truly all material facts necessary for the assessment of that year, held that the power to reopen an assessment must be conditioned on the existence of "tangible material" and that "reasons must have a live link with the formation of the belief". This principle was followed subsequently in a two judge Bench decision in Income Tax Officer, Ward No. 162 (2) v Techspan India Private Limited. While adverting to these decisions we have noticed that Section 83 of the HPGST Act uses the expression "opinion" as distinguished from "reasons to believe". However for the reasons that we have indicated earlier we are clearly of the view that the formation of the opinion must be based on tangible material which indicates a live link to the necessity to order a provisional attachment to protect the interest of the government revenue. 72. For the above reasons, we hold and conclude that (i) The Joint Commissioner while ordering a provisional attachment under section 83 was acting as a delega....
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....o grant an opportunity of being heard; (x) The Commissioner is duty bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attached; (xi) A final order having been passed under Section 74 (9), the proceedings under Section 74 are no longer pending as a result of which the provisional attachment must come to an end; and (xii) The appellant having filed an appeal against the order under section 74 (9), the provisions of sub-Sections 6 and 7 of Section 107 will come into operation in regard to the payment of the tax and stay on the recovery of the balance as stipulated in those provisions, pending the disposal of the appeal." 11. Referring to the above decisions it was submitted by the learned Senior Advocate that the case of the petitioner is squarely covered by the conclusions arrived at by the Hon'ble Supreme Court and the respondent authorities are therefore required to be directed to lift provisional attachment over the immovable properties of the petitioner. 12. Reliance was also placed on the decision of this Court in case of Arya Metacast (P.) Ltd. Vs. S....
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....oods electronic items including mobile phone, laptop and other seized documents shall be retained in its original form and shall not be disposed of pending the investigation, if any. At the same time, we permit the respondent authorities to secure the original data by availing necessary certificate under Section 65B of the Information and Technology Act." 13. Reliance was placed on the decision of this Court in case of Utkarsh Ispat LLP Vs. State of Gujarat reported in [2022] 136 taxmann.com 1 (Gujarat), wherein the Hon'ble Court relying upon the decision of the Hon'ble Supreme Court in case of Radha Krishan Industries (Supra) as well as circular dated 23.02.2021 held as under: "38 What is relevant for our purpose is clause 3.4.5 of the guidelines referred to above. It says that as far as possible, the authority should ensure that the attachment does not hamper the normal activities of the taxable person. It has been clarified that the raw materials and input required for the production or finished goods should not normally be attached by the department. 39 In the case on hand, we do not approve the provisional attachment of the goods, stock and receivables, mo....
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....the issues with regard to the issuance of the tax invoices without actual supply of goods and services or both and to ensure uniformity in the implementation of the provisions of the law across the formations the Board has clarified the issues. Reliance was also placed on the illustration given in issue no. 3 to submit that when a registered person has issued tax invoice to another registered person without any underlying supply of goods or services or both and other person avails input tax credit on the basis of the said tax invoices and further passes on the said input tax credit to another registered person by issuing invoices without underlying supply of goods or services or both, only shall be liable for penal action and not the third person who has received the input tax credit from the second person. It was submitted in the facts of the case of the petitioner also the issue of invoices by the petitioner, there is no allegation against the petitioner for passing on the ITC without underlying supply of the goods. It was therefore submitted that even on merits the petitioner has a very good case and there is no likelihood of any demand against the petitioner. 16. It was ther....
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....amounts to Rs. 146.60 crores out of which the ITC of around Rs. 276.68 crores is bogus and therefore more than 52% of the total ITC claimed by the petitioners appears to be bogus. 21. It was submitted that the evidence is found by the respondent Department showing bogus billings in case of the petitioners and therefore in the facts of the case, the respondent authorities have passed the impugned order of provisional attachment under Section 83 of the Act. 22. Learned AGP Ms. Shah referred to the satisfaction note dated 14.09.2023 and further relied upon the averments made in the affidavit-in-reply filed on behalf of the respondent no. 3 to submit that in the facts of the case when the petitioner has indulged into bogus billing which is further fortified from the statements of transport recorded in the investigation that there was no supply of the goods relating to the invoices generated by the petitioners, the respondent authority was justified in passing the impugned order of provisional attachment of movable properties of the petitioner in addition to the immovable properties to protect interest of the revenue. 23. It was submitted that as per Circular no. 171 dated 06.0....
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.... HPGST Act and the CGST Act read with Section 20 of the Integrated Goods and Services Tax Act, 2017. This was through a search and seizure under Section 67 of the HPGST Act and CGST Act. The partners of GM Powertech were arrested on 3 December 2018 on the ground of raising fraudulent claims of input tax credit from fake/fictitious firms in Delhi and Kanpur. 7. The appellant received a memo by an e-mail dated 15 December 2018 from the third respondent directing it to be present on 17 December 2018 for explaining the allegedly illegal claim of ITC made during 2017-18 and 2018-19. By its letter dated 17 December 2018, the appellant contended that it had validly claimed ITC as it fulfilled the conditions under section 16 and other provisions of the HPGST Act and the CGST Act. 8. On 9 January 2019, a notice was issued to Fujikawa Power, Bagbania, BBN Baddi, one of the customers of the appellant, for provisionally attaching an amount of Rs. 5 crores due to the appellant, under Section 83 of the HPGST Act. On 19 January 2019, the third respondent passed an order of provisional attachment in respect of receivables worth Rs. 5 crores due from Fujikawa Power. This order ina....
