Telangana High Court

M/S Adil Trading vs The Superintendent, on 28 February, 2024

Author: P.Sam Koshy

Bench: P.Sam Koshy, N.Tukaramji

     IN THE HIGH COURT FOR THE STATE OF TELANGANA,
                       HYDERABAD
                           ***
              WRIT PETITION No.30818 of 2023

Between:
M/s. Adil Trading.

Petitioner
                            VERSUS

Superintendent of Customs and Ors.
                                                Respondents

              ORDER PRONOUNCED ON: 28.02.2024
             THE HON'BLE SRI JUSTICE P.SAM KOSHY
                              AND
             THE HON'BLE SRI JUSTICE N.TUKARAMJI


1.    Whether Reporters of Local newspapers
      may be allowed to see the Judgments?         : Yes

2.    Whether the copies of judgment may be
      marked to Law Reporters/Journals?            : Yes

3.    Whether His Lordship wishes to
      see the fair copy of the Judgment?           : Yes


                                              __________________
                                              P. SAM KOSHY, J


                                              ___________________
                                               N. TUKARAMJI, J
                                       2



           * THE HON'BLE SRI JUSTICE P.SAM KOSHY
                                     AND
             THE HON'BLE SRI JUSTICE N. TUKARAMJI
                + WRIT PETITION No.30818 of 2023



% 28.02.2024
# Between:
M/s. Adil Trading.
                                                              Petitioner
                                 VERSUS

Superintendent of Customs and Ors.
                                                               Respondents

! Counsel for Petitioner(s)      :          1) Mr.Bhaskar Reddy vemi Reddy



^Counsel for the respondent(s)            : 1) Mr. Dominic Fernandes

<GIST:

> HEAD NOTE:

? Cases referred
                                        3




             THE HON'BLE SRI JUSTICE P.SAM KOSHY
                                     AND
             THE HON'BLE SRI JUSTICE N.TUKARAMJI
                     W.P. No.30818 of 2023
ORDER:

(per Hon'ble Sri Justice P.SAM KOSHY) Heard Mr.Bhaskar Reddy Vemi Reddy, learned Senior Counsel

appearing on behalf of Mr.V.Siddharth Reddy, learned counsel for the

petitioner and Mr.Dominic Fernandes, learned Senior Standing

Counsel for respondents.

2. Aggrieved by the order dated 18.05.2023, passed by the 3rd

respondent, insofar, issuing the provisional attachment order

under Section 83 of the CGST Act in Form GST DRC-22, the

present writ petition has been filed. The contention of the

petitioner is that the petitioner is a partnership firm carrying the

business in the purchase and sale of iron scraps.

3. It is the contention of the petitioner that they have been

regularly filing their returns and reporting the turnover to the

respondent authorities in respect of the payments of all the tax

liability after adjustments alleging inupt tax credit.

4. The 1st respondent issued summons to the petitioner

seeking for production of records. The petitioner appeared before

the 1st respondent along with relevant records including the tax

invoices of outward tax invoices and inward supply to bank

statement and way bill etc., subsequently, the 2nd respondent

issued Form GST DRC 01A, dated 28.04.2023, ascertaining the

taxes to the tune of Rs.7,85,36,006/-, directing the petitioner to

pay the said amount along with the interest and penalty. It was

alleged that the petitioner has availed benefit of Input Tax Credit

from invoices issued from non-existing firms, beyond this there

has been no further proceedings drawn by the respondents

either by issuance of show cause notice or by any proceedings

drawn under Section 73 or for that matter under Section 74 of

the CGST Act.

5. Assailing the said order of provisional attachment issued

by the respondent, the petitioner contends that before the

issuance of the provisional attachment order, the respondents

have not served the petitioner with any notice in Form ASMT-10.

In the process, the petitioner was not provided with any notice

calling for his explanation for the discrepancy notice and for the

payment of tax liability. Instead, the respondent officer has

straightaway issued the impugned DRC-22. This order of

provisional attachment is un-just, arbitrary and with malafied

intentions. The same has also not in conformity to the principles

of natural justice and is liable to be set aside/quashed.

