Madhav Copper Limited vs State Of Gujarat
2021 Latest Caselaw 17567 Guj

     C/SCA/15201/2021                           JUDGMENT DATED: 23/11/2021




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
              R/SPECIAL CIVIL APPLICATION NO. 15201 of 2021

FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE SONIA GOKANI

and
HONOURABLE MS. JUSTICE NISHA M. THAKORE

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1     Whether Reporters of Local Papers may be allowed               NO
      to see the judgment ?

2     To be referred to the Reporter or not ?                        NO

3     Whether their Lordships wish to see the fair copy              NO
      of the judgment ?

4     Whether this case involves a substantial question              NO
      of law as to the interpretation of the Constitution
      of India or any order made thereunder ?

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                        MADHAV COPPER LIMITED
                                Versus
                          STATE OF GUJARAT
==========================================================
Appearance:
MR BM MANGUKIYA with MR CHETAN K PANDYA(1973) for the
Petitioner(s) No. 1,2
. for the Respondent(s) No. 3
MS MAITHILI MEHTA, ASST. GOVERNMENT PLEADER(1) for the
Respondent(s) No. 1
MR NIKUNT K RAVAL(5558) for the Respondent(s) No. 3,4
NOTICE SERVED BY DS(5) for the Respondent(s) No. 2
NOTICE SERVED(4) for the Respondent(s) No. 2
==========================================================
    CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
          and
          HONOURABLE MS. JUSTICE NISHA M. THAKORE

                       Date : 23/11/2021
                      ORAL JUDGMENT

(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)

1. This is a petition preferred under Article 226 of the

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

Constitution of India challenging the provisional attachment

order attaching the properties of Madhav Copper Limited

under Section 83 of the Central Goods and Services Tax Act,

2017 (hereinafter referred to as the 'CGST Act') and under the

provisions of Gujarat Goods and Services Tax Act, 2017

(hereinafter referred to as the 'GGST Act').

2. The brief facts are as follows: -

2.1. The petitioner no.1 is a company incorporated in the

year 2012 which is engaged in the business of Copper

Products and is a leading manufacturers of various products

of copper like Copper Rod, Copper Wire, Fiber Glass

Conductor etc. The petitioner no.1 also imports raw-materials/

scraps for manufacturing these products and export final

products made out of the copper. It has its own Certificate of

Importer-Exporter Code (IEC). The petitioner also supplies to

the reputed private entities and government entities across

the India. All requisite licenses are with the petitioner for the

purpose of manufacturing at their factory at Bhavnagar.

2.2. The petitioners had been issued the certificate of ISO

45001:2018 on 30.09.2019 for the period from 30.09.2019 to

29.09.2020 and also issued ISO 14001:2015 on 08.11.2019

and ISO 9001:2015 on 13.11.2019. The petitioners also

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

applied for the GSTN on the commencement of GCST and

GGST Acts, 2017. It enjoys the registration of GST. The State

Jurisdictional Office for the purpose of assessment etc. is

Division-9, Range-19, Ghatak-75, Bhavnagar. So far as the

Central Jurisdiction is concerned, Bhavnagar Division-I,

Ranger-I is the jurisdictional office.

2.3. A notice came to be issued by the Assistant

Commissioner of State Tax in the Form GST DRC-01 on

08.07.2019 calling upon the petitioner no.1 to make payment

for the input tax credit claimed for the purchase made

through the suppliers who defaulted in payment of GST. The

reply had been given on 06.08.2020 with a request to drop the

proceedings, however, no communication has been received

from the Assistant Commissioner of State Tax till this date.

According to the petitioner, it has to be understood that the

explanation is accepted.

2.4. The State Tax Officer-5, Unit 75, Bhavnagar sought an

explanation under Section 61 of the GGST Act in FORM GST

ASMT-10 dated 18.07.2019 in connection with the petitioners'

supplier M/s. Gujarat Enterprises and M/s. Royal Trading.

Explanation has been given by way of reply dated 12.08.2019

to the State Tax Officer-5. No communication has been

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

received from the said officer and hence also, according to the

petitioner, the explanation is accepted.

2.5. It is further urged that to the shock and dismay of the

petitioner, the officers of the State Tax had caused search

under the GGST Act at the office premises of the petitioner

no.1 and drew the Panchnama on 04.10.2019 and seized

various purchase files as noted in order of seizure on the very

date under FORM GST INS-02. Since there was a discrepancy

in the stock, the petitioner no.1 voluntarily deposited the GST

to the tune of Rs. 1,76,198/- and 15% penalty by DRC-03. The

petitioner has also substantiated the same with the Challan in

FORM GST DRC-03.

2.6. The summons came to be issued on 22.10.2019

exercising the powers vested under Section 70 of the GGST

Act to appear before him on 25.10.2019 at Bhavnagar Office

to give statement. The petitioner submitted the original

invoices of purchase upto 25.10.2019, the original invoices

from 01.11.2019 to 31.03.2020 and 01.04.2020 to 30.11.2020

also had been received by the Assistant Commissioner of State

Tax on the very day.

2.7. Pursuant to the said search and seizure dated

04.10.2019, the respondent no.2 issued FORM GST DRC-01A

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

under Rule 142(1A) on 22.07.2020 directing the petitioner to

deposit the total tax of Rs. 10,43,33,762/- under Section 74(5)

of the GGST Act on the ground that the ITC was not allowable

as per the provisions of Section 16(2) of the GGST Act and the

same was required to be recovered under the provisions of

Section 74 of the GGST Act.

2.8. It is essentially on the ground that the registered

company M/s. Madhav Copper Limited availed the credit of

cancellation of GSTN and charges which is nothing but the

recovery of the damages resulting from the breach of

contract. Accordingly, it has held that the petitioner has

wrongly availed and utilized ITC totally amounting to Rs.

