Fine Exime PVT LTD. vs. Union Of INDIA And Ors

Held

The Court held that the order of provisional attachment dated December 1, 2020, was void ab initio. The Court found that the provisional attachment order was made not during the pendency of any proceedings under Section 83 of the CGST Act, but in contemplation of proceedings under Section 73. The show-cause notice under Section 73(1) was issued approximately 45 days after the attachment order, meaning the jurisdictional fact for exercising power under Section 83 was non-existent at the time of the order. Furthermore, even if the attachment were initially valid, it should have ceased to subsist once the proceedings under Section 73 were concluded by a final order. The Court relied on the reasoning in Radha Krishan Industries, stating that the provisions of the HPGST Act and CGST Act are not materially different in this regard. Consequently, the Court granted prayer clause (b) of the interim application, quashing and setting aside the attachment order dated December 1, 2020, and directing the de-freezing of the balance amount. The Court also granted prayer clause (c) for rectification of an error in a previous order. No order was made on prayer clause (d) as respondent no.4 was not properly arrayed. The writ petition and interim application were disposed of.

Facts

The petitioner, Fine Exime Private Limited, challenged an order dated December 1, 2020, by the Principal Commissioner, Central Tax and CX, Mumbai East (Respondent No. 2), provisionally attaching its bank account with Development Bank of Singapore Ltd. (Respondent No. 3). The attachment was made under Section 83 of the CGST Act, citing alleged fraudulent refund claims under Section 54. The petitioner argued that the condition precedent for provisional attachment under Section 83 was not met as no proceedings under Sections 62, 63, 64, 67, 73, or 74 were pending. A previous order dated March 2, 2021, had directed the withdrawal of 10% of the attached amount, with 90% remaining under debit freeze, subject to the outcome of the appeal. The petitioner filed an interim application seeking to de-freeze the remaining 90% and quash the attachment order, relying on the Supreme Court decision in Radha Krishan Industries.

Key Issues

1. Whether the order of provisional attachment dated December 1, 2020, can be kept alive in light of the Supreme Court's decision in Radha Krishan Industries vs. State of Himachal Pradesh & Ors., and the subsequent filing of an appeal against the order in original. Petitioner's arguments: The petitioner contended that the Supreme Court decision in Radha Krishan Industries is applicable, and since proceedings initiated against it culminated in the order dated February 12, 2021, which has been appealed, there is no justification for keeping the provisional attachment alive. They also argued that Section 107(7) of the CGST Act statutorily restrains recovery proceedings for the balance amount once the pre-deposit is made for the appeal. Revenue's arguments: The Revenue argued that the Radha Krishan Industries decision is distinguishable due to different facts and that new facts of revenue being defrauded have been unearthed, justifying the continuation of the provisional attachment despite the appeal. They also contended that the provisional attachment order was validly passed during the pendency of proceedings under Section 73 of the CGST Act.