6. According to the learned counsel for the petitioner it was

incumbent upon the Department to have first issued in Form

GST ASMT 10, as is required his explanation. Should the

respondents have resorted the proceedings drawn under Section

73 or under Section 74. Learned counsel for the petitioner relied

upon the decisions of the Madras High Court in the case of

M/s.Vadivel Pyrotech v. Assistant Commissioner 1, there was

yet another decision from Madras High Court in the case of

Amutha Metal Industries v. Deputy State Tax Officer 2,

Madras High Court and in the case of Syska Led Lights

Private Limited v. Union of India 3.

7. According to the learned counsel for the petitioner, the

party is facing enormous inconvenience and difficulties as a

consequence of the provisional attachment of the account. It was

also the contention of the petitioner that even though the

impugned order has passed as early as on 18.05.2023, yet till

date the order of provisional attachment has not been served

2022(10) TMI 784 Madras High Court

2022 (6) TMI 358 - Madras High Court

2021 377 ELT 33 (Bom)

upon the petitioner. The impugned document on the basis of

which the present writ petition has been filed is one which has

been issued to the concerned bank of the petitioner with no

intimation being made to the petitioner. On this ground along

the impugned order deserves to be interdicted. According to the

petitioner, the summons and notices which have been issued by

the Department, he had promptly made his response and also

made available with all relevant records and as such there was

no necessity for the issuance of the provisional attachment

order. Moreover, it is contented that before passing of the order

of provisional attachment, the Department was liable to have a

concrete evidence in respect of the so called evasion of tax by the

petitioner. This in the other words means that under the normal

parlance should not have initiated the action of provisional

attachment which is mandatorily required under Section 83

itself and as such the said decision being too harsh. The same

should be interfered with by this Court.

8. The learned Senior Counsel for the petitioner in the course

of his submissions also contended that the impugned order on

the part of the respondents is also bad in law for the reason that

the order of provisional attachment under Section 83 has never

been issued as such he was not intimated by any person inspite

of the action of attachment, that he came to know before the

attachment only from the bank authorities when the petitioner

found it difficult to carry further transactions from the said

account that they were informed about the provisional

attachment by the respondent/Department. This according to

the learned counsel for the petitioner was also in contravention

to the provisions of Rule 159 of the CTST Rules 2017. He further

submits that since the copy of the attachment was not served

upon the petitioner, he cannot avail the remedy that is otherwise

provided under Sub-Rule (5) of Rule 159.

9. The learned Senior Counsel for the petitioner also

contended that the impugned order is also bad in law in as

much as the same on being inconsonance to the provisions of

section 83 of the CGST Act. As per the learned Senior Counsel,

before issuance of the provisional attachment order, the

mandatory requirement as envisaged under Section 83 is that

the Commissioner shall form an opinion that for the purpose of

protecting the interest of the Government Revenue, it is

necessary to pass an order under Section 83 ordering

provisional attachment. The said forming of opinion is missing

from the impugned order. Therefore, the same is liable to be

interdicted on this ground also.

10. Per contra, the learned Standing Counsel for the

respondent/Department on the other hand opposing the petition

submits that upon scrutiny of the return submitted by the

petitioner, it has been reflected that the invoices on the basis of

which the petitioner is said to have availed the benefit of ITC are

all invoices which have been issued by fake and non-existing

units and therefore, prima facie, it appears that the petitioner

has wrongfully availed the ITC knowing fully well that it cannot

had been availed. Referring to the invoices issued from M/s

Hindustan Enterprises vs. K. enterprises Kolkata, the counsel

for the Department contended that these are non-operating

units so also the good which is reflected in the different invoices

are only invoices which have been issued for the purpose of

availing ITC and that infact, there has been no physical

involvement of goods as mentioned in the invoices and that no

materials were infact supplied and for this reasons also the

provisional attachment order should not have been interfered

with by this Court in exercise of its writ jurisdiction.

