Bombay High Court
S. S. Offshore Pvt. Ltd vs Union Of India And 8 Ors on 3 August, 2021
Bench: G. S. Kulkarni
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Prajakta Vartak
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L.) NO.13363 OF 2021
M/s. S.S. Offshore Pvt. Ltd. ... Petitioner
vs.
Union of India & Ors. ... Respondents
.....
Mr. Rahul Kadam for Petitioner.
Mr. J.B. Mishra with Ms. Sangeeta Yadav for Respondents
.....
CORAM :- DIPANKAR DATTA, CJ &
G. S. KULKARNI, J.
DATE :- AUGUST 03, 2021
PC :
1. The challenge in this writ petition is to an order dated
May 17, 2021 passed by the Commissioner, CGST & Central
Excise, Belapur Commissionerate, respondent no.3, under
Rule 159(5) of the Central Goods and Services Tax Rules,
2017 (for short "the CGST Rules", hereafter). By the
impugned order, the respondent no.3 declined to lift the order
of provisional attachment of the petitioner's bank account,
which was earlier ordered in purported exercise of power
conferred by Section 83 of the Central Goods and Services Tax
Act, 2017 (for short "the CGST Act", hereafter) read with Rule
159(1) of the CGST Rules.
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2. The ground on which Mr. Kadam, learned advocate for
the petitioner, mounts a challenge to the impugned order is
that no proceedings are pending against the petitioner under
Sections 62 or 63 or 64 or 67 or 73 or 74 of the CGST Act
and, therefore, the jurisdictional fact for invocation of the
power conferred by Section 83 of the CGST Act read with Rule
159(1) of the CGST Rules did not exist; hence, the order of
provisional attachment, passed under Section 83 read with
Rule 159(1), together with the order declining to lift the
provisional attachment, passed under Rule 159(5), are
entirely without jurisdiction. In support of his contention, Mr.
Kadam has placed reliance on the decision of the Supreme
Court in M/s. Radha Krishan Industries v/s. State of
Himachal Pradesh & others, reported in 2021 SCC Online
SC 334. In such decision, it has been held by the Supreme
Court that the power to order a provisional attachment of the
property of the taxable person, including a bank account, is
draconian in nature and the conditions which are prescribed
by the statute for a valid exercise of the power must be
strictly fulfilled. Reliance has also been placed on the Bench
decision of this Court in Kaish Impex (Pvt.) Ltd. v/s.
Union of India & Ors., reported in 2020 SCC OnLine Bom
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125, wherein it has been laid down that initiation of
proceedings against one taxable person would not authorize
the revenue to provisionally attach the bank account of
another taxable person. Based on the above submissions, Mr.
Kadam prays for quashing of the impugned order as well as
for a direction on the respondents to defreeze the petitioner's
bank account.
3. Per contra, Mr. Mishra, learned advocate appearing for
the respondents has invited our attention to the impugned
order dated May 17, 2021. According to him, the respondent
no.3 has discussed in detail to what an extent fraud has been
practiced on the revenue by generation of fraudulent Input
Tax Credit (ITC), based on issuance of fake invoices, which
was availed of by the petitioner causing loss to the revenue.
He, thus, contends that since fraud vitiates even the most
solemn proceedings, the respondent no.3 was justified in
spurning the request of the petitioner for lifting of the order of
provisional attachment.
4. During the course of his arguments, Mr. Mishra has
referred to a Bench decision of Gujarat High Court in Kushal
Ltd. v. Union of India, reported in 2020(34) G.S.T.L. 203
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(Guj.). Referring to paragraph 14 of such decision, it is
pointed out by him to the Court that the Gujarat High Court in
similar circumstances had held that in the absence of
proceedings pending under sections 62 or 63 or 64 or 67 or
73 or 74 of the CGST Act, the revenue would not be
authorized to provisionally attach the property including a
bank account of the taxable person and, therefore, such
action would not be in consonance with the provisions of the
statute. The decision in Kushal Ltd. (supra), according to Mr.
Mishra, has been challenged by the revenue before the
Supreme Court in SLP (C) No.10070 of 2020, whereupon the
Supreme Court has observed in its order dated October 27,
2020 that the view expressed in the impugned judgment has
to be kept in abeyance and cannot be followed in other cases
till the issue is finally answered/decided by the Supreme
Court. In view of such observation, Mr. Mishra urges that no
order should be passed on this writ petition till such time the
issue is finally decided by the Supreme Court.
5. We have heard learned advocates for the parties and
perused the materials on record.
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6. Since Mr. Mishra has referred to the order dated October
27, 2020 of the Supreme Court in SLP (C) No.10070 of 2020
to persuade us not to make any order, as prayed for by the
petitioner, we propose to deal with the same first.
