M/S Adil Trading vs. The Superintendent
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The petitioner's property was provisionally attached by the GST authorities under Section 83 of the CGST Act. The petitioner contended that no proper notice was issued before the attachment, and the order lacked specific reasons. The authorities alleged wrongful availment of Input Tax Credit from non-existing firms.
Held
The Court held that the provisional attachment order was unsustainable due to a lack of specific reasons and grounds for forming the opinion required under Section 83. It also noted that the absence of reasons prevented the petitioner from filing an effective objection under Rule 159(5).
Key Issues
Whether the provisional attachment order under Section 83 was issued without proper notice and sufficient reasons, violating principles of natural justice and statutory requirements.
Sections Cited
Section 83, Rule 159(5)
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Cause title — parties, addresses and appearances
The Court made the following: ORDER
3 t I i I, I ,I II ; III I I I ! THE HON,BLE SRI JUSTICE P.SAM KOSTIY AND THE HON'BLE SRI JUSTICE N.TUKARAMJI W.P. No.3O818 of 2o23 Of,LDER:6,rer ao n ble Sn Jusricv P.SAM KOSIIY) Heard Mr.Bhaskar Reddy Vemi Reddy, learned Senior Counsel appearir-rg on behalI ol Mr.V.Siddharth Reddy, learned counsel for the peti[ioner and Mr,Dominic Fernandes, learned Senior Standing Counsel lor rcspondents.
Aggrieved by thc order clated 18.05.2023, passed by the 3.a respondent, insofar, issuir-rg the provisional attachment order under Section 83 of thc CGST Act in Form GST DRC-22, the present w'rit petition has been filed. The contention of the petitioner is that the petitioner is a partnership firm carrying the business in the purchase and sale of iron scraps.
It is the contention ol the petitioner that they have been regularly filing their returns and reporting the turnover to the respondent authorities in respect of the payments of all the tax liability after adjustments alleging inupt tax credit.
The 1', respondent issued summons to the petitioner seeking for produclion ol rccords. The petitioner appeared before the 1., respondent along rr ith relevant records including the tax I III : : I
4 invoices of outward tax invoices ald inward supply to bank statement and way bill etc., subsequently, the 2"a respondent issued Form GST DRC OlA, dated 28.04.2023, ascertaining the taxes to the tune of Rs.7,85,36,006 l-, directing the petitioner to pay the said amount along with the interest and penalty. It n,as allegecl that the petitioner has availed benefit of Input Ta-x Credit from invoices issued from non-existing firms, beyond this there has been no further proceedings drawn by the respondents either by' issuance of show cause notice or by any procccdings drarvn under Section 73 or for that matter under Section 74 of the CGST AcT-
Assailing the said order of provisional attachmenl issued by the respondent, the petitioner contends that beforc thc issuance o[ the provisional attachment order, the respondcnts have not served the petitioner with any notice in Form ASMT 1O In thc process, the petitioner was not provided with an1' rrotice calling for his explanation for the discrepancy notice and for the pavment of ta-x liability. Instead, the respondent office r has straightas'av issued the impugned DRC-22. This ordcr of provisronal attachment is un-just, arbitrary and ri ilh merla[ied
5 intentions. The same has also not in conformity to the principles of natural justice and is liable to be set aside/quashed.
According to the learned counsel for the petitioner it was incum bent upon the Department to have first issued in Form GST ASMT 10, as is required his explanation. Should the respondents have resorted the proceedings drawn under Section 73 or under Section 74. I*arned counsel for the petitioner relied upon the decisions of the Madras High Court in the case of M/s.Vadiael Pgrotech o. Assistant Commissionerr, there r,r,as .yet another decision from Madras High Court in the case of Arnutha Metal Ind.ustries a. Deputg State Tax OfJicep, Madras High Court and in the case of Syska Led Lights Priaate Limited. a. Union of Indiaz.
According to the learned counsel for the petitioner, the part1, is facing enormous inconvenience and difficulties as a consequence of the provisional attachment of the account. [t \\.as also the conrention of the petitioner that even though the impugned order has passed as early as on 18.05 .2023, yet tlll date the order of provisional attachment has not been sened 2O22(lOl TMI 784 Madras High Court 2022 l6t TMI 358 - Madras High Court '2021 377 ELT 33 (Bom)
6 upon the petitioner. The impugned document on the basis of which the present writ petition has been fiied is one which has been issued to the concerned bank of the petitioner with no intimation being made to the petitioner. On this ground along the impugned order deserves to be interdicted. According to the petitioner, the summons and notices u'hich havc been issued by the Department, he had promptly made his response and also made available with a.ll relevant records ald as such there was no necessity for the issuance of the provisior-ral attachment order. Moreover, it is contented that before passirlg of the order of provisionai attachment, the Department $'as liable to have a concrete evidence in respect of the so called e"'asior-r of tax by the petitioner. This in the other words mcans thal urlcler the normal parlance should not have initiated the actiotr ol provisional attachment which is mandatorily required under Section 83 itself and as such the said decision being too harsl'r. The same should be interfered with by this Court.
