TMI Blog2023 (11) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... f facts leading to the present petition are as follows:- 2.1. On 25.02.2020, the Superintendent of Central Excise, Vadodara conducted a search and seizure at the premises of the petitioner located at 2/3 Dharamnagar Village- Bholav, Bharuch and thereafter investigation in respect of evasion of GST was conducted. The petitioner was summoned and his statement was recorded. 2.2. On 09.06.2020, the present petitioner was arrested and later he was sent to the judicial custody. Mr. Dilip Babulal Jain was a promoter and existing director of Glamox Solution Private Limited ('GSPL' for short) which is a registered company engaged in the business of finding angel investor for its customers. Mr. Jain is also a promoter and primary partner in Grabdeal Advertisement and Tourism LLP ('GATL' for short) and also a sole proprietor of M/s. Genesis Group which are engaged in the business of providing other financial services such as advisory and consulting services as also in relation to the investment and capital market, derivate market, money market, commodity market, insurance market, real estate market, infrastructure, mutual fund, systematic investment plan etc. 2.3. The company after obtaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors Act and Sections 4, 5, 6 and 7 of the Prize Chits and Money Circulation Schemes (Prohibition) Act, 1978. Mr. Dilip Babulal Jain was released on regular bail in connection with the offences under the GST Act by this Court by passing the order in Criminal Misc. Application No. 16486 of 2020. 2.8. The grievance on the part of the petitioner, made emphatically is that the offence is registered although the GST department itself is not clear whether any offence actually occurred or not. The documentary evidences, according to Mr. Jain are such that he would be surely acquitted and hence, there are no logical reasons for implicating him in the matter. The investigating agency is also acting highhandedly and in arbitrary manner. 2.9. According to the petitioner, the action of the respondent no. 2 of freezing the bank account by exercising the powers under Section 83 of the CGST Act is arbitrary and illegal. It is a case where the provisions of CGST Act are not applicable at all and the department is not sure whether the provisions would apply against the petitioners. Because of the attachment of the bank accounts, the petitioners are not in a position to make any payments and as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice of the Principal Commissioner, Central GST, GST Bhawan, Subhanpura, Vadodara which has denied all the allegations emphatically. 3.1. It is contended that information from the reliable sources was received that Mr. Dilip Jain, resident of Bharuch was running businesses in the name of Genesis Group, Grabdeal International, Grabdeal Advertisement and Tourism LLP, Glamox Solution Private Limited without obtaining registration under the Service Tax / GST and evading the huge amount of Service Tax and GST. 3.2. Based on the inputs received, it appeared that this person was running either a pyramid scheme or a similar type of scheme. Based on the intelligence, investigation was initiated against Mr. Jain and his firms and a search was conducted under Section 67(2) of the CGST Act at the premises located at Bholav, Bharuch on 25.02.2020 under the authorization issued by the Joint Commissioner, Vadodara-II Commissionerate. The documents were seized under INS-02. 3.3. During the course of search, statement of Mr. Jain was recorded under Section 70 of the CGST Act on 25.02.2020 wherein he described the business activity practiced by its firms namely M/s. Genesis Group, M/s. Grabdeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.02.2021 to the bank directing to freeze the debit facility/withdrawal from these bank accounts for one year. 3.7. It is further the say of the respondent that the transactions worth Rs. 430 crores have been entered into and he had evaded Rs. 74 crores of GST/ Service Tax. This huge economic offence committed by him during his activities would make him liable to be punished under Section 132 of the CGST Act which are punishable under Sections 132(1)(i) and (iv) of the CGST Act, 2017 read with Section 132(5) of the CGST Act, 2017. 4. The rejoinder affidavit has been filed denying all these aspects and also further alleging that per-force he had been directed to admit the tax liability of Rs. 51 crores. 5. This Court has heard extensively learned Senior Advocate Mr. Nirupam Nanavati appearing with learned advocate Mr. Chetan Pandya for the petitioner and learned advocate Ms. Kruti Shah appearing for the respondent no. 1, 3 to 9 and learned Senior Standing Counsel Mr. Nikunt Raval for the respondent no. 2. 5.1. In respect of admission of GST/ CGST liability of Rs. 51,00,000, much reservation has been expressed by the petitioner emphasizing that the writing is executed under forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability as value of taxable service plus service tax payable and this has been substantiated by the decision of the Apex court in case of Commissioner vs. Advantage Media Consultant [2009 (14) S.T.R. J49 (S.C).] 