TMI Blog2020 (1) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... 83 of the Act, for the purpose of provisional attachment. The dictum of law, as laid in the decision of this Court in the case of Valerius Industries, can straight way be made applicable to the case on hand. In the case on hand, we looked into the order passed by the Assistant Commissioner of State Tax under Section 83 of the Act - in the case on hand, the order of provisional attachment as well as the order of prohibition are not sustainable on two counts, i.e. (i) the order has been passed by the Assistant Commissioner, and (ii) the order has been passed without any credible materials, available for the purpose of passing such order of provisional attachment. The order of provisional attachment passed by the Assistant Commissioner, so far as the immovable property is concerned is set aside - application allowed. - R/Special Civil Application No. 14129 of 2019 - - - Dated:- 8-1-2020 - HONOURABLE MR. JUSTICE J.B. PARDIWALA AND HONOURABLE MR. JUSTICE BHARGAV D. KARIA Mr Ravish D Bhatt for the Petitioner Mr Soaham Joshi, AGP And Mr Nirzar S Desai for the Respondent ORAL ORDER PER: HONOURABLE MR. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing admission, hearing and final disposal of this application, Your Lordship may be pleased to stay the execution, implementation and operation of order of prohibition dated 30.07.2019 (Annexure C) passed under rule 139(4) of CGST Rules, 2017, in the interest of justice. (H) Your Lordship may be pleased to pass such other and further orders as may be deemed just, fit and proper in the facts and circumstances of the case, in the end of justice. 2. The facts, giving rise to this Writ Application, may be summarized as under: 2.1. The writ applicant is a company, incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of laying of pipelines, works contract, renting the machinery and sale of old machinery and scrap material, etc. 2.2. The writ applicant is a company registered under the provisions of the Gujarat Goods and Services Tax Act, 2017 (for short 'the GGST Act, 2017'). 2.3. It appears that the office premises of the writ applicant situated at Ahmedabad and Baroda were raided by the respondent-Authorities, in exercise of their powers, under Section 67 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office premises. 4. This court has also heard Ms. Maithili Mehta learned Assistant Government Pleader for the respondents. 5. On a perusal of the order dated 30.7.2019 passed by the Assistant Commissioner of State Tax, Unit 22, Ahmedabad under rule 139(4) of the GGST Rules, pursuant to the search of the premises of the petitioner under sub-section (2) of section 67 of the GGST Act, 2017, it is evident that the properties in respect of which the prohibition order has been passed were not found at the premises which came to be searched. 6. Under the circumstances, the attachment of such property appears to be beyond the scope of the powers of the concerned Officer under subsection(2) of section 67 of the Act. 7. In the aforesaid premises, issue rule, returnable on 10.10.2019. Ms. Maithili Mehta learned Assistant Government Pleader waives service of notice of rule on behalf of the respondent Nos.1, 2 and 4 and Mr. Nirzar Desai learned Senior Standing Counsel waives service of notice of rule on behalf of respondent No.3. 8. In the meanwhile by way of interim relief, the order dated 30.7.2019 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislature upon the Commissioner. The subjective satisfaction that for the purpose of protecting the interest of the government revenue, it is necessary that the goods should be provisionally attached should be that of the Commissioner. The Commissioner has been conferred with the power to pass an order in writing for the purpose of attaching provisionally any property including the bank account belonging to the taxable person. Indisputably, in the case on hand, the order of provisional attachment of the bank account as well as the goods has not been passed by the Commissioner, the same has been passed by the State Tax Officer I.e. the respondent No.3 herein. 17. The order of provisional attachment of property under Section 83 in form NO.GST DRC22 in accordance with Rule 159(1) of the Rules reads as follows: FORM GST DRC 22 [See rule 159(1)] Reference NO.AC/U44/STO1/Valerius/2018-19 dated : 20/11/2018 To, The Manager Bank of Baroda Alkapuri Branch Vadodara Provisional attachment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST + SGST 1 ADIDEV ENTERPRISE 24HEGPS2435C1 ZN 6488624 1167954 2 LAXMIRAJ ENTERPRISE 24GTXPS2601K1 Z3 14284362 2571183 3 RADHESH TRADERS 24DFNPP9188F1 ZR 3387911 609823 4 RAGHAV TRADERS 24APHPY6226N1 Z8 17975638 3235614 TOTAL 42136534 7584575 Thus, the tax credit of purchases made by you from the above mentioned dealers is liable to be rejected and tax, interest and penalty are liable to be levied. For the security of the government tax, you have to maintain goods stock of ₹ 1,60,00,000/against the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Gujarat State, Ahmedabad. 20. The first and the foremost question that needs to be answered is whether the Commissioner could have delegated his power by virtue of the aforesaid order. Ms. Mehta, the learned A.G.P. Seeks to rely upon Section 5 of the Act, 2017. Section 5 of the State GST Act reads as under: 5. Powers of Officers (1)Subject to such conditions and limitations as the Commissioner may impose, an officer of State tax may exercise the powers and discharge the duties conferred or imposed on him under this Act and discharge the duties conferred or imposed on him under this Act. (2)An Officer of State tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other Officer of State tax who is subordinate to him. (3)The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other Officer who is subordinate to him. (4)Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, it is necessary to look into few provisions of the Central GST Act, 2017. Section 2(24) of the CGST Act, 2017 defines Commissioner as under: Commissioner means the Commissioner of State tax appointed under section 3 and includes the Chief Commissioner or Principal Commissioner of State tax appointed under section 3; 27 Section 2(25) of the CGST Act defines Commissioner in the Board as under: 2(25) Commissioner in the Board means the Commissioner referred to in section 168; 28. Section 83 of the CGST Act is pari materia to Section 83 of the State GST Act. Section 167 of the CGST Act with regard to the delegation of powers reads as under: 167. Delegation of powers. The Commissioner may, by notification, direct that subject to such conditions, if any, as may be specified in the notification, any power exercisable by any authority or officer under this Act may be exercisable also by another authority or officer as may be specified in such notification. 