10.43 crores (rounded off) which is not allowable under

Section 16(2) of the GGST Act and hence, it was directed to be

recovered along with interest and penalty.

2.9. The petitioner has further urged that the State Tax

Officer-4 sought explanation under Section 61 of the GGST

Act on 20.07.2020 in connection with supplier M/s. Gujarat

Enterprises and M/s. Aksha Enterprises. The explanation has

been made on 24.08.2020 and no communication has been

received and therefore, the petitioner assumed that nothing

objectionable was found.

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

2.10. A show cause notice dated 22.07.2020 has been issued

in the FORM GST DRC-01 for the financial years 2017-18,

2018-19 and 2019-20 on the ground that the suppliers' GSTN

had been cancelled ab-initio and hence, the petitioner no.1

has been asked to pay the tax of Rs. 2,37,20,365/- for the year

2017-18, Rs. 7,90,31,782/- for the year 2018-19 and Rs.

15,81,616/- for the year 2019-20. Although, it is a grievance of

the petitioners that respondents did not disclose the details of

dealers whose registrations were cancelled.

2.11. According to the petitioner, the payments have been

made to all through the banking channel towards the goods as

well as tax, therefore, the respondent no.2 cannot ask the

petitioner no.1 to pay the tax of the supplied goods. The

discrepancies in the return also has been sought for in the

FORM GST ASMT-10 on 14.12.2020 under Rule 99(1) of the

GGST Rules, 2017.

2.12. Once again, the search was conducted on 23.12.2020

and the Panchnama had been drawn. The petitioners have

cooperated all throughout. It is further averred that the

petitioner has been summoned on 06.01.2021 by the Director

General of Goods and Services Tax Intelligence, Surat Zonal

Unit exercising the powers under Section 70 of the CGST Act

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

to appear before him on 20.01.2021 to give statement and

produce documents mentioned in the summons. The petitioner

therefore filed Special Civil Application No. 3729 of 2021

seeking various reliefs. The Court issued notice and passed

the order on 08.03.2021. It has essentially challenged the

actions of the respondent under the CGST Act and also

challenged the vires of Section 16(1) and 16(2)(c) of the CGST

Act and also has sought the striking down of Section 43(A)(6)

of the GGST Act. It also sought the declaration in relation to

the input tax credit to be reversed.

2.13. Since another search was carried out on 07.07.2021

pending the adjudication of the show cause notice dated

05.11.2020 and several documents were seized, the petitioner

is before this Court seeking following reliefs: -

"(A) To issue a writ of mandamus and/or writ of certiorari and/or any other appropriate writ, order or direction directing to quash and set Provisional Attachment Orders at Annexure-A, Annexure-B, Annexure-C, Annexure-D and Annexure-E passed by the respondent no.2 with consequential and incidental relief in favours of the petitioners on such terms and conditions as may be deemed fit and proper to this Hon'ble Court.

(B) To issue a writ of mandamus and/or writ of certiorari and/or any other appropriate writ, order or direction directing to quash and set aside communication / an order dated 27/07/2021 at Annexure-F passed by the respondent no.2 and declare that petitioner no.1 is entitled to receive its debts from the debtors (buyers) of the petitioner No.1

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

along with other consequential and incidental reliefs on such terms and conditions as may be deemed fit and proper to this Hon'ble Court.

(C) To issue a writ of mandamus and/or writ of certiorari and/or any other appropriate writ, order or direction to quash and set an order passed by the respondent no.2 blocking Input Tax Credit of Rs. 3,10,07,409/- of the petitioner no.1 company by communication dated 09/07/2021 at Annexure-G on such terms and conditions as may be deemed fit and proper to this Hon'ble Court.

(D) To issue a writ of mandamus and/or writ of certiorari and/or any other appropriate writ, order or direction to quash and set an order of Prohibition passed in FORM GST INS-03 dated 10/07/2021 by the respondent no.2 prohibiting the petitioners from removing, part with or otherwise deal with the goods except with the previous permission at Annexure-H on such terms and conditions as may be deemed fit and proper to this Hon'ble Court.

(E) Pending admission, final hearing and disposal of this petition, to stay implementation and operations of Provisional Attachment Orders at Annexure-A, Annexure-B, Annexure-C, Annexure-D and Annexure-E passed by the respondent no.2 on such terms and conditions as may be deemed fit and proper to this Hon'ble Court.

(F) Pending admission, final hearing and disposal of this petition, to stay implementation and operations of the order/communication dated 27/07/2021 at Annexure-F and to direct the respondent nos. 1 and 2 to communicate all 49 buyers (debtors) of the petitioner no.1 who are listed in communication dated 27/07/2021 at Annexure-F to make the payment against the Tax Invoice and goods received from the petitioner no.1 in the designated bank account declared before the GST authority on such terms and conditions as may be deemed fit and proper to this Hon'ble Court.

(G) Pending admission, final hearing and disposal of this petition, to stay implementation and operation of an order of Prohibition passed in FORM GST INS-

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

03 dated 10/07/2021 by the respondent no.2 at Annexure-H prohibiting the petitioners from removing, part with or otherwise deal with the goods except with the previous permission and permit the petitioner no.1 to dispatch the finished goods to the Buyers of the petitioner no.1 on such terms and conditions as may be deemed fit and proper to this Hon'ble Court.

(H) To pass such other and further orders as this Hon'ble Court may deem just and proper in the facts and circumstances of the case and in the interest of the petitioners.

(I) To provide for the CGSTs of this petition. "

3. On 07.10.2021 this Court issued notice. Essentially since

the question is of the provisional attachment, without there

being any proceedings pending, according to the petitioner, at

the time of exercising the powers under Section 83 of CGST

Act, the Commissioner is required to form his opinion. Neither

has he formed any opinion nor is it justifiable for him to

exercise these powers in absence of any pending proceedings.