7. The order in SLP (C) No.10070 of 2020, to which the
Court's attention has been invited by Mr. Mishra, is dated
October 27, 2020. On that date, it was the desire of the
Supreme Court that till such time the issue is finally decided
by the Court, the view expressed in Kushal Ltd. (supra) by
the Gujarat High Court should not be followed in other cases.
However, the decision in M/s. Radha Krishan Industries
(supra) is dated April 20, 2021. It is, therefore, a decision
rendered subsequent to the interim order in SLP (C) No.10070
of 2020. We can safely proceed on the premise that the
Supreme Court, by its decision in M/s.Radha Krishan
Industries (supra), has settled the issue of power to order
provisional attachment to the effect that unless proceedings
are pending against a taxable person under any of the
provisions referred to in Section 83 of the CGST Act, no order
of provisional attachment could be made and if any such order
is made, the same would be ultra vires Section 83 of the
CGST Act. It matters little at this stage that such statement of
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law was not made by the Supreme Court while deciding SLP
(C) No.10070 of 2020. We are further of the view, having
read the decision in M/s.Radha Krishan Industries (supra),
that such decision, in effect, approves the view taken by the
Gujarat High Court in Kushal Ltd. (supra).
8. A reading of paragraph 20 of the impugned order dated
May 17, 2021 reveals a specific contention having been raised
on behalf of the petitioner that no proceedings under Sections
62 or 63 or 64 or 67 or 73 or 74 of the CGST Act were
pending against the petitioner and, therefore, the order of
provisional attachment of its bank account is illegal. The
respondent no.3 did not specifically deal with such contention
of the petitioner; however, the impugned order came to be
made merely because of a satisfaction recorded by the
respondent no.3 that the petitioner had availed benefits of
fake ITC from non-existing and fake firms on the strength of
invoices issued by such fake firms. It is also noted that the
respondent no.3 in paragraph 22 of the impugned order has
observed that the petitioner has failed to appreciate Section
83 of CGST Act in letter and spirit, which authorized her to
provisionally attach any property to protect the interest of the
revenue.
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9. That fraud vitiates even the most solemn proceedings in
any civilized system of jurisprudence does not admit of any
doubt. However, what is of significance is that the provision of
a taxing statute is under consideration and it is settled law
that a taxing statute has to be strictly construed. As has been
held in M/s.Radha Krishan Industries (supra), the
conditions which are prescribed by the statute for a valid
exercise of the power must be strictly fulfilled. In the
considered opinion of the Court, the approach of the
respondent no.3 that a fraud has been practiced, by itself and
without there being any provision in the relevant statute
conferring power which could be invoked for such purpose,
was not sufficient ground to clothe her with the power to
order provisional attachment of a bank account under Section
83 read with Rule 159(1). It is also well settled that where a
person on whom fraud is committed is in a position to
discover the truth by due diligence, fraud is not proved. [see:
Shri Krishnan v. Kurukshetra University, reported in AIR
1976 SC 376]. It is not the case of the Commissioner that the
alleged fraudulent acts could not have been detected by
exercise of due diligence. In the absence thereof, the
inference to be drawn is that due diligence had not been
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exercised at the end of the revenue, and the orders impugned
cannot be defended by reference to the principle urged by the
respondent no.3 that since there has been an alleged fraud,
the power to order provisional attachment can be exercised.
To empower a Commissioner to order provisional attachment
on account of presence of vitiating circumstances as the one
under consideration before the respondent no.3, the statute
itself ought to have provided so and the power to attach
property, which is of a drastic nature, ought not to have been
exercised on facts and in the circumstances. As a matter of
fact, no proceedings under Sections 62 or 63 or 64 or 67 or
73 or 74 of the CGST Act are pending; hence, the respondent
no.3 committed an error of jurisdictional fact for which the
Court is constrained to hold that she had no authority to
invoke the power conferred by Section 83 of the CGST Act
read with Rule 159(1) of the CGST Rules.
10. True it is, Section 83 of the CGST Act read with Rule
159(1) of the CGST Rules empowers a Commissioner to
protect the interests of the revenue by way of provisional
attachment, but such provisional attachment cannot be
ordered without fulfillment of the condition(s) precedent, as
referred to above. In the absence of fulfillment of such
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conditions(s) precedent, the respondent no.3 could not have
protected the interest of the revenue in the manner she
proceeded to pass the impugned order.
11. For the reasons aforesaid, the order impugned cannot be
sustained. It stands set aside. The respondent no.3 is directed
to forthwith defreeze the bank account of the petitioner.
12. The writ petition stands allowed. There shall, however,
be no order as to costs.
(G. S. KULKARNI, J.) (CHIEF JUSTICE)
Digitally
signed by
PRAJAKTA
PRAJAKTA SAGAR
SAGAR VARTAK
VARTAK Date:
2021.08.06
10:48:39
+0530
