2020 (10) TMI 758 - HC - GST

Provisional attachment of the immovable property - residential premises - Direction to respondent to transfer the proceedings to the CGST department - Section 83 of GST Act - HELD THAT - Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - But at the same time there must be material based on which alone the authority could form its opinion that it has become necessary to order 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 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. 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 bereft of any reason but there is nothing on the original file on the basis of which this Court may be in a position to ascertain the genuineness of the belief formed by the authority. The word necessary means indispensable requisite; indispensably requisite useful incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. The formation of the opinion by the authority should reflect intense application of mind with reference to the material available on record that it had become necessary to order provisional attachment of the goods or the bank account or other articles which may be useful or relevant to any proceedings under the Act. In the absence of any cogent or credible material if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. This writ application stands partly allowed - the relief with regard to the order in Form GST DRC-01A is not granted whereas the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside.

Summary

Issues Involved:
1. Quashing of Form DRC-01A dated 23.07.2020.
2. Quashing of the provisional attachment order in Form GST DRC-22 dated 24.07.2020.
3. Transfer of proceedings to the CGST department.
4. Interim reliefs including lifting the attachment of factory premises, staying the operation of Form GST DRC-01A, and preventing coercive action against the petitioner.

Analysis of Judgment:

1. Quashing of Form DRC-01A dated 23.07.2020:
The court was not inclined to interfere with the order passed in Form GST DRC-01A dated 23rd July 2020. The court did not provide relief concerning this order, implying that the issuance of Form GST DRC-01A was found to be in accordance with the law.

2. Quashing of the Provisional Attachment Order in Form GST DRC-22 dated 24.07.2020:
The court found that the provisional attachment of the immovable property in the form of residential premises under Section 83 of the Act was not sustainable in law. The court emphasized that Section 83 requires the formation of an opinion based on credible material to protect the interest of government revenue. The order of provisional attachment was deemed a mechanical exercise of power without the necessary material to justify it. The court highlighted that the formation of the opinion must be based on credible material and not on imaginary grounds or wishful thinking. The court also referenced several Supreme Court judgments to support its conclusion that the subjective satisfaction for provisional attachment must be based on rational connection and credible material.

3. Transfer of Proceedings to the CGST Department:
The judgment does not provide specific details about the court's decision on the request to transfer the proceedings to the CGST department. The primary focus of the judgment was on the provisional attachment and the validity of Form GST DRC-01A.

4. Interim Reliefs:
The court did not explicitly address the interim reliefs requested by the petitioner, such as lifting the attachment of factory premises, staying the operation of Form GST DRC-01A, and preventing coercive action. However, by quashing the provisional attachment order, the court implicitly provided relief concerning the attachment of immovable property.

Conclusion:
The writ application was partly allowed. The court quashed the provisional attachment order of immovable property under Section 83 of the Act but did not grant relief concerning Form GST DRC-01A. The court clarified that this order would not prevent the Department from taking appropriate action afresh, strictly in accordance with the law as explained by the court.