M/S Mitansh Impex vs. State Of Gujarat

Held

The Court held that the provisional attachment of the bank account was an excessive measure at this stage. While acknowledging the need to secure the revenue, the Court found no reasonableness in the respondent's submission that the bank guarantee should cover interest and penalty, particularly when the adjudicatory process against the petitioner was yet to be completed. The Court reasoned that a bank guarantee for the principal tax amount would adequately secure the revenue's interest. Therefore, the Court allowed the petition, setting aside the attachment order and the communication thereof. The attachment was ordered to be lifted upon the petitioner furnishing a bank guarantee equivalent to the tax amount of Rs. 6,10,511/-. The Court explicitly stated that it had not expressed any opinion on the merits of the controversy to be adjudicated.

Facts

The petitioner, M/s. Mitansh Impex, a firm engaged in trading ferrous and non-ferrous metals, filed a writ petition challenging the attachment of its current bank account. The attachment was based on allegations that the petitioner had availed and utilized fake input tax credit amounting to Rs. 6,10,511/- by purchasing goods from M/s. Sabarmati Resources Limited, which was allegedly involved in bogus billing activities. The proprietor of M/s. Sabarmati Resources Limited was arrested. The petitioner appeared before the authorities, provided documentary evidence for transactions and payments, and requested further investigation. However, the petitioner failed to submit satisfactory documentary evidence for purchases from M/s. Sabarmati Resources Limited. Consequently, the respondent-Commissioner of State Tax (4), Enforcement, Division-1, Ahmedabad, attached the petitioner's bank account, demanding a total of Rs. 7,93,613/- (including tax, interest, and penalty).

Key Issues

1. Whether the provisional attachment of the petitioner's bank account under Section 83 of the CGST Act, 2017, was justified given that no formal assessment order or demand had been raised, and the petitioner had not been afforded a full opportunity to present its case? 2. Whether the attachment of the bank account, which is crucial for the petitioner's business operations, was a disproportionate measure, especially when the petitioner offered to furnish a bank guarantee? Petitioner's arguments: The petitioner argued that powers under Section 83 are drastic and require careful exercise. They contended that no demand had been raised and they lacked an opportunity to present their case. The attachment severely hampered their business. They offered to provide a bank guarantee for the tax amount. Revenue's arguments: The respondent-State argued that the petitioner was given ample time to submit evidence but failed to prove the genuineness of transactions. The attachment was necessary to protect the government's interest against wrongfully availed input tax credit. They also submitted that the bank guarantee should cover the total demand including interest and penalty.