M/S. Kaleidoscope vs. State Of West Bengal And Ors.

Facts

The appellant, M/s. Kaleidoscope, filed an intra-court appeal against an order dated January 9, 2024, passed by a single judge in a writ petition. The writ petition was dismissed on the grounds of disputed questions of fact. The appellant had received a show cause notice under Section 74(1) of the WBGST Act, 2019, read with Rule 142(1) of the WBGST Rules, 2017, proposing a total tax payable of Rs. 92,44,628. The appellant submitted a reply to the show cause notice. However, from December 20, 2023, thirteen provisional attachment orders in FORM GST DRC-22 were issued, attaching all the appellant's bank accounts, which brought their business activities to a standstill. The appellant sought directions to operate their bank accounts.

Held

The Court held that the provisional attachment orders, numbering thirteen and attaching all the appellant's bank accounts, were unsustainable. The Court reasoned that such harsh measures were unjustified, especially when the show cause notice was still pending adjudication and there was no material on record to suggest any attempt by the appellant to evade tax. The Court emphasized that the tax and interest payable were yet to be adjudicated. Therefore, the provisional attachment orders could not be sustained at that juncture. The ratio decidendi is that provisional attachment of all bank accounts is disproportionate and unsustainable when the underlying tax liability is yet to be adjudicated and there is no evidence of tax evasion. The Court set aside the order of the writ petition, allowed the appeal, and set aside all provisional attachment orders in FORM GST DRC-22. The appellant was permitted to operate all bank accounts and carry on business activities. The respondent authorities were directed to commence and complete the adjudication of the show cause notice within three weeks of receiving the server copy of the order. The Court clarified that it had not gone into the merits of the matter.

Key Issues

1. Whether the provisional attachment orders issued in FORM GST DRC-22, attaching all bank accounts of the appellant, are sustainable when the show cause notice is yet to be adjudicated and there is no material to indicate an attempt to evade tax? (Section 74(1) of WBGST Act, 2019, and Rule 142(1) of WBGST Rules, 2017). Appellant's arguments: The appellant contended that the provisional attachment orders were harsh and unsustainable because the show cause notice had not yet been adjudicated. They argued that the tax and interest payable were still to be determined. They also submitted that their reply to the show cause notice had been uploaded within the permitted time. Revenue's arguments: The judgment does not record any specific arguments made by the State respondent regarding the sustainability of the provisional attachment orders.