4. Affidavit-in-reply is filed by the Assistant Commissioner

of State Tax. According to the respondents, defreezing of the

attachment over the immovable properties vide order dated

09.07.2021 in Form DRC-22 and attachment order by which

the bank account of the petitioner also has been attached on

08.07.2021 are sought to be questioned. The attachment is

also made of the vehicles of the petitioner. According to the

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

respondent authority, the debtors also have been asked not to

pay any amount to the petitioner and the input tax credit of

the petitioner also has been blocked. The authorities also

blocked the ITC worth Rs. 3,10,07,409/-.

5. The petitioner has also challenged the action of the

respondent of removing, parting with the stock, plant and

machinery etc. without prior permission of the authorities.

According to the respondent, in exercise of the powers under

Section 83 of the Goods and Services Tax Act, 2017 the

respondent authorities have acted in accordance with the

provisions of Section 67 of the GST Act whereby the search

warrant was issued by the Additional Commissioner of State

Tax (Enforcement) and accordingly the authorities initiated

the search proceedings at the business and residential

premises of the petitioner no.1. For the purpose of protecting

the government revenue, it is necessary to provisionally

attach the property and hence, the exercise of powers under

Section 83 have been done. The Commissioner have powers of

delegation under Section 5 of the GST Act and it has

delegated his powers to the officer subordinate to him.

5.1. It is further urged that the search proceedings have

been concluded on 07.07.2021 at the residential places.

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

Search proceedings at the Head Office were concluded on

09.07.2021 and at the place of factory and office it were

continued on day to day basis upto 15.07.2021. Since no

Director was available at such places, summons were issued

to Directors of M/s. Madhav Copper Limited to remain present

at the State Tax Office and the proceedings were postpone till

16.07.2021.

5.2. On 10.08.2021, the search team visited at the place of

factory and office and carried out further proceedings and

also seized the documents etc. The bank accounts have been

attached on 08.07.2021 in exercise of powers under Section

83. The vehicles, properties etc. have been attached and the

ITC have been blocked under Rule 86(A) of the GST Rules.

5.3. On different dates various directions have been issued

for the attachment of the properties and precluding the

debtors to make payments. Reliance is place on Sections 67,

83 and 137 of the GST Act, 2017 and Rule 86(A) of the GST

Rules and urged that exercising such powers, actions have

been taken.

5.4. According to the respondent, the search proceedings

under Section 67 of the GST Act were initiated on 07.07.2021

and got concluded on 10.08.2021. A detailed report of which

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

was prepared and furnished to the appropriate authority.

Confidential report in a sealed cover was also furnished

before the Apex Court in Special Leave Petition bearing W.P.

(Cr.) No. 301 of 2021, where the Apex Court directed the

petitioner to approach the appropriate forum for any other

relief during the progress of investigation and the confidential

report which was furnished by the authorities in sealed

envelop was taken on record and the matter was adjourned on

21.10.2021.

5.5. The grievance on the part of the respondent is that the

authorities issued summons under Section 70 however,

nobody has appeared and after the direction of the Apex

Court, they appear before the authority on 17.09.2021. The

material has been collected and the investigation is still under

process which established a clear link of the petitioner in the

fraud of wrongfully availing Input Credit Tax having its nexus

with approximately 36 bogus firms. Therefore, there is a

possibility of its involvement in billing transaction.

5.6. Section 137 specifies that when an offence is committed

by a company, every person who is in charge of the company

shall be deemed to be guilty. It is therefore urged that no

interference at this stage is desirable. It cannot be said that

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

the authorities have transgressed or acted beyond the scope

and powers.

6. This Court has extensively heard learned advocate Mr.

B.M.Mangukia assisted by learned advocate Mr. Chetan

Pandya for the petitioners who has along the line of the memo

of the petition argued this matter.

6.1. Reliance is placed on the following judgments: -

(i) Radha Krishan Industries vs. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (S.C.)]

(ii) Bhavesh Kiritbhai Kalani vs. Union of India [2021 (50) G.S.T.L. 37 (Guj.)]

(iii) Vinodkumar Murlidhar Chechani vs. State of Gujarat [2021 (45) G.S.T.L. 209 (Guj.)]

(iv) Jay Ambey Filament Private Limited vs. Union of India [2021 (44) G.S.T.L. 41 (Guj.)]

(v) Valerius Industries vs. Union of India [2019 (30) G.S.T.L.

           15 (Guj.)]
(vi)       Coromandel Agrico Private Limited vs. Commercial Tax
           Officer [2019    (26) G.S.T.L. 460 (Guj.)]

(vii) Patran Steel Rolling Mill vs. Asstt. Commissioner of State Tax, Unit 2 [2019 (20) G.S.T.L. 732 (Guj.)]

(viii) Prakashsinh Hathisinh Udavat vs. State of Gujarat [2019 (31) G.S.T.L. 583 (Guj.)]

6.2. The rejoinder affidavit has been filed denying all

contentions raised in the affidavit-in-reply. According to the

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

petitioner, the formation of the opinion for the purpose of

purported protection of the state revenue should be based on

objective facts and not on ipse dixit and caprice of the

respondent authority. According to the petitioner, the

proceedings under Section 67 have been completed on

10.08.2021 and hence, there is no proceeding pending or

initiation of any proceedings as contemplated under Chapters

XII, XIV and XV and therefore, the attachment orders are ex-

facie illegal.

7. Learned Assistant Government Pleader Ms. Maithili

Mehta has argued along the line of the contentions raised in

the affidavit-in-reply. According to her, the investigation is

going on. She does not dispute that the hearing has been

completed two months back and the order needs to be yet

passed. She further has submitted that the liability of the

petitioner is huge and hence, at the stage of provisional

attachment, the Court may not interfere.

