TMI Blog2023 (5) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... e alleged transactions covered under any of the specified clauses of Section 122(1) of the CGST Act. On the contrary, the allegation is that the petitioner has facilitated M/s Best Crop Science LLP / M/s Best Crop Science Pvt. Ltd. to avail fraudulent ITC. More importantly, there is no allegation that any of the allegedly offending transactions were conducted at the instance of the petitioner. On the contrary, it is alleged that the petitioner company was set up by the promoters of M/s Best Crop Science Pvt. Ltd. for availing fraudulent ITC - The impugned order is, thus, liable to be set aside on this ground alone. The second reason that the petitioner is a dummy company because the director of the petitioner is/was an employee of M/s Best Crop Group is also somewhat in the realm of assumptions. The petitioner had stated that Shri Raman Kumar was employed by M/s Best Crop Group but he had since moved on and had taken up his role as a director of the petitioner company - there must be a live nexus between the reasons for provisionally attaching assets and bank accounts and the material available with the Commissioner. Merely because there was some material (although disputed) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bank A/C No. 4563002100002434) maintained with respondent no. 3 (Punjab National Bank Limited). The petitioner also impugns a subsequent confirmation order dated 08.12.2022 (hereafter the impugned order ) passed by respondent no. 1, confirming the attachment order. Factual context 2. The petitioner company was incorporated on 05.09.2012, under the provisions of the Companies Act, 1956 and claims that it is engaged in the trade of industrial chemicals relating to the pesticide industry. Its Permanent Account Number under the Income Tax Act, 1961 is PAN AASCS0082M. The petitioner has two principal places of business. One in the State of Uttar Pradesh and the other in Haryana. It is registered with the GST Department under GSTIN 09AASCS0082M1ZP for its principal place of business in Uttar Pradesh and under GSTIN 06AASCS0082M1ZV for its place of business in the State of Haryana. For carrying out import of industrial chemicals, the petitioner has been granted Importer-Exporter Code (IEC) No.0512052859 by the Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India. 3. On 20.05.2022, respondent no. 2 [Superintendent (Anti-Evasion), C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed of the said application by an order dated 05.12.2022 with directions to respondent no. 1 to pass a reasoned order on or before 09.12.2022. 9. In the meantime, the respondent authorities continued the investigations and summoned Shri Raj Kumar, Shri Ankit Bhutani and Shri Raman Kumar (stated to be the directors of the petitioner company) for a hearing on 09.12.2022. At the hearing Shri Raj Kumar and Shri Ankit Bhutani sought an adjournment on the ground that they had ceased to be directors in the petitioner company and were not involved with the day-to-day running of its business. 10. On 08.12.2022, respondent no. 1 passed the impugned order confirming the attachment order. Aggrieved by the same, the petitioner has filed the present petition. Impugned Order 11. Respondent no. 1 upheld the attachment order on the ground that the petitioner company had fraudulently transferred ITC amounting to ₹36.6 crore to M/s Best Crop Science Pvt. Ltd. and M/s Best Crop Science LLP, without supplying any goods to the said companies. Respondent no. 1 alleged that during the course of investigation, it was found that the petitioner company s office at Kundli, Sonipat, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the Revenue. Next, he submitted that the power of the provisional attachment is a draconian power and that the same can be exercised only if it is necessary for protecting the interests of the Revenue, which cannot be protected otherwise. He relied on the decision of the Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh Ors.: (2021) 6 SCC 771 and the decision of the Gujarat High Court in Valerius Industries v. Union of India: 2019 SCC OnLine Guj 6866 in support of his contention. Reasons and Conclusion 16. The first and foremost question to be addressed is whether respondent no. 1 has the jurisdiction to pass the impugned order attaching the petitioner s bank account maintained with Punjab National Bank, Pitampura, Delhi. The petitioner is registered as a taxable person in respect of its two principal places of business. The first being Plot No.26 near Lakhmi Piou, Main G.T. Road, Kundli, Sub-Tehsil Rai, Sonipat, Haryana - 131028 (GSTIN Registration No. 06AASCS0082M1ZV) and the second being D-16, Gopalpur, Sikandrabad, Bulandshahar, Uttar Pradesh - 203205 (GSTIN No. 09AASCS0082M1ZP). Admittedly, the territorial jurisdiction of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. 21. If the aforesaid conditions are met, the Commissioner can provisionally attach the property and/or bank account belonging to the taxable person or any person specified in sub-section (1A) of Section 122 . Section 83 also mandates that the order of provisional attachment be in writing. 