M/S Formative Fashions PVT. LTD. vs. State Of Gujarat
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The petitioner, M/s. Formative Fashions Pvt. Ltd., filed a writ application challenging an order dated January 15, 2018, issued by respondent no. 2, and two Forms DRC-22 dated October 6 and 7, 2020, issued by respondent no. 4. These forms were related to a show-cause notice issued under Section 74 of the SGST Act, 2017, proposing a liability of approximately Rs. 3,46,133/- (inclusive of interest and penalty). The impugned actions included the provisional attachment of the petitioner's immovable properties and its cash credit bank account with Kotak Mahindra Bank. The petitioner argued that the attachment of the cash credit account and subsequently other accounts, including term deposits, was disproportionate and legally untenable, especially for the stated liability. The petitioner sought to declare the initial order without authority and to quash the attachment orders.
Held
The Court held that the provisional attachment of the cash credit account of the writ-applicant, bearing account number 510044020408 with Kotak Mahindra Bank Limited, Surat, could not continue and was hereby lifted. The Court found that the position of law regarding the attachment of such accounts was well-settled and that this particular attachment was not permissible. Regarding the provisional attachment of immovable properties, the Court stated that it would not comment on it at that point. However, it noted that if the entire liability was discharged by the writ-applicant, the authority might then consider passing appropriate orders for lifting the provisional attachment of the immovable properties as well. The Court disposed of the writ-application with these observations.
Key Issues
1. Whether the provisional attachment of the cash credit account of the writ-applicant under Section 83 of the SGST Act, 2017, was permissible and legally valid, considering the established position of law and the amount of alleged liability? 2. Whether the provisional attachment of immovable properties worth over Rs. 10 crores for a liability of approximately Rs. 3.46 lakhs was excessive and disproportionate, warranting intervention by the Court? Petitioner's Arguments: The petitioner contended that the provisional attachment of the cash credit account was not in line with the settled position of law. Furthermore, for a relatively small liability of approximately Rs. 3 lakhs, the provisional attachment of immovable properties valued at over Rs. 10 crores was disproportionate. The freezing of the cash credit account also led to the provisional attachment of other accounts, including term deposits, which the petitioner argued was an overreach. Revenue's Arguments: The judgment does not record any specific arguments made by the revenue or State respondents.
Sections Cited
Section 83, Section 74
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Cause title — parties, addresses and appearances
ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
By this writapplication under Article226 of the Constitution of India, the writapplicant has prayed for the following reliefs: 30(a) to declare the impugned Order No.GSL/S.5(1)/S.83/B.14 dated 15.01.2018 issued by respondent no.2, as without authority of law and ultra vires the provisions of the Gujarat Goods and Services Tax Act. (b) to quash and set aside the impugned Form DRC 22 dated 06.10.2020 attaching the property and DRC 22 dated 07.10.2020 attaching the bank accounts and fixed deposits, issued by the respondent no.4. (c) pending admission, hearing and till final disposal of this petition, be pleased to direct the respondents (i) to release the bank accounts provisionally attached by the respondent no.4, as in Annexure K; (ii) not to take any coercive action against the petition. (d) to issue order(s), direction(s), writ(s) or any other relief(s) as this C/SCA/13878/2020 ORDER Hon'ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice; (e) to award costs of and incidental to this application be paid by the respondents;
We have heard Mr. Avinash Poddar, the learned counsel appearing for the writapplicant and Mr. Chintan Dave, the learned AGP appearing for the respondents.
It appears from the material on record that the writapplicant has been served with a showcause notice under Section74 of the SGST Act, 2017 in Form GST DRC01 dated 07/10/2020. The liability, which is sought to be fasten by way of the said showcause notice is around Rs.3,46,133/ [inclusive of interest and penalty]. It appears that as the proceedings under Section74 of the Act came to be initiated, the Assistant Commissioner of State Tax, Surat passed an order of provisional attachment of the immovable properties as well as the cash credit account of the writapplicant maintained with the Kotak Mahindra Bank Limited, Surat in Form GST DRC22, dated 06/10/2020. 4. Being dissatisfied with the aforesaid action, the writapplicant is here before this Court with the present writapplication.
We are of the view that the cash credit account of the writ applicant should not have been ordered to be provisionally attached under Section83 of the SGST Act, 2017. The position of law in this regard is now wellsettled. Even otherwise, Mr. Poddar, the learned counsel would submit that for a liability of Rs.3 lac and odd amount, the authority ought not to have proceeded to provisionally attached the immovable properties worth rupees more than 10 crores. He would further submit that as the cash credit account came to be freezed and rather provisionally attached, all other accounts including the term C/SCA/13878/2020 ORDER deposits have also been provisionally attached.
At this point of time, we would not like to comment anything as regards the provisional attachment of the immovable properties. We may only say that the provisional attachment of the cash credit account bearing No.510044020408 with the Kotak Mahindra Bank Limited, Surat cannot continue and the same is hereby lifted. Ultimately, if the entire liability as sought to be fasten is discharged by the writapplicant, then the authority may continue passing appropriate orders lifting the provisional attachment of the immovable properties also.
With the above, this writapplication stands disposed of. (J. B. PARDIWALA, J) (ILESH J. VORA,J) A. B. VAGHELA
Reproduced from the public record of the Gujarat High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.