8. During the hearing, the Court directed the additional

affidavit on behalf of the petitioners and accordingly, the

petitioner no.2 has solemnly affirmed that the stock of the

company is approximately Rs. 18 Crores being 209156.6 kgs.

in quantity and the finished goods worth approximately Rs.

C/SCA/15201/2021 JUDGMENT DATED: 23/11/2021

4.64 Crores being 53,128.24 kgs in quantity is lying with the

company. The finished goods which are to be supplied to the

public sector as well as private sector companies within the

Country and out side are to be discharged the contractual

obligations where one company is at Sri Lanka and another at

United Kingdom.

8.1. It is further the say of the petitioner no.2 that the

company has supplied the finished goods to several other

companies prior to July, 2021 and Rs. 38.68 Crores are

required to be recovered from the debtors of the company.

According to the petitioner, various orders have been received

from the different customers worth Rs. 59 Crores as per the

current price of the material. The final product lying ready

would approximately be of Rs. 70 Crores. The public sector

entities like Indian Railway - CLW, Northern Railway, South

Eastern Railway, Bharat Heavy Electricals Limited - Bhopal

and Jhansi, Suzlon Energy Limited, Pubuddu Engineering

Limited - Sri Lanka and Cannock Chemicals Limited - United

Kingdom. It is further the say that the company is running its

current account in the Bank of Baroda. It has an arrangement

of overdraft of about Rs. 10 Crores and deficit is of Rs. 7

Crores. The company also needs to make payment of tax to

the revenue authorities approximately to the tune of Rs. 2.5

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Crores and the company has to receive the ITC of

approximately Rs. 3 Crores. Therefore, the request is made to

unblock the same.

8.2. It is ensured that the company would provide the details

of every transaction at the end of the day to the revenue

authority without fail. All the transactions of purchase and

other expenses would be through the bank transaction and

not by cash. It is also the say of the petitioner that the

director would not draw any remuneration of any nature until

the authority permits. The company would not pay any

dividend to any share-holders. The company will have no

objection of the revenue authority will place any officer at the

factory premises of the petitioner. Such operation will be

posted with every financial transaction immediately.

9. Since the affidavit has been filed today, learned

Assistant Government Pleader Ms. Mehta and learned Senior

Standing Counsel Mr. Nikunt Raval also have been heard. On

receiving the instructions from the respective officers, they

have objected to the allowing of the proposal at para 6, 7 and

8 of the additional affidavit.

9.1 It is further urged that the supply which needs to be

made to the private as well as public undertakings to fulfill the

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contractual obligations, the Court may consider deputing of

the officer of the rank of Assistant Commissioner of State Tax

or the Deputy Commissioner of the State Tax and the amount

to be deposited in the current account and not in the CC

Account. It has a serious reservations regarding lifting of any

attachment of the bank.

10. Noticing the decision of the Apex Court in case of Radha

Krishan Industries (Supra), where the Court has held that

provisional attachment is a draconian power exercised before

finalization of assessment or raising of demand. The same has

to be exercised with due caution. The provisional attachment

as in aid of something else and its purpose is to protect the

revenue. Its validity would be depend on strict observance of

statutory pre-conditions. The formation of Commissioner's

opinion must have proximate and live nexus to protection of

revenue interest and it is not left to unguided subjective

discretion. Commissioner's opinion must be based on tangible

material regarding statutory requirements. Thus, the powers

are with the commissioner to levy the provisional attachment

but the formation of the opinion has to be on the part of the

concerned officer. The power to levy the provisional

attachment is considered draconian in nature by exercising

the powers. The property belonging to the taxable person may

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be attached including the bank account.

The statute has contemplated an attachment during the

pendency of the proceedings under the stipulated statutory

provisions noticed earlier. An attachment which is

contemplated in Section 83, in other words, at a stage which

is anterior to the finalization of an assessment or the rising of

a demand. Conscious as the Legislature was of the draconian

nature of the power and the serious consequences which

emanate from the attachment of any property including bank

account of the taxable person, it conditioned the exercise of

the powers by employing specific statutory language which

conditions the exercise of the power. There is an insistence of

formation of opinion. The procedural requirement is of right

to submit objection and opportunity of hearing which

according to the Apex Court requires strict compliance. There

must be a reasoned order passed accepting or rejecting the

objections. Thus, the statute has provided a guided discretion

of the Commissioner and the formation of the opinion to have

a proximate and live nexus for the purpose of protecting the

interest of the Government Revenue. The necessity, according

to the Apex Court, postulates a more stringent requirement

than a mere expediency. A provisional attachment under

Section 83 contemplates during the pendency of certain

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proceedings, which means that a final demand or liability is

yet to be crystallized. The anticipatory attachment of this

nature must strictly conform to the requirements of

substantive and procedural embodied in the statute and the

rules.

"34 Similar to the decisions of the Gujarat High Court, other High Courts have recognized the restrictive nature of the power of provisional attachment under Section 83 of the SGST Act and the need for it to be based on adequate substantive material. The High Courts have also underscored the extraordinary nature of this power, necessitating due caution in its exercise.

40 The marginal note to Section 83 provides some indication of Parliamentary intent. Section 83 provides for "provisional attachment to protect revenue in certain cases". The first point to note is that the attachment is provisional - provisional in the sense that it is in aid of something else. The second point to note is that the purpose is to protect the revenue. The third point is the expression "in certain cases" which shows that in order to effect a provisional attachment, the conditions which have been spelt out in the statute must be fulfilled. Marginal notes, it is well-settled, do not control a statutory provision but provide some guidance in regard to content. Put differently, a marginal note indicates the drift of the provision. With these prefatory comments, the judgment must turn to the essential task of statutory construction. The language of the statute has to be interpreted bearing in mind that it is a taxing statute which comes up for interpretation. The provision must be construed on its plain terms. Equally, in interpreting the statute, we must have regard to the purpose underlying the provision. An interpretation which effectuates the purpose must be preferred particularly when it is supported by the plain meaning of the words used.