5.4. The attachment of the bank accounts by the order for afurther period of one year under Section 83 of CGST act passed on 09.02.2021 is also seriously challenged. Some of the decisions pressed into service to support this version of submissions are:- I. JSK and Sons vs. State of Gujarat [2020 (43) G.S.T.L. 154 (Guj.) II. Radha Krishan Industries vs. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (S.C.)] III. Amazonite Steel Private Limited vs. Union of India [2020 (36) G.S.T.L. 184 (Cal.)] 6. According to the learned senior standing counsel Mr Raval, investigation is in progress and the petitioner till date has not come forward to discharge the government dues and he also does not appear to have any intention to pay the same. The department has powers under Section 83(2) of the CGST act 2017 and therefore, the banks have been directed to freeze the debit facility for the period of one year and the fresh orders after the expiry of one year also have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 83 is reproduced herein under for the better appreciation of the controversy in question. This Section provides that for the purpose of protecting the interest of government revenue, the provisional attachment of any property including bank account belonging to the taxable person as prescribed in this provision, is permissible. 8.3. Apt would be to refer and reproduce Section 83 of the CGST Act 2017:- "83. Provisional attachment to protect revenue in certain cases:- (1) Where after the initiation during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, Chapter XII, Chapter XIV or Chapter XV 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 or any person specified in subsection (1A) of section 122, 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)." 8.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of the petitioner. Whereas according to the Petitioner, the business model of his is not attracting any service tax and the very initiation of process by the respondents is ill conceived. 9. Entertainment of the challenge to the merit is not desirable at this juncture at all as appropriate Authority would determine that aspect and statutory remedies would also demand address to such core issue at the relevant point of time. Therefore, this Court has chosen not to enter into the details of business model as explained in the statement of the petitioner and whether the transaction in money amounts to service attracting taxability under the Statute, except for the limited purpose of examining the apt exercise of powers under Section 83 of the Act prior to the finalization of assessment and raising of demand. Otherwise, let the same be agitated at an appropriate stage by the petitioner before the Authority prescribed statutorily, at the same time, for the limited purpose of addressing the issue of freezing of accounts, it shall need to be said that it is a discretion of the commissioner who would need to take a call bearing in mind the interest of Revenue during the pendency o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along the identical line as Section 281B. The Court noticed that there are certain guidelines for making provisional attachment which are missing so far as Section 83 of the act is concerned and the balance in both the bank accounts being negligible, it did not continue the provisional attachment. 11. What has also been pressed into service before this Courtis the decision of the Apex Court in case of Radha Krishan Industries vs. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (SC)] where the Apex court has held that the nature of provisional attachment being a draconian power, exercised before finalization of assessment or raising of the demand, the same has to be exercised with due caution. It is provisional as an aid of something else and its purpose is to protect revenue. Its validity depends on strict observance of statutory preconditions. Formation of commissioner's opinion must approximate and live nexus to protection of revenue interest and it is not left to unguided subjective discretion of the commissioner's opinion which must be based on tangible material regarding statutory requirement. "C.1 Maintainability of writ petition before the High Court 24 The High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field." (emphasis supplied) 26. Following the dictum of this Court in Whirlpool(supra), in Harbanslal Sahnia v Indian Oil Corpn. Ltd., this court noted that "7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Seth Chand Ratan v Pandit Durga Prasad (2003) 5 SCC 399, Babubhai Muljibhai Patel v Nandlal Khodidas Barot (1974) 2 SCC 706 and Rajasthan SEB v. Union of India (2008) 5 SCC 632, among other decisions. C.2 Provisional Attachment 29. At this stage, we will advert to relevant precedents outlining the contours of the power of provisional attachment and specifically, in the context of provisions worded similarly to Section 83 of the HPGST Act. 30. The decision of this Court in Raman Tech Process Engg Co and Anr v Solanki Traders 2008(1) R.C.R.