The learned Senior Counsel for the petitioncr in the course of his submissions also contended that the impugned order on the part of the respondents is also bad in lal' for tlrc rcason that the order of provisional attachment under Scctiotr 3.1 has never r
7 been issued as such he was not intimated by any person inspite of the action of attachment, that he came to know before the attachment only from the bank authorities when the petitioner found it difficult to carry further transactions from the said account that they were informed about the provisional attachment by the respondent/ Department. This according to the learned counsel for the petitioner r.t as also in contravention to the provisions of Rule 159 ol the CTST Rules 20 17. He further submits that since the copy of the attachment was not served upon the petitioner, he cannot avail the remedy that is otherwise provided under Sub-Rule (5) ol Rule 159. 9. The learned Senior Counsel lor the petitioner also contended that the impugned order is also bad in law in as much as the same on being inconsonance to the provisions of section 83 of the CGST Act. As per the learned Senior Counsel, before issuance of the provisional attachment order, the mandatory requirement as envisageci under Section 83 is that the Commissioner shall form an opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary to pass an order under Section 83 ordering provisional attachment. The said forming of opinion is missing
8 ;l t' I ; i I ii ij i i from the impugned order. Therefore, the same is liable to be interdicted on this ground also 1O. Per contra, the learned Standing Counsel for the respondent/ Department on the other hand opposing the petition submits that upon scrutiny of the return submitted by the petitioner, it has been rcflected that the invoices on the basis of which the petitioner is said to have availed the benefit of ITC are a1l invoices u'hich hai,e been issued by fake and non-existing units and therefore, prima facie, it appears that the petitioner has wrongfully availed the ITC knoning fully well that it cannot had been availed. Referring to the invoices issued from M/ s for the Department contended that these are non-operating units so also the good .,vhich is reflected in the different invoices are only invoices wh ich have been issued for the purpose of availing ITC and that infact, there has been no physical involvement of goods as mentioned in the invoices and that no materials were infact supplied and for this reasons also the provisional attachmcnL ordcr should not have been interfered with by this Court in exercise of its '*,rit juri iction
o 1 1" In addition, the learned counsel for the Department also submitted that upon verification, various other invoices the petitioner had relied upon for avaiiing the ITC were found to be fake, without issuance of any supply of arry goods. All of which establishes that the petitioner have fraudulently availed the ITC and therefore in order to ensure that these fraudulently availed ITC is not further utilize by the petitioner, the order of provisional attachment has been issued.
Having hearcl the contentions put forth on either side and on perusal of record it rvould be relevant at this juncture to take note of the tr.r,o provisions under the statute. First is Section 83(1) of the CGST Act and other being Sub-Rule (5) of the Rule 159 of the CGST Rules. Both these provisions for convenience sake is being reproduced hereunder: Sectiort 83(1): Where, after the initiation of ang proceeding under Chapter XII, Chapter XIV or Chapter XV, the Comrnissioner is of the opinion ttnt for the purpose of protecting the interest of tte Gouenrrnent reuenue it is necessary so to do, le mag, by order irt untirtg, attach prouisionally, any prcper4l, including bark ttccount. belonging to tLrc taxable persorT or atuJ person specified in sub- sectton (1A) of sectiort 122, Ln such manner os maA be prescribed. atI II I ;.' t I I a 1 i ! I I I i II
10 Rule 159(5): Ang person urhose property is attached may, [file an objection in FORM GST DRC-22A] to the effect that the property attached u.ns or is not liable to attachmen\ and tLte Commissioner may, after affording an opportunitg of being leard to the person filing the objection, release tle said propetlg bg an order in FORM GST DRC-23. 13. After reproducing the a-foresaid provisions of lau,, it would be relevant at this juncture also necessar5r to take note of the operati\.e part of the impugned order. ln ctrder to protect the interests of reuenue and in exercise of the powers conferred under section 83 of the CGST Act 2017, I Smt.V Songeetha, Pincipal Co mrnis sione r, Hy derabad GSI Commiss ione rate herebg prouisionally attach tLrc aforesoid accourlt.