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48 Now in this backdrop, it becomes necessary to emphasize that before the Commissioner can levy a provisional attachment, there must be a formation of "the opinion" and that it is necessary "so to do" for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency of the proceedings under the stipulated statutory provisions noticed earlier. An attachment which is contemplated in Section 83 is, in other words, at a stage which is anterior to the finalization of an assessment or the raising of a demand. Conscious as the legislature was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, it conditioned the exercise of the power by employing specific statutory language which conditions the exercise of the power. The language of the statute indicates first, the necessity of the formation of opinion by the Commissioner; second, the formation of opinion before ordering a provisional attachment; third the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourth, the issuance of an order in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory preconditions by the Commissioner. While conditioning the exercise of the power on the formation of an opinion by the Commissioner that "for the purpose of protecting the interest of the government revenue, it is necessary so to do", it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of

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the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue.

49 By utilizing the expression "it is necessary so to do" the legislature has evinced an intent that an attachment is authorized not merely because it is expedient to do so (or profitable or practicable for the revenue to do so) but because it is necessary to do so in order to protect interest of the government revenue. Necessity postulates that the interest of the revenue can be protected only by a provisional attachment without which the interest of the revenue would stand defeated. Necessity in other words postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make preemptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue.

50 These expressions in regard to both the purpose and necessity of provisional attachment implicate the doctrine of proportionality. Proportionality mandates the existence of a proximate or live link between the need for the attachment and the purpose which it is intended to secure. It also postulates the maintenance of a proportion

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between the nature and extent of the attachment and the purpose which is sought to be served by ordering it. Moreover, the words embodied in sub- Section (1) of Section 83, as interpreted above, would leave no manner of doubt that while ordering a provisional attachment the Commissioner must in the formation of the opinion act on the basis of tangible material on the basis of which the formation of opinion is based in regard to the existence of the statutory requirement. While dealing with a similar provision contained in Section 4536 of the Gujarat Value Added Tax Act 2003 , one of us (Hon'ble Mr Justice MR Shah) speaking for a Division Bench of the Gujarat High Court in Vishwanath Realtor v State of Gujarat37 observed:

"8.3. Section 45 of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, the order of provisional attachment can be passed by the Commissioner when the Commissioner is of the opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary so to do. Therefore, before passing the order of provisional attachment, there must be an opinion formed by the Commissioner that for the purpose of protecting the interest of the Government Revenue during the pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally any property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale and/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the Revenue may not be in a

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position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers under Section 45 of the VAT Act." (emphasis supplied)

53 Under sub-Rule (1) of Rule 159, an attachment of property by the Commissioner under Section 83 is effected by passing an order mentioning the details of the property which is attached. The form in which the order is to be made is prescribed in form GST DRC-22. This form is extracted below: FORM GST DRC 23 "

10.1. This Court in case of Bhavesh Kiritbhai Kalani

(Supra), was considering the provisional attachment of the

bank account, where there were no proceedings pending

under Sections 62, 63, 67, 73 and 74 of the CGST Act, 2017,

the proceedings were in connection with the third parties and

hence, invocation of powers under Section 83 were held not to

be availed with departmental authorities.

"11. Having heard both the sides, firstly, the decision rendered by this Court in case of Piyush Shamijibhai Vasoya vs. Union of India (Supra) delivered on 27.01.2021, shall need to be regarded. There also the controversy was in relation to the third party, in whose case the bank account in exercise of the powers under Section 83 of the CGST Act, 2017 had been freezed. It was a question of some actions taken by the authority concerned against few other individuals. The Court having noted that there being no proceedings under sections 62, 63, 64, 67, 73 or 74, having been initiated or pending against the writ applicant, held that the powers under Section 83 of the Act could not have been invoked by the respondents for the purpose of provisional attachment. Paragraph 6

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to 9 are reproduced herein:

"6. Section 83 of the Act, 2017 reads thus: SECTION 83. Provisional attachment to protect revenue in certain cases. -- (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.

7. Indisputably, in the case on hand, no proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74 of the Act have been initiated or pending against the writ applicant. In the absence of pendency of any such proceedings referred to above, the respondent no.2 could not have invoked Section83 of the Act for the purpose of provisional attachment. Assuming for the moment that something has surfaced in the course of any inquiry or investigation against the writ applicant as regards some business transaction with any other individuals, the same by itself will not confer jurisdiction to the respondent no.2 to invoke the Section 83 of the Act. The language of Section 83 of the Act is plain and simple. In the absence of any proceedings pending as on date against the writ applicant under the provisions of the GST Act as referred to under Section83 of the Act, the order of provisional attachment could not have been passed.

8. In such circumstances referred to above, we are left with no other option to quash and set aside the impugned order of provisional attachment. However, we clarify that in future if any proceedings are initiated as referred to in Section83 of the Act and if the authority deems fit, then he may proceed to invoke the Section83 of the Act in

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accordance with law. However, as on date, the order of provisional attachment cannot continue.

9. In the result, this writ application succeeds and is hereby allowed. The impugned communication at Page 24, Annexure-C to this writ-application is hereby quashed and set aside. The attachment is ordered to be lifted. The bank shall permit the writ-

applicant to operate his bank account.