(Civil) 195 was concerned with the power of a civil court under Order 38 Rule 5 of the CPC to order an attachment before judgment. In that case, proceedings had been instituted by the respondent, for the recovery of moneys due for the supply of material to the appellant. The plaintiff moved an application under Order 38 Rule 5, for a direction to the defendants to furnish security for the suit claim and if they failed to do so, for attachment before judgment. This Court described the power of attachment before judgment in the following terms: "5. The power under Order 38, Rule 5 Civil Procedure Code is a drastic and extraordinary power. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation...It is not any and every material, howsoever vague and indefinite or distant, remote or far-fetching, which would warrant the formation of the belief. (1) The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. (3) The power of provisional attachment under Section 83 of the Act should be exercised by the authority 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. (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 objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions for the invocation of Section 83 of the SGST Act: ("i) Order should be passed by Commissioner; (ii) Proceeding under Section 62 or 63 or 64 or 67 or 73 or 74 should be pending; Bindal Smelting Private Limited v Addl. Director General of GST Intelligence, 2020 (34 G.S.T.L 592 (P&H); Society for Integrated Development of Urban and Rural Areas v Commissioner of Income Tax, A.P. II, Hyd, 2001 (252) ITR 642; Vinod Kumar Murlidhar Prop. Of Chechani Trading Co v. State of Gujarat, Special Civil Application No. 12498 of 2020 dated 9 December 2020 WP(C) 11245 of 2020 dated 6 January 2021 (iii) Commissioner must form an opinion; (iv) Order should be passed to protect interest of revenue; (v) It must be necessary to attach property." 36 In UFV India Global Education v Union of India 2020 (43) GSTL 472, the Punjab and Haryana High Court held that pendency of proceedings under the sections mentioned in Section 83 viz. Sections 62 or 63 or 64 or 67 or 73 or 74 is the sine qua non for an order of provisional attachment to be issued under Section 83. 37. Another case which is relevant for our purposes is the decision of the Bombay High Court in Kaish Impex Private Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Online Guj 1811, where the Gujarat High Court was considering the validity of a notification by which the Commissioner of State Tax had delegated all the functions under the SGST Act to the Special Commissioner and Additional Commissioners of State Tax. In rejecting a challenge to this notification, the High Court held that: "39. As pointed out by the Supreme Court in the case of Sahni Silk Mills [internal citation omitted], the courts should normally be rigorous while requiring the power to be exercised by the persons or the bodies authorized by the statutes. As noted above, it is essential that the delegated power should be exercised by the authority upon whom it is conferred and by no one else. At the same time, in the present administrative setup, the extreme judicial aversion to delegation should not be carried to an extreme. There is only one Commissioner of State Tax in the State of Gujarat, and having regard to the enormous functions and duties to be discharged under the new tax regime, he has been empowered to delegate his powers to the Special Commissioner of State Tax and the Additional Commissioners of State Tax. 40. We take notice of the fact that the delegation h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the sense that it is in aid of something else. The second point to note is that the purpose is to protect the revenue. The third point is the expression "in certain cases" which shows that in order to effect a provisional attachment, the conditions which have been spelt out in the statute must be fulfilled. Marginal notes, it is well-settled, do not control a statutory provision but provide some guidance in regard to content. Put differently, a marginal note indicates the drift of the provision. With these prefatory comments, the judgment must turn to the essential task of statutory construction. The language of the statute has to be interpreted bearing in mind that it is a taxing statute which comes up for interpretation. The provision must be construed on its plain terms. Equally, in interpreting the statute, we must have regard to the purpose underlying the provision. An interpretation which effectuates the purpose must be preferred particularly when it is supported by the plain meaning of the words used. 41. Sub-Section (1) of Section 83 can be bifurcated into several parts. The first part provides an insight on when in point of time or at which stage the power can be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and produce documents. - (1) The proper officer under this Act shall have powers to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908, (5 of 1908). (2) Every such inquiry referred to in sub-section (1) shall be deemed to be a "judicial proceedings" within the meaning of section 193 and section 228 of the Indian Penal Code, 1860, (45 of 1860)." 