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TMI Blog2022 (4) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... tered taxable person. 2.2 The writ applicants have claims to have regularly paid output tax for three Financial Years i.e. A.Y. 2018-19, 2019-20 and 2020- 21. It is further pleaded by the writ applicants that they have entered in business transaction only with genuine dealers who are registered taxable persons under the GST act. In support, the writ applicants have placed on record regularly maintained record of the purchase transactions, which include invoices, e-way bill, weightment slips, photographs of material being unloaded and material received inspection report etc. 2.3 It appears that the office of the Deputy Commissioner of State Tax, Vadodara, suspected that the writ applicant had shown purchase from fictitious firms, which are otherwise non existent. The respondent launched the proceedings against the writ applicants whereby search was carried out at the business premises of the writ applicants as per the procedure prescribed under Section 67 of the GST Act. 2.4 It appears that pursuant to the said search, the dispute arose with regard to the claim for input tax credit availed by the writ applicants on the ground that the Firm from whom the writ applicants had made p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest of the Government revenue". He further submitted that while exercising such power of provisional attachment of the properties of the taxable person including bank account, demat account is draconian in the nature and such condition of forming opinion by the Commissioner should be strictly adhered to before passing order of provisional attachment. Mr. Sheth therefore argued that upon bare reading of the subjective satisfaction recorded by the Assistant Commissioner of State Tax (4), Enforcement Division -5, Vadodara, is without any base of tangible material and therefore, the action of the respondent authority of provisional attachment of the properties of the writ applicants is completely arbitrary and illegal and is required to be quashed and set aside. 5. Mr. Sheth has further referred to and relied upon the decision of the Supreme Court in the case of Radhe Krishan Industries Vs. State of Himachal Pradesh reported in (2021) 6 SCC 771. Mr. Sheth has further drawn attention of this Court to the Circular bearing No. CBEC-20/16/05/2021-GST dated 23.02.2021, whereby the Central Board of Indirect Taxes and Customs of the Revenue Department have laid down various guidelines fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous firms which upon investigation are either found non-existent at the business place or the owners are not traceable and the firms are in the name of the persons of no means and the owners are not aware of such alleged business activities. Learned AGP has further referred to list of such 15 fictitious firms and has submitted that prima facie the investigation so far undertaken reveals that the writ applicants have wrongly availed the input tax credit worth Rs. 4,73,39,338/- which has ultimately resulted into tax evasion and as on date the total evasion of tax including penalty and interest comes to Rs. 10,76,61,243/-. Mr. Sharma has further contended that the Assistant Commissioner of State Tax, during the course of inquiry, has seized various invoices of the aforesaid fictitious firms. He further emphasize that such tangible material has lead to believe the Assistant Commissioner of State Tax(4) to prima facie arrived at subjective satisfaction that the assessee is likely to defeat the demand and at the same time, the quantum of tax evasion involved is likely to increase further which may enhance the gravity of the case. Mr. Sharma further submitted that the Assistant Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 83 of the Act. 3.1 Grounds for provisional attachment of property 3.1.1 Section 83 of the Act is reproduced hereunder. "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). 3.1.2 Perusal of the above provision of the law suggests that the followings grounds must exist for resorting to provisional attachment of property under the provisions of section 83 of the Act. (i) There must be pendency of a proceeding against a taxable person under the sections mentioned in section 83 of the Act; (ii) The Commissioner must have formed the opinion that provisional attachment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed by the taxable person, Commissioner should provide an opportunity of being heard to the person filing the objection. After considering the facts presented by the person in his written objection as well as during the personal hearing, if any, the Commissioner should form a reasoned view whether the property is still required to be continued to be attached or not, and pass an order in writing to this effect. In case, the Commissioner is satisfied that the property was or is no longer liable for attachment, he may release such property by issuing an order in FORM GST DRC-23. 3.2.4 Even in cases where objection is not filed within the time prescribed under Rule 159(5) of CGST Rules, the Commissioner may take the grounds mentioned in the said objection/representation on record and pass a reasoned order. Where the Commissioner is satisfied that the property was or is no longer liable for attachment, he may release such property by issuing an order in FORM GST DRC-23, 3.2.5 Each such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order of attachment. 3.2.6 If the provisionally attached property is of perishable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the recipients but has not paid the commensurate tax 3.3.2 The above list is illustrative only and not exhaustive. The Commissioner, may examine the specific facts of the case and take a reasoned view in the matter. 3.4 Types of property that can be attached 3.4.1 It should be ensured that the value of property attached provisionally is not excessive. The provisional attachment of property shall be to the extent it is required to protect the interest of revenue, that is to say, the value of attached property should be as near as possible to the estimated amount of pending revenue against such person, 3.4.2 More than one property may be attached in case value of one property is not sufficient to cover the estimated amount of pending revenue against such person. Further, different properties of the taxpayer can be attached at different points of time subject to the conditions specified in section 83 of the Act. 3.4.3 It may be noted that the provisional attachment can be made only of the property belonging to the taxable person, against whom the proceedings mentioned under section 83 of the Act are pending. 3.4.4 Movable property should normally be attached only if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure, 1908 (5 of 1908), exempted from attachment and sale for execution of a Decree of a Civil Court shall be exempt from provisional attachment 4. It may be noted that an amendment to section 83 has been proposed in Finance Bill 2021. However, such proposed amendment shall come into effect only from a date to be notified in future. The present guidelines, which are based on the existing provisions of section 83 of the Act, shall stand modified according to the amended provisions of section 83, once the said amendment comes into effect. 5. Difficulty, if any, in the implementation of the above guidelines may please be brought to the notice of the Board. Sd/- (Sanjay Mangal) Commissioner (GST)" 9. On bare reading of the contents of the aforesaid instructions, we find that the respondent no.2, inspite of repeated reminder by this Court in various decisions has once again overlooked the aforesaid guidelines issued by the Central Board of Indirect Taxes and Customs dated 23.02.2021, which otherwise in clear terms provides the guidelines to be adhered while exercising powers conferred upon the respondent authority under Section 83 of the GST Act. We may guardedly put the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled. The summary of findings recorded by the Supreme Court reads as under : * The Hon'ble HP High Court has erred in dismissing the writ petition on the ground that it was not maintainable; * The power to order a provisional attachment 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 fulfilled; * 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. Before ordering a provisional attachment the Commissioner must form an opinion 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 expression "necessary so to do for protecting the government revenue" implicates that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat their action of the provisional attachment should not hamper normal business activities of the taxable person. Even thereafter this Court vide judgment dated 27.01.2022 passed in Special Civil Application No.188 of 2022 in the case of M/s. Utkarsh Ispat LLP Vs. State of Gujarat had an occasion to deal with the similar facts whereby the respondent authorities have provisionally attached goods, stock and receivables and also bank accounts. This Court did not approve the provisional attachment of the goods, stock and receivables, more particularly, when the entire stock and receivables have been pledged and a floating charge has been created in favour of the Kalupur Commercial Bank Limited for the purpose of availing the cash credit facility with the provisional attachment of the goods, stock and receivables the entire business will come to a standstill. 12. For the aforesaid reasons, present writ application succeeds in part. We hereby quash and set aside the order of the provisional attachment dated 27.11.2021 qua the stock of goods, two demat accounts as well as current account of the writ applicants is concerned. So far the prayer of the writ applicants with regard to release ..... X X X X Extracts X X X X X X X X Extracts X X X X
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