9. Mr. Vyas would submit that the proceedings under Section 79 of the Act, 2017 have been initiated against the writapplicant and they are pending as on date. We may only say that if such proceedings have been initiated and are pending, the same may continue in accordance with law. We do not express any opinion on merits as regards the proceedings initiated under Section79 of the Act, 2017."

12. We have given to understand by the learned advocate, Mr. Paneri that as the proceedings under Section 79 of the Act have already been initiated against the writ applicant under jurisdiction of the Bombay High Court, he earlier also have challenged such proceedings initiated under Section 79 of the Bombay high Court and the same have not been initiated here as he was waiting for this writ petition to be taken up and the action on the part of the bank of freezing his account also be interfered with.

13. We have noticed that in the instant case also, there are no proceedings against the present petitioner under Sections 62, 63, 64, 67, 73 and 74 of the Act. There is no reason therefore, to invoke section 83 against the writ applicant and proceedings. Since the proceedings are initiated by the authorities in connection with the third parties, invocation of powers under Section 83 are not available with the respondents. Therefore, the order of the provisional attachment in connection with the bank account No.3785569992 of M/s. Global

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Corporation be interfered with. It is also necessary to note that despite of due service to the bank the bank has chosen not to remain present. Under the RTI Act, where information was sought by the petitioner, It has chosen not to divulge on the ground of pending investigation strangely. It is rightly pointed out before us that this action of freezing account is harsh and to be resorted as provided under the Statute. Thus, being a drastic power, the authority concerned cannot be oblivious of the serious consequences of provisional attachment of the bank account. Even if for the purpose of safeguarding the interest of the government revenue, the bank had chosen to follow the directions from the respondents,not to intimate to the petitioner as to why his account was freezed is wholly impermissible. In relation to the third party when such powers are impermissible to be exercised under section 83 of the Act, the bank ought to have applied its mind and more so when even under the RTI Act, the bank had been requested to furnish the details. Let a copy of this order be sent to the legal department of the bank for the future reference where it is not to be a party to something which the statute does not permit.

14. We notice at this stage that section 79 of CGST Act, 2017 which provides for the powers to the proper officer to recover the amount where the amount payable by a person to the government under the provisions of this act and rules, is not paid. What would be relevant for the purpose of this matter is to refer to Section 79 (1)(c)(i) where the proper officer by a notice in writing require any other person from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay the government either forthwith upon the money becoming due or being held, or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is

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equal to or less than that amount. Such person to whom such a notice is issued, is bound to comply with the notice and where the notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of entry, endorsement or the like being made before payment is made. Section (1) (C)(iii) also provides that in case of a person to whom the notice has been issued, fails to make the payment in pursuance to thereof of the government despite of the notice, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Act or the rules made thereunder shall follow. The proper officer may detain any movable or immovable property belonging to such person and detain the same until the amount payable is paid."

10.2. This Court in case of Vinodkumar Murlidhar

Chechani (Supra), was considering the provisional

attachment of the bank account, it held that the Court can

determine whether the opinion is arbitrary, capricious or

whimsical. The order and record must record and indicate

that it was necessary to take a drastic action.

"42. Thus, the amount as on date in the two bank accounts aggregates to Rs.22,065=00. What good purpose the department is going to achieve by provisionally attaching the two bank accounts with balance of a paltry amount of Rs.22,065=00.

43. Let us try to take a practical view of the matter.

The avowed object of exercise of power under Section 83 of the Act for the purpose of provisional attachment of any property is to protect the interest of the Revenue. Say for instance, tomorrow an order of assessment is passed and liability of the assessee

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to pay a particular amount is fixed. It is at that stage that the department may consider recovering the amount determined towards the tax liability from the amount lying in the bank accounts. In the same manner, if any immovable property has been provisionally attached and final liability towards the payment of tax is fixed under the order of assessment, then such immovable property can be put to auction for the purpose of recovering the dues. In the case on hand, we do not propose to interfere with the investigation already undertaken by the department. Ultimately, if sufficient material surfaces indicating the involvement of the writ-applicant in some bogus transaction, the next step in the process can always be a show-cause notice under Section 73 or Section 74 of the Act, as the case may be. However, to provisionally attach all the bank accounts and that too those accounts in which there is hardly any balance would only cause undue hardship to the assessee. This is the grey area where the Revenue or the authority concerned needs to apply its mind before the power is exercised. This is the reason why in Valerius Industries (supra) this Court observed that the considerations are altogether different for the purpose of exercising the power of provisional attachment under Section 83 of the Act. Just because some proceedings are initiated under Section 67 of the Act by itself may not be sufficient to arrive at the subjective satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of the Government Revenue. An order of provisional attachment cannot be as a matter of course. It is one of the drastic measures which the authority may be compelled to take if the situation demands for the purpose of protecting the interest of the Government Revenue.

50. In the overall view of the matter, more particularly, having regard to the fact that there is hardly a balance of Rs.22,065/- in the two bank accounts, we see no good reason to continue the provisional attachment.

51. In the result, this writ-application succeeds and is hereby allowed. The impugned order of provisional attachment of the two bank accounts is hereby

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quashed and set-aside. The connected Civil Application would not survive and the same is disposed of accordingly."

11. As is quite clear from the various decisions which have

been discussed hereinabove, that there shall need to be

ordinarily the pendency of proceedings under Sections 62 or

63 or 64 or 67 or 73 or 74 of the GST Act for the

commissioner to form an opinion for the purpose of protecting

the interest of the Government Revenue to order in writing to

attach the provisionally any property including the bank

account belonging to the taxable person. In absence of any

kind of pendency of proceedings, it is not permissible for the

respondent authority to invoke powers under Section 83 for

the purpose of provisional attachment. This Court in case of

Piyush Shamjibhai Vasoya vs. Union of India and Others [SCA

16437/2020, decided on 27.01.2021] has in categorical terms

held thus and quashed and set aside the provisional

attachment.