29. Section 168 of the CGST Act, 2017 reads as under: 168. (1) The Board may, if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State Tax. 31. Delegation is the act of making or commissioning a delegate. It generally means parting of powers by the person who grants the delegation and conferring of an authority to do things which otherwise that person would have to do himself. Delegation is defined in Black s Law Dictionary as the act of entrusting another with authority by the empowering another to act as an agent or representative . In P. Ramanatha Aiyar s, The Law Lexicon, delegation is the act of making or commissioning a delegate. Delegation generally means parting of powers by the person who grants the delegation, but it also means conferring of an authority to do things which otherwise that person would have to do himself . Justice Mathew in Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. v. The Assistant Commissioner of Sales Tax and Others [1974 (4) SCC 98], has succinctly discussed the concept of delegation. Paragraph 37 reads as follows: 37. Delegation is not the complete handing over or transference of a power from one person or body of persons to another. Delegation may be defined as the entrusting, by a person or body of persons, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings under Section 67 of the Act. The submission of Ms. Mehta is that Section 67 of the Act confers power of inspection, search and seizure. Where the proper officer not below the rank of Joint Commissioner has reasons to believe that a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has indulged in contravention of any of the provisions of the Act or the rules made thereunder to evade tax under the Act 2017, then such proper officer not below the rank of Joint Commissioner may authorize in writing any other officer of the State Tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place. According Ms. Mehta, if, ultimately, the entire exercise of inspection, search and seizure is undertaken by an authorized person, then such authorized officer can always be delegated with the power to pass an order of provisional attachment under Section 83 if the authorized officer who is of the opinion that it is necessary so to do for the purpose of protecting the interest of the govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed 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 mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed : The legislature had to leave it to the discretion of the Government as it would be in a better position to know the requirement. Further, the discretion conferred upon the Government is not absolute. It is in The nature of a statutory obligation or duty. It is the requirement which would necessitate exercise of power by the Government. When a necessity would arise and of what type being uncertain the legislature could not have laid down any other guideline except the guidance of necessity . It is really for that reason that the legislature while conferring discretion upon the Government has provided that the Government shall appoint as many Special Judges as may be necessary. The words as may be necessary in our opinion is the guideline according to which the Government has to exercise its discretion to achieve the object of speedy trial. The term necessary means what is indispensable, needful or essential. 38. In Barium Chemicals Ltd. vs. Company Law Board [AIR 1967 SC 295], the Supreme Court pointed out, on consideration of several English and Indian authorities that the expressions is satisfied , is of the opinion and has reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re must exist circumstances from which the Authority forms an opinion that they are suggestive of the crucial matters set out in the three subclauses. It is hard to contemplate that the legislature could have left to the subjective process both the formation of opinion and also the existence of circumstances on which it is to be founded. It is also not reasonable to say that the clause permitted the Authority to say that it has formed the opinion on circumstances which in its opinion exist and which in its opinion suggest an intent to defraud or a fraudulent or unlawful purpose. It is equally unreasonable to think that the legislature could have abandoned even the small safeguard of requiring the opinion to be founded on existent circumstances which suggest the things for which an investigation can be ordered and left the opinion and even the existence of circumstances from which it is to be formed to a subjective process. These analysis finds support in Gower s Modern Company Law (2nd Ed.) p. 547 where the learned author, while dealing with S. 165(b) of the English Act observes that the Board of Trade will always exercise its discretionary power in the light of specified grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a mere pretence. 41. In Bhikhubhai Vithalabhai Patel (supra), the Supreme Court observed in paras 32 and 33 as under: 32. We are of the view that the construction placed on the expression reason to believe will equally be applicable to the expression is of opinion employed in the proviso to Section 17 (1) (a) (ii) of the Act. The expression is of opinion , that substantial modifications in the draft development plan and regulations, are necessary , in our considered opinion, does not confer any unlimited discretion on the Government. The discretion, if any, conferred upon the State Government to make substantial modifications in the draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory powers. The basic principles in this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in the chapter entitled abuse of discretion and under the general heading the principle of reasonableness which read as under : The common theme of all the authorities so far mentioned is that the notion of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of the statute. 