43. A power is conferred by Section 70 upon the proper officer to summon a person whose attendance is considered necessary to give evidence or produce a document or any other things in any enquiry in the manner which is provided in the case of a civil court under the CPC. 44. Section 74 is extracted below: "74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful mis-statement or suppression of facts. - (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) pays the said tax alongwith interest payable under section 50 and a penalty equivalent to twenty five per cent of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded. (9) The proper officer shall, after considering there presentation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order. (10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund. (11) Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent of such tax within thirty days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded. Explanation-1. - For the purposes of section 73 and this section,- (i) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which falls short of what is actually payable. Sub-Section (8) contains a stipulation that where a person who is chargeable with tax under sub-Section (1) pays the tax together with interest and a penalty of twenty-five per cent of the tax within thirty days of the issuance of the notice, all proceedings in respect of the notice shall be deemed to be concluded. Under sub-Section (9), the proper officer after considering the representation of the person chargeable to tax is authorized to determine the amount of tax, interest and penalty due and to issue an order. A period of five years is stipulated by sub-Section (10) for the issuance of an order in sub-Section (9). Sub-Section (11) stipulates that upon service of an order under sub-Section (9), all proceedings in respect of the notice shall be deemed to be concluded upon the person paying the tax with interest under Section 50 and a penalty equivalent to 50 per cent of the tax within thirty days of the communication of an order. These provisions indicate how sub-Sections (5), (8) and (11) operate at different stages of the process. 48. Now in this backdrop, it becomes necessary to emphasize that before the Commissioner can levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 protect interest of the government revenue. Necessity postulates that the interest of the revenue can be protected only by a provisional attachment without which the interest of the revenue would stand defeated. Necessity in other words postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer 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 and/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the Revenue may not be in a position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers under Section 45 of the VAT Act." (emphasis supplied) 51. We adopt the test of the existence of "tangible material". In this context, reference may be made to the decision of this Court in the Commissioner of Income Tax v Kelvinator of India Limited (2010) 2 SCC 723. Mr Justice SH Kapadia (as the learned Chief Justice then was) while considering the expression "reason to believe" in Section 147 of the Income Tax Act 1961 that income chargeable to tax has escaped assessment inter alia by the omission or failure of the assessee to disclose fully and truly all material facts necessary for the assessment of that year, held that the power to reopen an assessment must be conditione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........................Address
(Bank/ Post Office/Financial Institution/Immovable property registering authority)
Provisional attachment of property under section 83
It is to inform that M/s .................. (name) having principal place of business at -......................... (address) bearing registration number as............... (GSTIN/ID), PAN -........ is a registered taxable person under the < X X X X Extracts X X X X X X X X Extracts X X X X ..... as or is not liable to attachment. In using the expression "was or is no longer liable for attachment", the delegate of the legislature has comprehended two alternative situations. The first, evidenced by the use of the words "was" indicates that the property was on the date of the attachment in the past not liable to be attached. That is the reason for the use of the past tense "was". The expression "is not liable to attachment indicates a situation in praesenti. Even if the property, arguably, was validly attached in the past, the person whose property has been attached may demonstrate to the Commissioner that it is not liable to be attached in the present. 