11.1. The Apex Court in no unclear terms has adopted

the test of tangible material and has emphatically held that

the writ petition before this Court under Article 226 of the

Constitution challenging the provisional attachment is

maintainable. The power to order a provisional attachment of

the property of the taxable person including a bank account is

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draconian in nature and the conditions which are prescribed

by the statute for a valid exercise of the power must be

strictly fulfilled. Such powers when exercised must need to be

preceded by the formation of an opinion by the Commissioner

that it is necessary to so do it for the purpose of protecting

the interest of the Government Revenue and the opinion

needs to be formed on the basis of tangible material that the

assessee is likely to defeat the demand, if any, and that

therefore, it is necessary so to do for the purpose of

protecting the interest of the Government Revenue.

11.2. The reference to the provisions of Rule 159(5) also

provides that a person whose property is attached is entitled

to the safeguard of submitting the objections that the property

was or is not liable to attachment and needs to be given an

opportunity of being heard and the Commissioner is duty

bound to deal with the objections by passing a reasoned order

which must be communicated to the taxable person whose

property is attached.

12. In this background, the Court needs to consider the

actions on the part of the respondent authority. Firstly, it

needs to be held that the aspect of alternative remedy will not

have any bearing. The writ petition under Article 226 is

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maintainable when there is a provisional attachment made by

the respondent authority. Section 67 of the GST Act speaks of

the power of inspection, search and seizure where the proper

officer not below the rank of Joint Commissioner has a reason

to believe that a taxable person has suppressed any

transaction relating to supply of goods or services or both or

the stock of goods in hand or has claimed input tax credit in

excess of his entitlement under this Act or has indulged in

contravention of any of the provisions of this Act or rules

made thereunder to evade tax under this Act, he may

authorize in writing any other officer of central tax to inspect

any places of business of the taxable person or the persons

engaged in the business of transporting goods or the owner or

the operator of warehouse or godown or any other place.

13. In the instant case, the search was carried out under the

GGST Act at the office premises of the petitioner no.1 and the

panchnama was drawn on 04.10.2019. There was discrepancy

noticed in the stock, therefore summons came to be issued on

22.10.2019 under Section 70 of the GGST Act. As detailed

hereinabove, the various proceedings followed this action of

search and seizure dated 04.10.2019. The Court notices that

the search proceedings were initiated on 07.07.2021. The

warrant has been issued by the Additional Commissioner of

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Tax (Enforcement) and the search of the business as well as

residential premises of M/s. Madhav Copper Limited had

begun soon thereafter and the provisional attachment had

been directed invoking the powers under Section 83. The

Commissioner had delegated the powers to the officers

subordinate to them and accordingly, the powers have been

exercised by the Deputy Commissioner, Assistant

Commissioner as well as the State Tax Officer. The search

proceedings were initiated on 07.07.2021 at the residential

premises and concluded on the same date, it concluded on

09.07.2021 at the head office and at the factory and office

premises, it continued upto 15.07.2021. The directors since

were not present, they were asked to remain present and the

proceeding was postponed on 16.07.2021. Once again, the

search team on 10.08.2021 had visited the factory and office

premises to carry out the search.

14. Prima facie, there does not appear to be any

sustainability of contention that in absence of any kind of

proceedings, the invocation had been made at the end of the

respondent authority. The said proceedings since had been

initiated on 07.07.2021, the order of attachment of bank

account in FORM GST DRC 22, the attachment of immovable

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properties, the vehicles, movable properties and the personal

properties of the Directors as well as directions to the debtors

not to make the payments were on different dates starting

from 08.07.2021 to 27.07.2021. Therefore, that contention is

not found sustainable.

15. The vital question that arise is as to whether the

authority concerned has exercised the powers by

safeguarding the procedural aspects of giving opportunity of

hearing to the parties, where it is required to pass a reasoned

order. Noticing the fact that the hearing has already taken

place two months' back and according to learned advocates

appearing for the petitioners, it was an exhaustive hearing

which lasted for many hours, the order is needed to be passed

by the concerned authority and therefore, let such order be

passed within 10 days by the authority concerned as giving an

opportunity of hearing alone is not sufficient, passing of

reasoned order will also be equally imperative and the same

shall need to be done to fulfill the obligations under the

principle of natural justice as also in due compliance of the

directions issued in case of Radha Krishan Industries

(supra) bearing in mind the provisions and rules in this

regard.

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16. This Court has prima facie noticed that the allegations

made are of such a nature that the respondents have collected

the material from the business premise during the

investigation revealing that the company has availed the Input

Tax Credit by engaging in billing transactions for wrongful

availment of the ITC, the huge amount of ITC to the tune of

Rs. 137 Crores is alleged to be fraudulently claimed by the

petitioner and according to the petitioner, the cancellation of

registration number of the companies with which it was

dealing would not be in many manner putting an onus on the

petitioner company. Here is a public limited company, the

allegation of wrongful availment of Rs. 137 Crores and

attachment order is without any credible material on record.

According to the petitioner, unless the show cause notices are

decided, it will be wrong to say on the part of the respondent

that 36 registered dealers who had the GSTN and which were

active on the date of supply of the goods and who had also

filed the regular returns under the GST, for any default on

their part, liability cannot be shifted on the petitioner. This

version is already before the concerned authority for him to

consider.

17. Today, learned Assistant Government Pleader

Ms.Maithili Mehta has placed before us the order of this Court

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dated 14.10.2021 in anticipatory bail delivered in Criminal

Misc. Application Nos.17697, 17700 and 17702 of 2021,

where the Court after perusing the confidential papers

supplied by the learned Public Prosecutor noticed the evasive

reply to certain important questions on the part of the

applicants to hold that they have not been cooperating with

the Investigating Agency.