22. The term the Commissioner is defined under Section 2(24) of the CGST Act as under: 2(24) Commissioner means the Commissioner of central tax and includes the Principal Commissioner of central tax appointed under Section 3 and the Commissioner of integrated tax appointed under the Integrated Goods and Services Tax Act. 23. In terms of Section 3 of the CGST Act, the Government is required, by a notification, to appoint various classes of officers as set out in the said Section including the Principal Chief Commissioner of Central Tax, Chief Commissioner of Central Tax and Commissioner of Central Tax. Section 5 of the CGST Act contains the provisions regarding power of officers and reads as under: 5. Powers of officers. (1) Subject to such conditions and limitations as the Board may impose, an officer of central tax may exercise the powers and discharge the du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the petitioner company. He contended that the petitioner would be liable to penalty and it was necessary to attach its bank account to protect the interest of the Revenue. 26. We are unable to agree that respondent no. 1 would have the jurisdiction to pass orders in respect of other taxable persons who do not fall within its jurisdiction. The jurisdiction of respondent no. 1 would necessarily be confined to the taxable persons falling within its jurisdiction or persons specified under Sub-section (1A) of Section 122 of the CGST Act. 27. The contention that respondent no. 1 has the jurisdiction to attach the bank account of the petitioner as it was a person specified under Sub-section (1A) of Section 122 of the CGST Act is also unpersuasive. Sub-section (1A) and the relevant clauses of Sub-section (1) of Section 122 of the CGST Act are set out below: 122. Penalty for certain offences. (1) Where a taxable person who (i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply; (ii) issues any invoice or bill without supply of goods or services or both in violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count) under Section 83 of the CGST Act is formation of an opinion by the Commissioner that such attachment is necessary for protecting the interest of the Government and the Revenue. It is now well settled that formation of the opinion cannot be a mere subjective satisfaction of the Commissioner empowered to take measures under Section 83 of the CGST Act but must necessarily be an opinion, which is formed on credible material having live link with formation of the opinion. 32. In Radha Krishan Industries (supra), the Supreme Court had set out the parameters for exercising powers under Section 83 of the CGST Act in the following words: 76.4. 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. 76.5. 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 Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC of approximately ₹36.6 crores. It was alleged that the invoices were without the supply of goods. It was also alleged that there were circular transactions amongst the petitioner company and two other entities, namely, MK Chemicals and Guru Kripa Impex prior to final billing by those entities to M/s Best Crop Science Pvt. Ltd. Thus, leading to believe that they were suspicious transactions without the supply of goods. It is stated that during the course of search operations at the premises of M/s Best Agrolife Ltd. and Best Crop Science Pvt. Ltd., certain incriminating documents were found including the employment record of Shri Raman Kumar, who was employed as the Senior Manager Account by M/s Best Crop Science Pvt. Ltd. and was also a director of the petitioner company. The said order also refers to the search conducted on 06.09.2022 at the premises of the petitioner in Haryana where it was found to be non-existent and the search conducted on 18.05.2022 at the premises of the petitioner in Sikandrabad, where no records regarding purchase, sale, stock and production were found. 37. It is alleged that during the search conducted in the premises of the petitioner, recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents answered in the negative. This Court had also enquired whether there was any material whatsoever, which would indicate that the sale proceeds of shares of companies of M/s Best Agro Group had been deposited in the bank account of the petitioner. The respondents fairly stated that there was none. 42. It is apparent from the above that the principal reason for attaching the petitioner s bank account the sale proceeds of shares of M/s Best Agro Group and other group companies are parked in the bank account of the petitioner is not founded on or has nexus with any tangible material. Thus, any such belief would be clearly in the realm of unsubstantiated suspicion and therefore, cannot be considered as a ground for taking the drastic step of provisionally attaching a taxpayer s bank account. 43. It is necessary to bear in mind that attachment of a bank account would in effect result in the closure of the business of a taxpayer and has the propensity to cause irretrievable harm. The said drastic action is impermissible merely on the basis of suspicion and without any tangible material. 44. The second reason that the petitioner is a dummy company because the directo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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