42. 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. In the aforesaid context, we may refer to and rely upon a decision of the Supreme Court in the case of Smt. S.R. Venkatraman vs. Union of India reported in (1979) ILLJ 25(SC) where it had been held: There will be an error of fact when a public body is prompted by a mistaken belief in the existence of a nonexisting fact or circumstances. This is so clearly unreasonable that what is done under such a mistaken belief might almost be said to have been done in bad faith; and in actual experience and as things ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worth only ₹ 1,60,00,000/from the total goods worth ₹ 2,48,59,485/( Rupees Two Crore Forty Eight Lakh Fifty Nine Thousand Four Hundred Eighty Five only). 44. We would like to add something more to what we have stated above. It would be a big mistake on the part of the respondents to understand that the reasons to believe necessary for the purpose of carrying out inspection, search and seizure under Section 67 of the Act, 2017 would be sufficient enough for the purpose of formation of the opinion that it is necessary to provisionally attach the goods or other articles for the purpose of protecting the interest of the government revenue. In our opinion, Section 83 of the Act stands altogether on a different footing. The considerations also are quite different for the purpose of exercising the power of provisional attachment under Section 83 of the Act. Just because, some proceedings are initiated under Section 67 by itself would not be sufficient to arrive at the satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of the government revenue. The power has been specifically conferred upon the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in subsection (10) for issuance of order. (3)Where a notice has been issued for any period under subsection (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1), on the person chargeable with tax. (4) The service of statement under sub-section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any willful-misstatement or suppression of facts to evade tax, for periods other than those covered under subsection (1) are the same as are mentioned in the earlier notice. (5) The person chargeable with tax may, before service of notice under subsection (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. Of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation 2. For the purposes of this Act, the expression suppression shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer. 46. Thus, Section 74 provides for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of fact. The case of the department is very specific. 47. Rule 142(5) of the Rules 2017 reads as under: 142. Miscellaneous transitional provisions. (5) Notwithstanding anything to the contrary contained in this Act, any amount of input tax credit reversed prior to the appointed day shall not be admissible as input tax credit under this Act. 48. It appears from the materials on record that without issue of any show cause notice, the tax liability came to be determined under Section 74 of the Act. Section 74 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. 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 Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before judgment, ie, before assessment order is made, is legal if assessing authority is of opinion that it is necessary to 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 farreaching 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ension of period of provisional attachment 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 en-cash 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, 1961dealing 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. 51. Thus, although the provisions of Section 281B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 attachment should take into consideration two things: (I) whether it is a revenue neutral situation (ii) the statement of output liability or input credit . Having regard to the amount paid by reversing the input tax credit if the interest of the revenue is sufficiently secured, then the authority may not be justified in invoking its power under Section 83 of the Act for the purpose of provisional attachment. 6. The dictum of law, as laid in the decision of this Court in the case of Valerius Industries (Supra), can straight way be made applicable to the case on hand. In the case on hand, we looked into the order passed by the Assistant Commissioner of State Tax under Section 83 of the Act. 7. By placing reliance on the averments made in the affidavit-in-reply duly affirmed by the Assistant Commissioner, Mr.Joshi, the learned Assistant Government Pleader appearing for the respondent- Authorities, invited the attention of this Court to paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as levied interest amounting to ₹ 12.24 Lakhs and penalty of ₹ 49.80 Lakhs. The statement of Sanket Shah, the head cashier of the Central Bank of India on several occasion he was given ₹ 8,000/- to the proprietor of Shivay Enterprise viz. Tushar Makwana, for providing false bills. 8. By relying upon the averments made in the aforesaid paragraphs, an attempt is made on the part of the learned Assistant Government Pleader appearing for the respondent-Authorities to submit that there was sufficient material with the Assistant Commissioner to arrive at the subjective satisfaction that it is necessary to pass an order of provisional attachment to protect the interest of the Revenue. 9. We are not in a position to accept such submission. What has been stated in paragraph Nos.17 to 20 of the affidavit-in-reply, has something to do with the merits of the case, for which, notice under Section 73 of the GGST Act, 2017, has been issued upon the writ applicant and the proceedings are pending before the concerned authority. What is lacking in the present case is the credible material, in its true sense, for the purpose of arriving at the subje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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