Except lor the words "in order to protect the interest of revenue there does not appear to be any reflection of the groun ds / reasons/ circumstances that compelled the Principal Commissioner to pass the order of provisional attachment. [f u,e Iook at section 83, what 1" snvlsaged is upon initiation of anv proceedings under Chapter XII, Chapter XIV or Chaptcr XV, the Commissioner has to make up an opinion that opinion is to be formed on thc basis of the reasons which formed in the course of proceedings from the circumstances that prevailed in belseen
1 ' t: ri 11 etc., etc. If the opinions wer€ not to be revealed and reflected in the order, the framers of law would have simply held that the Principal Commissioner had the power to issue orders of provisional attachment, protecting the interest of the government revenue. The very fact that the section provides for, moreover, to form an opinion before issuance of order of provisional attachment itself is sufficient enough to accept that it is required law that the order attachment in itself should disclose the reasons/ circumstances and grounds which in the opinion of the Principle Commissioner required issuance of the order of provisional attachment. This view of the bench stands fortified from the decision of the Gujarat High Court in the case ot M/s.Anjani Impex u. State of GuJdrdt, wherein in paragraph Nos. 15 Lo 17, it has been held as under: 15- A Coordinate Bench of this Court, to ttthich one of us J.B. Pardiutala, J. was a partg, had the occasion fo discuss Section 83 of the Act in the case of Valenus Industies us. (Jnion of India, Specictl Ciuil Application No.13132 of 2019, decided on 28th August, 20 19, uherein this Court dreu the following conclusion: "llj The order of proui-sional attachment before the assessment order is made, may be justified tf the assessing authoitg or onA other authoity i i ' l i I ii I
12 empou.)ered in lau is of the opinion that it is necEssary to protect the interest of reuenue_ Houteuer, the subjectiue satisfaction should. be based on some credible materials or infonnatiott and also should be supported by superuening factor. It is not ang and euery mateia| horusoeuer uague and indefinite or distant remote or far fetching, tohich tuould utarrant the fortnation of the belief. [2] The pouer confened upon the authoiLy under Section 83 of the Act for prouisional atlochtnent. could be tenned as a uery drastic ctnd far reaching pouer. Such pouer should be used sparingLy and onlg on substantiue ueightA grounds and reasons. pl 'fhe pouer of prouisional attachment uncler Section 83 of tLLe Act should be exercised by the authoitg onlg if there is a reasonable apprehension ttnt the ossessee maA default the ultintate collection of the demand that is likelg to be raised on completion of the assessn?.ent. It should, therefore, be exercised with extreme care and. caution. [4] T he pou)er uruier Section 83 of the Act for prouisional attachment should be exercisecl onLy if th.ere is sufiicbnt 11 W.P.No. 1236O of 2022 material on record to justifu the satisfaction thctt tlrc assessee is about to dispose of wholly or atry part of his / her propertg u)ith a uieu to thwatlirg the ultimate collection C/ SCA/ 9822/ 202O OITDER ol. -(
13 demand and in order to achieue tlrc said objectiue, the attachment should be of the properties and to that extent, it is required to achieue this objectiue. [5] The potuer under Section 83 of the Act stLould neither be used as a tool to hardss the assessee nor should it be used in a manner uhich mag houe an irreuersible detrimental effect on the business of the assessee. [6] he attachment of bank occount and trading assets should be resorted to onlA as a lost resort or medsure. TLrc prouisional attachment under Secttort 83 of tle Act should t'Lot be equated utith the attochment in the course o,f the recouery proceedings. [7] fhe autlnitg before exercisirtg pou;er under Section 83 of the Act for proutstonal attachment should take into constderation ttuo things: (i) uhether if is a reuenue neutrol stuation (ii) the statement of "output liability or input credit". Hauing regard to tLe amount paid bg reuersing the input tax credit if tlte interest of the reuenue is sufJiciently seanred, then the authoritA moA not be justified- in inuoking its pouter under Section 83 of the Act for ttLe purpose of prouisional dttachment "
We are of the uieu that rLone of the aboue referred conditions are fulf-ll.ed in the present case.
In the result, this uril applLcalion stands partly altotued. The relief uith regord to the order in 74 Fonn GST DRC- O1A is t:.ot granted, tolereas the order of prouisional attachment of immouoble propertg under Section 83 of the Act is quashed and set aside".