17.1. We could notice that the recall of the order also was

sought by way of Criminal Misc. Applications (Recall)No. 01 of

2021 in Criminal Misc. Application No. 17697 of 2021,

Criminal Misc. Applications (Recall)No. 01 of 2021 in Criminal

Misc. Application No. 17700 of 2021 and Criminal Misc.

Applications (Recall)No. 01 of 2021 in Criminal Misc.

Application No. 17702 of 2021 which has been also decided by

this Court on 29.10.2021 rejecting the request of the

petitioners and the Court had chosen not to go into the merits

by considering the recall application to hold that the

submissions canvased by both the sides have been duly

recorded and regarded, there was no occasion for the Court to

recall.

17.2. We have also heard both the sides on this aspect

including the recording of the statements of all the three

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directors on 17.09.2021 and 18.09.2021 after the Apex

Court's order dated 15.09.2021.

17.3. We could see the detailed recording of statements of

Mr. Nileshbhai Natubhai Patel who essentially is having a key

role in the decision making process as also handling the

Banking and Finance. The statement of Mr. Rohitbhai

Bhikhabhai Chauhan who according to the petitioner, is

availing the technological support to the company and Mr.

Divya Arvindbhai Monpara, who though is director and the

signatory to the various transactions of the company, he

emphasizes the role of Mr.Nilesh Patel as a key person to the

company as a director.

18. According to the learned AGP, the Investigating Officer

will take about eight weeks' time to complete the

investigation.

19. Learned advocate, Mr.Mangukiya appearing for the

petitioners has urged that the directors of the petitioner

company have been cooperating with the Investigating

Agency. Exhaustive statements of theirs have been recorded

and therefore, there will not be any requirement for them to

once again be called by the officer concerned, except for the

purpose of their arrest in wake of the rejection of the

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anticipatory bail and according to him, that is impermissible.

He has also relied on the complaints which have been filed

under Section 132 (1)(B) of the CGST Act and GGST Act

along with Section 120B of the Indian Penal Code before the

Court of learned Additional Chief Metropolitan Magistrate

being Criminal Case Nos. 108899/2021, 124170/2021,

129904/2021 and 108884/2021.

20. Insistence on the part of the petitioner is that nowhere

in the complaint made before the Court there is a whisper

about the involvement of the present petitioner and hence,

that should also be a guiding factor for the officer not to insist

on the presence of the petitioner.

21. The Court chooses not to enter into the arena of the

merit at this stage when the hearing has already been

concluded, however, noticing that there are certain

obligations to be fulfilled by the company, we deem it

appropriate to direct as follows: -

(i) The respondent authority shall deliver the order of the

hearing, concluded of the show cause notices, within 10 days

of the receipt of the copy of this order.

(ii) The finished goods produced by the company which have

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been lying with the company can be permitted to be utilized

for fulfilling the contractual obligations of the two countries

namely Sri Lanka and United Kingdom.

(iii) Two of the contracts which are to be carried out of

public sector are also to be permitted to be fulfilled out of the

finished goods lying with the company which is of 53,128.24

kgs.

(iv) Once the company supplies the finished goods to the

public sector entities as also to the foreign companies, the

amount received shall be deposited in the current account in

Bank of Baroda of the company so that the track of same can

be recorded by the Revenue Authority.

(v) So far as the operating of the current account in Bank of

Baroda, the credit of the ITC worth Rs. 3 Crores and

unlocking of the same, no order is presently needed to be

passed. The same is urged before the respondent already and

the same shall be considered by the concerned authority at

the time of adjudication.

(vi) The company shall provide the details of every

transaction physically as well as through e-mode to the

Revenue Authority without fail. As ensured before this Court,

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all the transactions of the supply shall be monitored by the

Deputy Commissioner of State Tax Department, Bhavnagar.

(vii) With regard to any other directions sought by way of

requests, the same shall be considered by the authority

concerned who is directed to adjudicate the matter within 10

days from the date of receipt of this order.

(viii) As we have noted above that the process of investigation

is continuing and as urged before us, it is about further six to

eight weeks which will be required for the same to be

completed, considering the magnitude of allegations, the

period of eight weeks is granted for the investigation to be

completed.

(ix) It is also being directed that the petitioner, who is before

this Court seeking to invoke the writ jurisdiction of this Court

shall need to essentially cooperate with the Investigating

Officer and the Assessing Officer who is looking into this

matter. Recording of his earlier statement or his cooperation

at an earlier date will not in any manner relieve him of his

obligations under the law, more particularly, being the

directors of the company which has allegation of taking undue

benefits of the provision of the law.

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(x) The director of the petitioner company (petitioner no.2)

will present himself before the Assistant Commissioner on

01.12.2021 at 11:00 a.m. in furtherance of the cooperation

which is required by the officer in connection with this and

thereafter, whenever necessary during the period of

investigation. However, the officer concerned shall also

attempt to complete the individual interrogation

expeditiously.

22. This petition is being disposed of without entering into

the merits of the matter. The disposal of this matter shall not

prejudice the rights of the parties before the authority

concerned. The investigation, as submitted before this Court,

shall be completed within 8 weeks. The petitioner shall

cooperate without fail. Any absence of cooperation from the

petitioner, the authority shall be at liberty to take the legal

recourse available.

23. Without entering into the merits and as discussed

hereinabove, we chose to pass the above directions including

the specific direction to the directors of the petitioner

company for cooperation.

24. For carrying out the specified transactions which have

been permitted in this order, for any further detailing,

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anything if is needed to be done, without in any manner

truncating the order or without improvisation thereof, the

Deputy Commissioner, appointed by this Court, shall be at

liberty to take the decision.

(SONIA GOKANI, J)

(NISHA M. THAKORE,J) Bhoomi