M/S Aks Electricals And Electronic PVT LTD vs. Chief Commissioner CGST And Central Excise And 3 Others

Held

The Court held that the issue was squarely covered by the Supreme Court's decision in M/s Radha Krishan Industries Vs. State of Himanchal Pradesh and others. Applying the principles laid down in paragraphs 72 (iv) to (vii) of that judgment, the Court found the impugned communication dated February 1, 2021, issued under Section 83 of the CGST Act, 2017, to be wholly laconic and inadequate. The reasoning was that the power of provisional attachment is draconian and must be exercised only upon formation of an opinion by the Commissioner, based on tangible material, that it is necessary for protecting the interest of the government revenue, and that such interest cannot be protected without the attachment. The Court found that the impugned communication did not demonstrate the formation of such an opinion based on tangible material. Therefore, the Court set aside the impugned communication and directed the immediate release of the attached bank account. The Court explicitly left it open for respondent no. 2 to pass a fresh order strictly in accordance with law. The ratio decidendi is that a provisional attachment order under Section 83 of the CGST Act must be supported by tangible material demonstrating the necessity of such an action for protecting government revenue, and a mere recital of statutory language is insufficient.

Facts

The petitioner, M/s Aks Electricals And Electronic Pvt Ltd, challenged a communication dated February 1, 2021, issued by respondent no. 2 under Section 83 of the CGST Act, 2017, read with Rule 159(1) of the CGST Rules, 2017. This communication attached the petitioner's bank account. The petitioner argued that the attachment was made without any factual basis or material on record, adversely impacting its business, and that the revenue's interest was not prejudiced. The Revenue contended that investigations and adjudication were pending, necessitating the attachment to secure potential demands. The petitioner relied on the Supreme Court's decision in M/s Radha Krishan Industries Vs. State of Himanchal Pradesh and others, while the Revenue cited this Court's decision in R.J.Exim Vs. Principal Commissioner of CGST and the Punjab & Haryana High Court's decision in Magna Wires Pvt Ltd Vs. Union of India.

Key Issues

1. Whether the communication dated February 1, 2021, issued under Section 83 of the CGST Act, 2017, for provisional attachment of the petitioner's bank account, was based on tangible material and was necessary for protecting the interest of the government revenue, as required by law? Petitioner's Arguments: The petitioner argued that the impugned communication was laconic and lacked any factual basis, circumstances, or material to justify the harsh consequence of attaching its bank account. It contended that the attachment adversely impacted its business without prejudicing the revenue's interest. The petitioner relied on the Supreme Court's judgment in M/s Radha Krishan Industries, emphasizing that the power of provisional attachment is draconian and requires strict fulfillment of statutory conditions, including the formation of an opinion based on tangible material that the assessee is likely to defeat the demand and that the revenue's interest cannot be protected otherwise. Revenue's Arguments: The Revenue contended that investigations and adjudication proceedings were pending against the petitioner, making it incumbent upon the authority to exercise its power to secure the demand likely to arise. The Revenue relied on this Court's decision in R.J.Exim, which held that against an order of provisional attachment, an opportunity to file an objection exists under Rule 159(5) of the Rules, and failure to do so meant the order did not suffer from manifest error of law. Reliance was also placed on the Punjab & Haryana High Court's decision in Magna Wires Pvt Ltd.