Relying upon the said Division Bench decision of the Guj arat High Court, the Andhra Pradesh High Court also in the case of M/s.Arhaan Ferrous & Non ferrous Solutions & others u. Se,rrior Intelligence Offt.cer & others, wherein the Andhra Pradesh High Court had referred to the decision of Guj arat High Court decision ald made the following observations: A peruscrl of the impugned orders of prouisionol attachment shotus thot the fourth respondent herein stated in the said orders that, os per the infonnation auailable utith the Department and in order to protect the interest of the Gouernment reuenue, in exercise of the pouters conferced under Section 83 of the Act, the account is proubionallg ottached. In this context, it mall be appropriate to refer to the prouisions of Rule 159 of the Sales Tax Rules. Accord tg to sub Rule (5) of Rule 159 of the Rules, the assessee ntay, tuithin seuen dags of the ottdchment under sub-Rttle (1), file an objection to the effect that the propeftA attached u.tas or is not tiabte to attochtnent before the Commissioner and ! ; I 15 the Commtssioner maA, after affording an opportunitg of being leard to the person filing tLLe objection, release the said propertA bg an order in FORM GST DRC-23. AdmittedLA, except saAing that the orders of prouisional attachnent are passed in order to protect the interest cf the Gouet'rlment reuenue, no otlter reasons are assigned bg tle fourth respondent in tLe impugned orders of prouisional attachment. When sub-Rule (5) of Rule 159 of the RuLes specrficallg prouides for filing objections ogainst the orders of prouisional attachmen[ the contention tllat the recsorzs for ordeing prouisionol attachment uere recorded tn the Note File and that there is no need to extract the same or state tte same it7 the prouisional order of attochment, in the considered opiniotl of this Court, cannot stand for judicictl sctuting. TLe f{or-L'bLe Supreme Court, in the aboue refered judqlLent, also categoricallg ruIed that the forunation of opinion on tl'Le basis of tangible material uthich indicates the necessitg to order proutsional attochnent to protect the interest of the Gouernment reuenue is rnandatory. Unless reasons ere recorded brood.lg, the ossessee cannot be expected to file ang objectiorus under the prouisiorts of sub Rule (5) 13 of Rule 159 of the Rules.
In vieu. of the aloresaid t\\'o decisions, i.e., the Division Bench of the Gujarat High Court and the Division Bench of t .
16 Andhra Pradesh High Court, under similar state of facts, if we look take into consideration the impugned order in the present case, relevant portion which has already been reproduced in the preceding paragraph, it leaves us in no doubt that the impugned order lacks reasons/grounds and circumstances on the basis of which the Principal Commissioner had formed an opinion that there was requirement for issuance of the order of provisional attachment. 1,7 . We are fully endorsing the view of the two High Courts, rvhercin it has becn emphatically held by both the High Courts that once rvhen Rule 159(5) provides for hling an objection, the person rl,ho intends to hle an objection must know the reasons and grounds under which the order was passed, so that he can effectively file his objection arrd made the objections and grounds on the basis of which, the order of provisional attachment was passed. We do not have any doubt lor the aforesaid reasons that the impugned order is un-sustainable and the same deserves to be and is accordingly set aside Nonetheless, the right of the respondents stands reserved if the,v so u.art to pass a fresh order under Section 83 after framing ol an opinion u.hich may not be spell out in the order enabling thc
77 , 'lit ' : l I I i :, It t i ! i! ii IT lr petitioner to avaii the remedy available to him under Rule 159(5) Of thE CGST RIllCS i8. With the aloresaid observation and direction this writ petition stands allowed Consequently, miscellaneous petitions pending, if any, shall stand closed ARt PRASAD . V. H ASSISTANT //// SECTION OFFICER ',IiEE'g.[i::Jofl ntspg;nx^i3,"'t*""Ysi315"3[n'31'^'errorcBrc) IOPUC] two CD CoPies BM GJP L.\{p G RAR To, One Fair Copy to the Hon'ble Sri Justice "-iO* KOSHY \r.'s ' q'|i irtr nis Lordships Kind Perusall one Fair Copy to tne nonGte-Sri Justice N'TUKARAMJI \-'r'|e ' u'lr - t'io' His Lordships Kind Perusal) H".*l$:l'""#"':3 3f "HiI"l fB3':'l[lT';:':J'"1#il::"tj3^: " Yilit3:1il;,:r**rxt'ng';,,'X"..g:Bi:'.?l:'sTf 1"J.?l;ii'35,,fl1" GST Comnrissionerate ' (,J [;i*$NrquSn;,#ii:i+:#.:3ru3zffi=:.;:::T.:':"""" 11 LR copies n of lndia Ministry of Law' Justice and company The Under Secretary' Unlo Affairs, New Delhi Advocates Association Library, High Court The Secretary, Telangana 1 2 3 4 5 6 7 8 9. 10 , ,
HIGH COURT DATED:2810212024 ORDER WP.No.30818 of 2023 ALLOWING THE WRITPETITION WITHOUT COSTS + .'.| r: , r.,?^ ' ,t 1 I HAB 2[24 ,... \),., (I .t ,l' LSvr."\'^
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.