TMI Blog2021 (12) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... o do it for the purpose of protecting the interest of the Government Revenue and the opinion needs to be formed on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting the interest of the Government Revenue - the reference to the provisions of Rule 159(5) also provides that a person whose property is attached is entitled to the safeguard of submitting the objections that the property was or is not liable to attachment and needs to be given an opportunity of being heard and the Commissioner is duty bound to deal with the objections by passing a reasoned order which must be communicated to the taxable person whose property is attached. In the instant case, the search was carried out under the GGST Act at the office premises of the petitioner no.1 and the panchnama was drawn on 04.10.2019. There was discrepancy noticed in the stock, therefore summons came to be issued on 22.10.2019 under Section 70 of the GGST Act - The search proceedings were initiated on 07.07.2021 at the residential premises and concluded on the same date, it concluded on 09.07.2021 at the head office a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... across the India. All requisite licenses are with the petitioner for the purpose of manufacturing at their factory at Bhavnagar. 2.2. The petitioners had been issued the certificate of ISO 45001:2018 on 30.09.2019 for the period from 30.09.2019 to 29.09.2020 and also issued ISO 14001:2015 on 08.11.2019 and ISO 9001:2015 on 13.11.2019. The petitioners also applied for the GSTN on the commencement of GCST and GGST Acts, 2017. It enjoys the registration of GST. The State Jurisdictional Office for the purpose of assessment etc. is Division-9, Range-19, Ghatak-75, Bhavnagar. So far as the Central Jurisdiction is concerned, Bhavnagar Division-I, Ranger-I is the jurisdictional office. 2.3. A notice came to be issued by the Assistant Commissioner of State Tax in the Form GST DRC-01 on 08.07.2019 calling upon the petitioner no.1 to make payment for the input tax credit claimed for the purchase made through the suppliers who defaulted in payment of GST. The reply had been given on 06.08.2020 with a request to drop the proceedings, however, no communication has been received from the Assistant Commissioner of State Tax till this date. According to the petitioner, it has to be understood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be recovered along with interest and penalty. 2.9. The petitioner has further urged that the State Tax Officer-4 sought explanation under Section 61 of the GGST Act on 20.07.2020 in connection with supplier M/s. Gujarat Enterprises and M/s. Aksha Enterprises. The explanation has been made on 24.08.2020 and no communication has been received and therefore, the petitioner assumed that nothing objectionable was found. 2.10. A show cause notice dated 22.07.2020 has been issued in the FORM GST DRC-01 for the financial years 2017-18, 2018-19 and 2019-20 on the ground that the suppliers GSTN had been cancelled ab-initio and hence, the petitioner no.1 has been asked to pay the tax of ₹ 2,37,20,365/- for the year 2017-18, ₹ 7,90,31,782/- for the year 2018-19 and ₹ 15,81,616/- for the year 2019-20. Although, it is a grievance of the petitioners that respondents did not disclose the details of dealers whose registrations were cancelled. 2.11. According to the petitioner, the payments have been made to all through the banking channel towards the goods as well as tax, therefore, the respondent no.2 cannot ask the petitioner no.1 to pay the tax of the supplied goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of ₹ 3,10,07,409/- of the petitioner no.1 company by communication dated 09/07/2021 at Annexure-G on such terms and conditions as may be deemed fit and proper to this Hon ble Court. (D) To issue a writ of mandamus and/or writ of certiorari and/or any other appropriate writ, order or direction to quash and set an order of Prohibition passed in FORM GST INS-03 dated 10/07/2021 by the respondent no.2 prohibiting the petitioners from removing, part with or otherwise deal with the goods except with the previous permission at Annexure-H on such terms and conditions as may be deemed fit and proper to this Hon ble Court. (E) Pending admission, final hearing and disposal of this petition, to stay implementation and operations of Provisional Attachment Orders at Annexure-A, Annexure-B, Annexure-C, Annexure-D and Annexure-E passed by the respondent no.2 on such terms and conditions as may be deemed fit and proper to this Hon ble Court. (F) Pending admission, final hearing and disposal of this petition, to stay implementation and operations of the order/communication dated 27/07/2021 at Annexure-F and to direct the respondent nos. 1 and 2 to communicate all 49 buyers (d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 83 of the Goods and Services Tax Act, 2017 the respondent authorities have acted in accordance with the provisions of Section 67 of the GST Act whereby the search warrant was issued by the Additional Commissioner of State Tax (Enforcement) and accordingly the authorities initiated the search proceedings at the business and residential premises of the petitioner no.1. For the purpose of protecting the government revenue, it is necessary to provisionally attach the property and hence, the exercise of powers under Section 83 have been done. The Commissioner have powers of delegation under Section 5 of the GST Act and it has delegated his powers to the officer subordinate to him. 5.1. It is further urged that the search proceedings have been concluded on 07.07.2021 at the residential places. Search proceedings at the Head Office were concluded on 09.07.2021 and at the place of factory and office it were continued on day to day basis upto 15.07.2021. Since no Director was available at such places, summons were issued to Directors of M/s. Madhav Copper Limited to remain present at the State Tax Office and the proceedings were postpone till 16.07.2021. 5.2. On 10.08.2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the following judgments: - (i) Radha Krishan Industries vs. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (S.C.)] (ii) Bhavesh Kiritbhai Kalani vs. Union of India [2021 (50) G.S.T.L. 37 (Guj.)] (iii) Vinodkumar Murlidhar Chechani vs. State of Gujarat [2021 (45) G.S.T.L. 209 (Guj.)] (iv) Jay Ambey Filament Private Limited vs. Union of India [2021 (44) G.S.T.L. 41 (Guj.)] (v) Valerius Industries vs. Union of India [2019 (30) G.S.T.L. 15 (Guj.)] (vi) Coromandel Agrico Private Limited vs. Commercial Tax Officer [2019 (26) G.S.T.L. 460 (Guj.)] (vii) Patran Steel Rolling Mill vs. Asstt. Commissioner of State Tax, Unit 2 [2019 (20) G.S.T.L. 732 (Guj.)] (viii) Prakashsinh Hathisinh Udavat vs. State of Gujarat [2019 (31) G.S.T.L. 583 (Guj.)] 6.2. The rejoinder affidavit has been filed denying all contentions raised in the affidavit-in-reply. According to the petitioner, the formation of the opinion for the purpose of purported protection of the state revenue should be based on objective facts and not on ipse dixit and caprice of the respondent authority. According to the petitioner, the proceedings under Section 67 have been completed on 10.08.2021 and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unblock the same. 8.2. It is ensured that the company would provide the details of every transaction at the end of the day to the revenue authority without fail. All the transactions of purchase and other expenses would be through the bank transaction and not by cash. It is also the say of the petitioner that the director would not draw any remuneration of any nature until the authority permits. The company would not pay any dividend to any share-holders. The company will have no objection of the revenue authority will place any officer at the factory premises of the petitioner. Such operation will be posted with every financial transaction immediately. 9. Since the affidavit has been filed today, learned Assistant Government Pleader Ms. Mehta and learned Senior Standing Counsel Mr. Nikunt Raval also have been heard. On receiving the instructions from the respective officers, they have objected to the allowing of the proposal at para 6, 7 and 8 of the additional affidavit. 9.1 It is further urged that the supply which needs to be made to the private as well as public undertakings to fulfill the contractual obligations, the Court may consider deputing of the officer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government Revenue. The necessity, according to the Apex Court, postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 contemplates during the pendency of certain proceedings, which means that a final demand or liability is yet to be crystallized. The anticipatory attachment of this nature must strictly conform to the requirements of substantive and procedural embodied in the statute and the rules. 34 Similar to the decisions of the Gujarat High Court, other High Courts have recognized the restrictive nature of the power of provisional attachment under Section 83 of the SGST Act and the need for it to be based on adequate substantive material. The High Courts have also underscored the extraordinary nature of this power, necessitating due caution in its exercise. 40 The marginal note to Section 83 provides some indication of Parliamentary intent. Section 83 provides for provisional attachment to protect revenue in certain cases . The first point to note is that the attachment is provisional provisional in the sense that it is in aid of something else. The second point to note is that the purpose is to protect the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory preconditions by the Commissioner. While conditioning the exercise of the power on the formation of an opinion by the Commissioner that for the purpose of protecting the interest of the government revenue, it is necessary so to do , it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. 49 By utilizing the expression it is necessary so to do the legislature has evinced an intent that an attachment is authorized not merely because it is expedient to do so (or profitable or practicable for the revenue to do so) but because it is necessary to do so in order to prote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, the order of provisional attachment can be passed by the Commissioner when the Commissioner is of the opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary so to do. Therefore, before passing the order of provisional attachment, there must be an opinion formed by the Commissioner that for the purpose of protecting the interest of the Government Revenue during the pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally any property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonging to the taxable person in such manner as may be prescribed. 7. Indisputably, in the case on hand, no proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74 of the Act have been initiated or pending against the writ applicant. In the absence of pendency of any such proceedings referred to above, the respondent no.2 could not have invoked Section83 of the Act for the purpose of provisional attachment. Assuming for the moment that something has surfaced in the course of any inquiry or investigation against the writ applicant as regards some business transaction with any other individuals, the same by itself will not confer jurisdiction to the respondent no.2 to invoke the Section 83 of the Act. The language of Section 83 of the Act is plain and simple. In the absence of any proceedings pending as on date against the writ applicant under the provisions of the GST Act as referred to under Section83 of the Act, the order of provisional attachment could not have been passed. 8. In such circumstances referred to above, we are left with no other option to quash and set aside the impugned order of provisional attachment. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is harsh and to be resorted as provided under the Statute. Thus, being a drastic power, the authority concerned cannot be oblivious of the serious consequences of provisional attachment of the bank account. Even if for the purpose of safeguarding the interest of the government revenue, the bank had chosen to follow the directions from the respondents,not to intimate to the petitioner as to why his account was freezed is wholly impermissible. In relation to the third party when such powers are impermissible to be exercised under section 83 of the Act, the bank ought to have applied its mind and more so when even under the RTI Act, the bank had been requested to furnish the details. Let a copy of this order be sent to the legal department of the bank for the future reference where it is not to be a party to something which the statute does not permit. 