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2024 (5) TMI 1035 - HC - GST
Provisional attachment under Section 83 of the MGST Act - Mandate of forming an opinion before passing the order of attachment - Petitioner has failed to discharge the liability without any justification - HELD THAT - The Hon ble Supreme Court in M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH ORS. 2021 (4) TMI 837 - SUPREME COURT has opined that the power to order a provisional attachment under Section 83 of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly followed. The Hon ble Supreme Court has further opined that the exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the Government revenue. The expression necessary so to do for protecting the government revenue implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment. Once this is the law laid down by the Hon ble Supreme Court and which we find applies with full force to the facts of the present case we have no hesitation in quashing the impugned attachments and the order passed under Section 83. The petition is allowed.
Issues Involved:
1. Validity of provisional attachment orders under Section 83 of the MGST Act.
2. Compliance with procedural and substantive requirements for provisional attachment.
3. Application of the Supreme Court's judgment in Radha Krishan Industries.
Issue-wise Detailed Analysis:
1. Validity of Provisional Attachment Orders under Section 83 of the MGST Act
The Writ Petitions sought the quashing of impugned orders in FORM GST DRC-22 dated 5th April 2024, issued under Section 83 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act), read with the Central Goods and Services Tax Act, 2017 (CGST Act) and Rule 159 of the CGST Rules, 2017. The attachment orders were issued to protect the interest of government revenue, as the Petitioner allegedly failed to discharge tax liabilities.
2. Compliance with Procedural and Substantive Requirements for Provisional Attachment
The Court scrutinized the procedural adherence to Section 83 of the MGST Act, which mandates that the Commissioner must form an opinion that provisional attachment is necessary to protect the interest of government revenue. The Court found that the impugned order lacked material evidence showing the necessity of attaching the Petitioner's bank accounts. The Court emphasized that the power to levy a provisional attachment is draconian and must be exercised with strict observance of statutory preconditions, as outlined by the Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh.
3. Application of the Supreme Court's Judgment in Radha Krishan Industries
The Court referred extensively to the Supreme Court's judgment in Radha Krishan Industries, which clarified that the power to order a provisional attachment must be based on tangible material indicating that the assessee is likely to defeat the demand. The Supreme Court held that the formation of an opinion by the Commissioner must have a proximate and live nexus to the purpose of protecting government revenue. The necessity to attach must be more stringent than mere expediency. The Court found that the Joint Commissioner failed to apply this principle, leading to a non-application of mind and rendering the provisional attachment illegal.
Conclusion
The Court concluded that the impugned attachments in FORM GST DRC-22 dated 5th April 2024, and the order passed under Section 83 also dated 5th April 2024, were invalid due to non-compliance with the legal requirements set forth by the Supreme Court. Consequently, the Writ Petitions were allowed, and the attachments were quashed. However, the Court clarified that the GST Authorities could issue a fresh provisional attachment order if they satisfy the requirements as per the Supreme Court's guidelines in Radha Krishan Industries.
Final Orders
The Writ Petitions succeeded, and the impugned attachments were quashed. There was no order as to costs. The Court also noted that this order would not preclude the GST Authorities from issuing a fresh provisional attachment order in compliance with the Supreme Court's judgment. The order was to be digitally signed, and all concerned were to act on the production of a digitally signed copy of the order.