M/S Ireo Hospitality Company PVT Limited vs. Union Of INDIA And Ors

Held

The Court held that while the respondents argued that Form GST-DRC-22 did not require reasons, the enabling Section 83 of the CGST Act mandates the Commissioner to form an 'opinion' for protecting the interest of Government revenue. The Court opined that this 'opinion' must be based on material and reasons. It was tentatively held that for the affected person to file objections under Rule 159(5), they must know the reasons for the attachment. Consequently, the Court set aside the impugned provisional attachment orders. However, this was conditional upon the Respondent No. 2 passing fresh orders in accordance with law, taking into account the petitioners' submissions, not later than April 10, 2020. These fresh orders were to be communicated by April 12, 2020. The Court also clarified that the interim order of de-freezing the OD account of IHCPL, including borrowings, term loans, and CC limits, would continue. The Court explicitly stated that it had not expressed any opinion on the merits of the contentions of either party, leaving them open for argument at the appropriate stage. The petitions were disposed of in these terms.

Facts

A batch of five writ petitions were filed by companies belonging to the Ireo group, challenging provisional attachment orders dated February 7, 2020, issued by the Principal Commissioner, CGST Commissionerate, Gurugram, attaching their bank accounts. The primary challenge was to the non-reasoned nature of these orders. The Court, while hearing the petitions, had directed the de-freezing of the petitioners' Over Draft (OD) accounts. The respondents argued that the attachment orders were passed in accordance with Form GST-DRC-22, which did not require recording reasons. The petitioners contended that Section 83 of the CGST Act necessitates an 'opinion' of the Commissioner, which requires material and reasons. The petitioners subsequently filed an affidavit detailing essential business payments required from the attached accounts and proposed to maintain status quo on Fixed Deposits.

Key Issues

1. Whether the provisional attachment orders issued under Section 83 of the Central Goods and Services Tax Act, 2017, read with Rule 159 of the Central Goods and Services Tax (CGST) Rules, 2017, are valid if they are non-reasoned orders? (Question of law) 2. Whether the requirement of forming an 'opinion' by the Commissioner under Section 83 of the CGST Act, 2017, necessitates the recording of reasons for the attachment of bank accounts? (Question of law) Petitioner's Contentions: The petitioners argued that the impugned orders were non-reasoned. They contended that the enabling provision, Section 83 of the CGST Act, requires the Commissioner to form an 'opinion' that it is necessary for protecting the interest of Government revenue. This opinion, they argued, must be based on material and reasons, especially since Rule 159(5) allows the affected person to file objections, which would be impossible without knowing the reasons. They relied on the principle that a reasoned order is a hallmark of good administration. Revenue's Contentions: The respondents argued that the attachment orders were passed in consonance with Form GST-DRC-22, and as per that form, there is no requirement for recording the reasons. They submitted that the proceedings were launched against the petitioner under Section 67 of the Act, which led to the attachment order.