Valerius Industries vs. Union Of INDIA

Held

The Court held that the respondents had not acted in accordance with the law. The assessment order dated June 17, 2019, demanding Rs. 1,60,79,302/- was quashed and set aside. The Court clarified that the authority could proceed against the writ applicant under Section 74 of the Act, provided a proper show cause notice was issued and an opportunity of hearing was given. The orders of provisional attachment of stock and bank accounts dated November 27, 2018, and November 20, 2018, were also quashed and set aside. The blockage of Input Tax Credit dated February 13, 2019, was declared illegal and ordered to be released forthwith. The Court emphasized that the power of provisional attachment under Section 83 is drastic and should be exercised sparingly, based on credible material, and with extreme care and caution, only when there is a reasonable apprehension of default in ultimate demand collection. The attachment should be of properties to the extent required to achieve the objective of thwarting the collection of demand. The Court found that the respondents failed to act in accordance with these principles.

Facts

The petitioner, Valerius Industries, a partnership firm engaged in purchasing and selling copper scrap, challenged an order dated June 17, 2019, by the Commercial Tax Officer, Vadodara, demanding Rs. 1,60,79,302/-. This demand included tax, interest, and penalty under the GST Act, 2017. The petitioner also challenged orders of provisional attachment of its stock (valued at Rs. 1,60,00,000/-) dated November 27, 2018, and its bank accounts (current and FD/RD CC accounts) dated November 20, 2018, passed by the State Tax Officer, Vadodara. Additionally, the blockage of its Input Tax Credit (ITC) dated February 13, 2019, was challenged. The petitioner claimed that it had purchased copper scrap and paid GST, but the suppliers had not remitted the tax. The State Tax Officer had provisionally attached the accounts under Section 83 of the GST Act, 2017.

Key Issues

1. Whether the order dated June 17, 2019, passed by the Commercial Tax Officer, Vadodara, demanding Rs. 1,60,79,302/- from the petitioner is valid? (Question of law) 2. Whether the orders of provisional attachment of stock and bank accounts dated November 27, 2018, and November 20, 2018, respectively, passed by the State Tax Officer, Vadodara, are valid under Section 83 of the GST Act, 2017? (Question of law) 3. Whether the blockage of Input Tax Credit dated February 13, 2019, is valid? (Question of law) Petitioner's Arguments: The petitioner argued that the provisional attachment of its stock and bank accounts was made without sufficient material and without adhering to the principles of natural justice. They contended that the power under Section 83 of the GST Act is drastic and should be exercised sparingly and only when there is a reasonable apprehension of the revenue not being collected. The petitioner also argued that the assessment order was passed without proper opportunity of hearing and that the blockage of ITC was illegal. Revenue's Arguments: The judgment does not explicitly record the arguments made by the revenue or state. However, the actions under challenge (demand order, provisional attachment, ITC blockage) indicate the revenue's stance was to secure potential tax liabilities.