56. The second significant aspect of sub-Rule (5) is the mandatory requirement of furnishing an opportunity of being heard to the person whose property is attached. This is in consonance with the principles of natural justice and ensures that a fair procedure is observed. Sub-Rule (5) provides for a post- provisional attachment right of: (i) Submitting an objection to the attachment; (ii) An opportunity of being heard. Sub - Rule (5) contains clear language to the effect that a person whose property is attached is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the amount likely to be due for which proceedings have been launched under the Act. Nor does it provide for a specific opportunity to the taxable person to offer any alternative form of security in lieu of the attachment. Such an opportunity must be read in to the provision to allow for a fair working in practice. Whether any alternative security that is furnished by the taxable person should be accepted and if so, its sufficiency, is a matter for the Commissioner to determine. Undoubtedly, the taxable person may not have a right to demand that only a particular form of security must be accepted. The Commissioner has to decide whether the form of security offered would secure the interest of the revenue. Where the taxable person sets up the plea that the extent of the attachment is excessive or where the taxable person offers an alternative form of security, these are also matters which ought to be determined by the Commissioner in the exercise of powers under Rule 159(5). The scope of objection can also extend to the nature of the property which is being provisionally attached. Now, it is in this backdrop that we proceed to a determination of whether the petition under Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of provisional attachment was withdrawn completely with immediate effect. On 9 April 2019 and 5 July 2019 a representative of the appellant attended the case hearing. On 4 July 2020, an intimation was furnished to the appellant of the tax ascertained as payable under Section 74(5). According to the intimation, the appellant received among other items, lead ingots from GM Powertech during FY 2017-18 and 2018-19 and investigation had revealed that ITC had been fraudulently availed of by the supplier on the basis of the invoices of fake firms. The appellant had also availed of ITC due to inward supplies from GM Powertech. On 3 and 5 August 2020, the appellant filed its submissions under Rule 142(2) (a) against the proposed liability. On 6 October 2020, an order was passed under Section 74(9) against GM Powertech confirming a demand of Rs 39.48 crores for 2017-18 and 2018-19. The proceedings concluded that GM Powertech had (i) No business establishment or property in Himachal Pradesh; and (ii) No security or surety. 58 On 21 October 2020, the Commissioner of State Taxes and Excise, Himachal Pradesh delegated, in pursuance of the provisions of Section 5(3) the powers vested under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned senior counsel appearing on behalf of the appellant submitted that GM Powertech had been relegated to the pursuit of an alternative remedy since an order of assessment had been passed against it. However, insofar as the appellant is concerned, the writ proceedings were instituted to challenge the levy of a provisional attachment under Section 83 and there is no alternative remedy provided under the Act for challenging an order under Section 83." 12. This makes it quite clear that as per the decision of the Apex court that the Court shall need to examine whether the commissioner exercised the powers under Section 83 read with Rule 159 in accordance with law and the material fact for making determination needs to be kept in mind where this Court also needs to bear in mind the necessity of provisional attachment which implicates the doctrine of proportionality which mandates the existence of approximate or live link between the need for attachment and the purpose which it is intends to secure. It postulates the maintenance of proportionality between the nature and extent of attachment and the purpose which is sought to be served. The mandatory requirement of furnishing the oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period without passing fresh orders would surely be illegal in violation of rights of Assessee for carrying on business under article 19 of the Constitution of India as was held by the Calcutta High Court in case of Amazonite Steel Private Limited vs. union of India (supra). However, even after expiry of one-year period as prescribed under the law, it is incumbent upon the authorities to release the provisional attachment by informing the bank on issuance of a fresh order of provisional attachment since the very purpose for which this exercise of provisional attachment was done is not completed. Here one finds that after the expiry of one year period, the authority has issued the fresh order of provisional attachment, such action of the authority, therefore, when challenged though shall need to be looked at cautiously for this being draconian powers, while directing the authority to complete and wind up its Proceedings of investigation in three months as the charge-sheet also has been filed against the petitioner within a specific time period, extension since has come by a specific order, the very action of attachment cannot be interfered with. 14. The petition accordingly stands ..... X X X X Extracts X X X X X X X X Extracts X X X X
|