TMI Blog2020 (1) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... aid otherwise than fraud) or Section 74 (determination of tax not paid on account of fraud), the Commissioner may provisionally attach any property including bank account. The power of attachment is not absolute. In the present case attached account is Over Cash Credit account and Petitioner had debit balance of ₹ 6.42 Crore, thus question arises that whether continuation of attachment would protect interest of revenue or not. The Petitioner is running unit and more than 100 families are dependent upon Petitioner. Till date no proceedings under Section 74 of CGST Act are pending which would start as soon as show cause notice is issued. The Respondent has seized record of the Petitioner who has further supplied various documents as well put personal appearance through Directors and employees - The mandate of Section 83 is to attach amount lying in an account in the form of FDR or saving and it cannot be intention or purport of Section 83 to attach an account having debit balance. No purpose leaving aside securing interest of revenue is going to be achieved except closure of business which cannot be permitted unless and until running of business itself is prohibited by law - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner has purchased scrap batteries from different suppliers which included 16 suppliers, who are not traceable. The Petitioner during July 2017 to March 2018 had availed Input Tax Credit (for short ITC ) amounting to ₹ 13.38 Crore on the basis of invoices of 16 suppliers, who are not traceable. The Respondent vide order dated 10.07.2019 (Annexure P-8) provisionally attached Over Cash Credit (for short OCC ) Account of the Petitioner, which they are maintaining with Lakshmi Vilas Bank, Karol Bagh, New Delhi. The Petitioner in terms of Rule 159 of CGST Rules, 2017 made a representation to the Respondent, who vide communication dated 23.10.2019 declined to accede request of the Petitioner to lift attachment of bank account. Hence the instant petition is filed. 3. Mr. Bansal, counsel for the Petitioner contended that account in question is an OCC Account and Petitioner till date had utilized credit limit to the tune of ₹ 6.42 Crore, thus there is debit balance in the account and its attachment amounts to closure of business because in the present era it is not possible to carry on business activities without bank account. Section 83 of CGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any taxable person to protect interest of revenue. Person aggrieved may make representation against attachment of property or bank account and Commissioner after affording opportunity of hearing is bound to decide representation in one or another way. Section 83 of CGST Act and Rule 159 of CGST Rules are reproduced as under: SECTION 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 section 67 or section 73 or section 74, 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 in such manner as may be prescribed. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1). RULE 159 PROVISIONAL ATTACHMENT OF PROPERTY: (1) Where the Commissioner decides to attach any property, including bank account in accordance with the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 62 or 63 or 64 or 67 or 73 or 74 should be pending; iii) Commissioner must form an opinion iv) Order should be passed to protect interest of revenue. v) It must be necessary to attach property. Expression is of the opinion or has reason to believe are of same connotation and are indicative of subjective satisfaction of Commissioner, which depends upon facts and circumstances of each case. It is settled law that opinion must have a rational connection with or relevant bearing on the formation of the opinion. Rational connection postulates that there must be a direct nexus or live link between the protection of interest and available property which might not be available at the time of recovery of taxes after final adjudication of the dispute.. The opinion must be formed in good faith and should not be a mere pretence. Courts are entitled to determine whether the formation of opinion is arbitrary, capricious or whimsical. 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 attachment. 8. We find it appropriate to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer to make a provisional attachment of any property of the assessee during the pendency of any proceedings or assessment or reassessment of any income, even though there is no demand outstanding against the assessee, if he is of the opinion that it is necessary to do so to protect the interests of the Revenue. To ensure that this power is not misused, a number of safeguards have been provided in the Section itself. It is not necessary for us, at this stage, to examine the same. One thing is clear that this power should be exercised by the Assessing Officer only if there is a reasonable apprehension that the assessee may thwart the ultimate collection of the demand that is likely to be raised on completion of the assessment. The power of attachment under this Section is in the nature of attachment before judgment under the Code of Civil Procedure. It is a drastic power. It should, therefore, be exercised with extreme care and caution. It should not be exercised unless there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of his property with a view to thwart the ultimate collection of the demand. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub section may be issued to any person who holds or may subsequently hold any money for or on account of the assessee jointly with any other person and for the purposes of this sub section, the shares of the joint holders in such account shall be presumed, until the controversy is proved, to be equal. (iii) (iv) Save as otherwise provided in this sub section every person to whom a notice is issued under this sub section shall be bound to comply with such notice and in particular where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. 5. Under clause (i) of sub section (3) of section 226, the Assessing Officer has power to issue notice requiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is commonly terms a garnishee summons. The classes of persons to whom such notice could be served are two: (i) any person from whom money is due or may become due to the assessee; and (2) any person who holds or may subsequently hold money for or on account of the assessee. The question which arises for consideration in the present case is, as to whether a bank, which has afforded overdraft facilities to its customer, holds the amount, specified as that up to which the customer may draw as either a debtor of the customer or holds that money on behalf of or on account of the customer.' 8. This decision was followed by the learned Single Judge of Bombay High Court in reported judgement of Calcutta High Court in case of Jugal Kishore Das v. Union of India [W.P. No. 22899 of 2013, dated 8-10-2013]. In the said case, the Assessing Officer had tried to recover the tax dues of the assessee in exercise of powers under Section 226(3) of the Act by attaching the cash credit account of the assessee. Following the decision of Madras High Court in case of K.M. Adam (supra), it was observed as under: In view of the above, this Court does not find that the action o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. The provisional attachment under Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings. 7. The authority before exercising power under Section 83 of the Act for provisional attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... running of business itself is prohibited by law. The contention of Respondent that they have power to attach bank account irrespective of nature of account cannot be countenanced. 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 protected. In case a property is mortgaged with bank and value of property is less than outstanding dues of bank, provisional attachment is meaningless and action remains only on paper. In the absence of record showing that interest of revenue is protected by attaching property or bank account, action deserves to be declared as taken without application of mind and formation of opinion on the basis of cogent material. Thus, attachment of current account having debit balance does not protect interest of revenue, instead merely ruins the business of a dealer. Such an action of attachment of over cash credit account for the sake of recovery of confirmed dema ..... X X X X Extracts X X X X X X X X Extracts X X X X
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