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....he Hon'ble Supreme Court in case of Radha Krishan Industries (Supra) are factually stands on different facts and therefore the same would not be applicable. It was submitted that the Hon'ble Supreme Court after considering that the order of the provisional attachment held that it contained no basis for formation of the opinion that provisional attachment was necessary to safeguard interest of revenue and accordingly quashed and set aside such orders. Reliance was placed on the following observations of the Hon'ble Supreme Court in the context of such finding: "66. Ex facie, the above order passed by the Joint Commissioner does not indicate any basis for the formation of the opinion that the levy of a provisional attachment was necessary to protect the interest of the government revenue. The order in the file noting refers to the fact that the case of GM Powertech had been decided under Section 74 resulting in an additional demand of Rs. 39 crores on account of a fraudulent claim of ITC for FY 2017-18 and 2018-19. GM Powertech is alleged to have passed on the ITC to various Registered Tax Persons situated in Himachal Pradesh by issuing invoices inter alia to the appellant d....
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....nuary 2019, after considering the representations made by the petitioner. On the very ground, without any material change in circumstances. Another order of provisional attachment came to be issued by another Joint Commissioner. Therefore, it was the contention of the petitioner before the High Court that the subsequent order of provisional attachment is in substance and effect an order reviewing the earlier order withdrawing the order of provisional attachment which was not permissible and therefore the subsequent order of provisional attachment is without jurisdiction. The High Court has not considered this aspect. Both the earlier and the subsequent orders of provisional attachment are on the same grounds. Therefore, unless there was a change in the circumstances, it was not open for the Joint Commissioner to pass another order of provisional attachment, after the earlier order of provisional attachment was withdrawn after considering the representations made by the petitioner. This is an additional ground to set aside the subsequent order of provisional attachment." 27. Referring to the above findings it was submitted that the Hon'ble Supreme Court in case of Radha Krishan I....
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....icability of demand and penalty provisions under the Central Goods and Services Tax Act, 2017 in respect of transactions involving fake invoices CIRCULAR NO. 171/03/2022-GST [F.NO. CBIC-20001/2/2022-GST], DATED 6-7-2022 A number of cases have come to notice where the registered persons are found to be involved in issuing tax invoice, without actual supply of goods or services or both (hereinafter referred to as "fake invoices"), in order to enable the recipients of such invoices to avail and utilize input tax credit (hereinafter referred to as "ITC") fraudulently. Representations are being received from the trade as well as the field formations seeking clarification on the issues relating to applicability of demand and penalty provisions under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "CGST Act"), in respect of such transactions involving fake invoices. In order to clarify these issues and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues detailed hereunder. Sl.No. Issues ....
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....y of the said ITC, along with penal action, under the provisions of section 74 of the CGST Act, along with applicable interest under provisions of section 50 of the said Act. Further, as per provisions of section 75 (13) of CGST Act, if penal action for fraudulent availment or utilization of ITC is taken against 'B' under section 74 of CGST Act, no penalty for the same act, i.e. for the said fraudulent availment or utilization of ITC, can be imposed on 'B' under any other provisions of CGST Act, including under section 122. 3. A registered person 'A' has issued tax invoice to another registered person 'B' without any underlying supply of goods or services or both. 'B' avails input tax credit on the basis of the said tax invoice and further passes on the said input tax credit to another registered person 'C' by issuing invoices without underlying supply of goods or services or both. Whether 'B' will be liable for the demand and recovery and penal action, under the provisions of section 73 or section 74 or any other provisions of the CGST Act. In this case, the input tax credit availed by 'B' in his electronic credit ledger on the basis of tax invoice issued by 'A', without ....
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....vokable, subject to conditions specified therein, based on facts and circumstances of each case. 3. It is requested that suitable trade notices may be issued to publicize the contents of this Circular. 4. Difficulty, if any, in implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow. (Sanjay Mangal) Principal Commissioner (GST)" 30. On perusal of the above circular the case of the petitioner would fall within second issue as the petitioner has received invoices without any underlying supplying goods and has availed input tax credit on the basis of the tax invoices and the petitioner has issued invoices along with underlying supply of goods or services to its buyers and utilized the ITC availed on the basis of the bogus invoices for payment of his tax liability in respect of outward supplies and hence the petitioner would be liable for the demand and recovery of the ITC along with penal actions, interest and penalty under the provisions of Section 74 of the CGST Act. Therefore, the facts of the case clearly shows that the facts emerging from the material on record are different than ....