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TMI Blog2025 (5) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be apposite to extract that order hereunder:- "1. The petitioner has approached this Court aggrieved by the order dated 12 May 2020 in terms of which its bank account maintained with the United Bank of India had come to be attached in purported exercise of powers conferred by Section 83 of the Central Goods and Services Tax Act, 2017. 2. Before us, it is conceded that the said provisional attachment could not have continued beyond a period of 12 months. Learned counsel appearing for the respondents, on instructions, further states that no fresh order under Section 83 has been issued. 3. Although we are informed that a Show Cause Notice ["SCN"] has come to be subsequently issued post conclusion of investigation, in our considered opinion, the mere issuance of that SCN would not sustain a continuance of the provisional attachment. 4. Accordingly, we allow the instant writ petition and quash the continuance of the provisional attachment order dated 12 May 2020. The respondents are directed to issue appropriate clarificatory directions and communicate the same to the Branch Manager of the United Bank of India forthwith." It is thereafter that a fresh order of provisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (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)." 6. The Supreme Court in its seminal decision of Radha Krishnan Industries v. State of Himachal Pradesh and Others ((2021) 6 SCC 771) had dealt with a challenge to a provisional attachment made under Section 83 of the Himachal Pradesh Goods and Services Tax Act, 2017 (HPGST Act) and Rule 159 of the Himachal Pradesh Goods and Services Tax Rules, 2017 (HPGST Rules). In Radha Krishnan, the Supreme Court had sounded a note of caution observing that the powers conferred by Section 83 being drastic and far reaching, are required to be exercised sparsely and with extreme care and caution. While noticing the precedents rendered on the subject, the Supreme Court further observed that such power should be wielded by authorities only if there is a reasonable apprehension that the assessee in question may default in the payment of tax that may be computed upon the completion of assessment or if there be sufficient material which would lead one to reasonably infer tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to that extent, it is required to achieve this objective. (5) The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (6) The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under Section 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." 32. In the same vein, in Jay Ambey Filament (P) Ltd. v. Union of India [Jay Ambey Filament (P) Ltd. v. Union of India, 2020 SCC OnLine Guj 3009 : (2021) 44 GSTL 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... launched against the aforesaid taxable person indicating a nexus between the proceedings to be initiated against a taxable person and provisional attachment of bank account of such taxable person." (emphasis supplied)" 8. Section 83 of the CGST Act mandates that provisional attachment may be exercised in situations where the Commissioner is of the opinion that "for the purpose of protecting the interest of Government revenue" such an action "is necessary so to do". The Supreme Court in Radha Krishnan also recognised the triumvirate conditions embodied in the provision, which is that the attachment of property is intended to be provisional, i.e., "in aid of something else", the purpose of such attachment must be to protect the interests of the Revenue and that the conditions as laid down within the provision must be met in order for such attachment to be deemed as a valid exercise of power. The pertinent observations rendered by the Supreme Court in the aforenoted context are as follows:- "D. Analysis 39. The essence of the present case lies in how the power to order a provisional attachment under Section 83 of the Hpgst Act is construed. Before interpreting it, the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth part indicates the manner in which an attachment is to be levelled. The final and the fifth part defines the nature of the property which can be attached. Each of these special divisions which have been explained above is for convenience of exposition. While they are not watertight compartments, ultimately and together they aid in validating an understanding of the statute. Each of the above five parts is now interpreted and explained below: 41.1. The power to order a provisional attachment is entrusted during the pendency of proceedings under any one of six specified provisions : Sections 62, 63, 64, 67, 73 or 74. In other words, it is when a proceeding under any of these provisions is pending that a provisional attachment can be ordered. 41.2. The power to order a provisional attachment has been vested by the legislature in the Commissioner. 41.3. Before exercising the power, the Commissioner must be "of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do". 41.4. The order for attachment must be in writing. 41.5. The provisional attachment which is contemplated is of any property including a bank account be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiation of action by the Commissioner must be preceded by the formation of opinion that such action was necessitated for the purpose of protecting the interest of government revenue. It was further noticed that the power to provisionally attach was one which was "draconian" in nature that may be exercisable only during the pendency of proceedings under the relevant statutory provisions and which bring with it serious consequences, particularly for the assessee whose properties come to be attached. Therefore and particularly in light of the phraseology embodied in the statute, it was deemed apparent that the Legislature was conscious of the draconian nature of the power enshrined in the provisions, because of which it employed specific statutory language conditioning the exercise of such power. Such a formation of opinion, the Supreme Court noted cannot be left at the arbitrary whims of the Commissioner but "must bear a proximate and live nexus" to the protection of interest of the revenue. The salient observations rendered in Radha Krishnan in that regard are reproduced herein below:- "49. Now in this backdrop, it becomes necessary to emphasise that before the Commissioner ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntent that an attachment is authorised 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 crystallised. 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 assessee can be levied. The Commissioner must be alive to the fact that such provisions are not intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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) 52. We adopt the test of the existence of "tangible material". In this context, reference may be made to the decision of this Court in CIT v. Kelvinator of India Ltd. [CIT v. Kelvinator of India Ltd., (2010) 2 SCC 723] S.H. Kapadia, J. (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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent revenue. 76.6. The expression "necessary so to do for protecting the government revenue" implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment. 76.7. The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue. 76.8. In the facts of the present case, there was a clear non- application of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal. 76.9. Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards: (a) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and (b) An opportunity of being heard. There has been a breach of the mandatory requirement of Rule 159(5) and the Commissioner was clearly misconceived in law in coming into conclusion that he had a discretion on whether or not to grant an opportunity of being heard. 76.10. The Commissioner is duty-bound to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tach the property so as to protect the interest of government revenue. 17. As observed by the Supreme Court in Radha Krishnan, the draconian nature of the provision and the grave consequences that are suffered by a person whose property is provisionally attached necessitates that the criterion for valid initiation of Section 83 actions are met. This requires the production of cogent and credible material basis which the respondents could have reasonably come to form an opinion that a provisional attachment is necessary and essential for the purposes of securing the interests of government revenue. It surely cannot be justified on the basis of vague apprehensions or a failure to cooperate or provide responses to notices. Therefore, and in light of the findings rendered by us herein above, we find ourselves unable to sustain the action of the respondents in terms of the order impugned before us. 18. Accordingly, and for all the aforesaid reasons, we allow the instant writ petition and quash the impugned order of provisional attachment dated 26 December 2024. We direct the respondents to issue appropriate clarificatory directions in light of our decision rendered herein for the de-f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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