14. We notice at this stage that section 79 of CGST Act, 2017 which provides for the powers to the proper officer to recover the amount where the amount payable by a person to the government under the provisions of this act and rules, is not paid. What would be relevant for the purpose of this matter is to refer to Section 79 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards the tax liability from the amount lying in the bank accounts. In the same manner, if any immovable property has been provisionally attached and final liability towards the payment of tax is fixed under the order of assessment, then such immovable property can be put to auction for the purpose of recovering the dues. In the case on hand, we do not propose to interfere with the investigation already undertaken by the department. Ultimately, if sufficient material surfaces indicating the involvement of the writ-applicant in some bogus transaction, the next step in the process can always be a show-cause notice under Section 73 or Section 74 of the Act, as the case may be. However, to provisionally attach all the bank accounts and that too those accounts in which there is hardly any balance would only cause undue hardship to the assessee. This is the grey area where the Revenue or the authority concerned needs to apply its mind before the power is exercised. This is the reason why in Valerius Industries (supra) this Court observed that the considerations are altogether different for the purpose of exercising the power of provisional attachment under Section 83 of the Act. Jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he formation of an opinion by the Commissioner that it is necessary to so do it for the purpose of protecting the interest of the Government Revenue and the opinion needs to be formed on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting the interest of the Government Revenue. 11.2. The reference to the provisions of Rule 159(5) also provides that a person whose property is attached is entitled to the safeguard of submitting the objections that the property was or is not liable to attachment and needs to be given an opportunity of being heard and the Commissioner is duty bound to deal with the objections by passing a reasoned order which must be communicated to the taxable person whose property is attached. 12. In this background, the Court needs to consider the actions on the part of the respondent authority. Firstly, it needs to be held that the aspect of alternative remedy will not have any bearing. The writ petition under Article 226 is maintainable when there is a provisional attachment made by the respondent authority. Section 67 of the GST Act speaks of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of attachment of bank account in FORM GST DRC 22, the attachment of immovable properties, the vehicles, movable properties and the personal properties of the Directors as well as directions to the debtors not to make the payments were on different dates starting from 08.07.2021 to 27.07.2021. Therefore, that contention is not found sustainable. 15. The vital question that arise is as to whether the authority concerned has exercised the powers by safeguarding the procedural aspects of giving opportunity of hearing to the parties, where it is required to pass a reasoned order. Noticing the fact that the hearing has already taken place two months back and according to learned advocates appearing for the petitioners, it was an exhaustive hearing which lasted for many hours, the order is needed to be passed by the concerned authority and therefore, let such order be passed within 10 days by the authority concerned as giving an opportunity of hearing alone is not sufficient, passing of reasoned order will also be equally imperative and the same shall need to be done to fulfill the obligations under the principle of natural justice as also in due compliance of the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions canvased by both the sides have been duly recorded and regarded, there was no occasion for the Court to recall. 17.2. We have also heard both the sides on this aspect including the recording of the statements of all the three directors on 17.09.2021 and 18.09.2021 after the Apex Court s order dated 15.09.2021. 17.3. We could see the detailed recording of statements of Mr. Nileshbhai Natubhai Patel who essentially is having a key role in the decision making process as also handling the Banking and Finance. The statement of Mr. Rohitbhai Bhikhabhai Chauhan who according to the petitioner, is availing the technological support to the company and Mr. Divya Arvindbhai Monpara, who though is director and the signatory to the various transactions of the company, he emphasizes the role of Mr.Nilesh Patel as a key person to the company as a director. 18. According to the learned AGP, the Investigating Officer will take about eight weeks time to complete the investigation. 19. Learned advocate, Mr.Mangukiya appearing for the petitioners has urged that the directors of the petitioner company have been cooperating with the Investigating Agency. Exhaustive statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h e-mode to the Revenue Authority without fail. As ensured before this Court, all the transactions of the supply shall be monitored by the Deputy Commissioner of State Tax Department, Bhavnagar. (vii) With regard to any other directions sought by way of requests, the same shall be considered by the authority concerned who is directed to adjudicate the matter within 10 days from the date of receipt of this order. (viii) As we have noted above that the process of investigation is continuing and as urged before us, it is about further six to eight weeks which will be required for the same to be completed, considering the magnitude of allegations, the period of eight weeks is granted for the investigation to be completed. (ix) It is also being directed that the petitioner, who is before this Court seeking to invoke the writ jurisdiction of this Court shall need to essentially cooperate with the Investigating Officer and the Assessing Officer who is looking into this matter. Recording of his earlier statement or his cooperation at an earlier date will not in any manner relieve him of his obligations under the law, more particularly, being the directors of the company which has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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