11. In addition, the learned counsel for the Department also

submitted that upon verification, various other invoices the

petitioner had relied upon for availing the ITC were found to be

fake, without issuance of any supply of any goods. All of which

establishes that the petitioner have fraudulently availed the ITC

and therefore in order to ensure that these fraudulently availed

ITC is not further utilize by the petitioner, the order of

provisional attachment has been issued.

12. Having heard the contentions put forth on either side and

on perusal of record it would be relevant at this juncture to take

note of the two provisions under the statute. First is Section

83(1) of the CGST Act and other being Sub-Rule (5) of the Rule

159 of the CGST Rules. Both these provisions for convenience

sake is being reproduced hereunder:

Section 83(1): Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, 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 or any person specified in sub- section (1A) of section 122, in such manner as may be prescribed.

Rule 159(5): Any person whose property is attached may, [file an objection in FORM GST DRC-22A] to the effect that the property attached was or is not liable to attachment, and the Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC-23.

13. After reproducing the aforesaid provisions of law, it would

be relevant at this juncture also necessary to take note of the

operative part of the impugned order.

In order to protect the interests of revenue and in exercise of the powers conferred under section 83 of the CGST Act 2017, I Smt.V Sangeetha, Principal Commissioner, Hyderabad GST Commissionerate, hereby provisionally attach the aforesaid account.

14. Except for the words "in order to protect the interest of

revenue" there does not appear to be any reflection of the

grounds/reasons/circumstances that compelled the Principal

Commissioner to pass the order of provisional attachment. If we

look at section 83, what is envisaged is upon initiation of any

proceedings under Chapter XII, Chapter XIV or Chapter XV, the

Commissioner has to make up an opinion that opinion is to be

formed on the basis of the reasons which formed in the course of

proceedings from the circumstances that prevailed in between

etc., etc. If the opinions were not to be revealed and reflected in

the order, the framers of law would have simply held that the

Principal Commissioner had the power to issue orders of

provisional attachment, protecting the interest of the

government revenue. The very fact that the section provides for,

moreover, to form an opinion before issuance of order of

provisional attachment itself is sufficient enough to accept that

it is required law that the order attachment in itself should

disclose the reasons/circumstances and grounds which in the

opinion of the Principle Commissioner required issuance of the

order of provisional attachment. This view of the bench stands

fortified from the decision of the Gujarat High Court in the case

of M/s.Anjani Impex v. State of Gujarat, wherein in paragraph

Nos.15 to 17, it has been held as under:

15. A Coordinate Bench of this Court, to which one of us J.B. Pardiwala, J. was a party, had the occasion to discuss Section 83 of the Act in the case of Valerius Industries vs. Union of India, Special Civil Application No.13132 of 2019, decided on 28th August, 2019, wherein this Court drew the following conclusion:

"[1] The order of provisional attachment before the assessment order is made, may be justified if the assessing authority or any other authority

empowered in law is of the opinion that it is necessary to protect the interest of revenue. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far- fetching, which would warrant the formation of the belief.

[2] The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons.

[3] The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution.

[4] The power under Section 83 of the Act for provisional attachment should be exercised only if there is sufficient 11 W.P.No.12360 of 2022 material on record to justify the satisfaction that the assessee is about to dispose of wholly or any part of his / her property with a view to thwarting the ultimate collection C/SCA/9822/2020 ORDER of

demand and in order to achieve the said objective, the attachment should be of the properties and to that extent, it is required to achieve this objective.

[5] The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.

[6] The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings.

[7] The authority before exercising power under Section 83 of the Act for provisional attachment should take into consideration two things: (i) whether it is a revenue neutral situation (ii) the statement of "output liability or input credit". Having regard to the amount paid by reversing the input tax credit if the interest of the revenue is sufficiently secured, then the authority may not be justified in invoking its power under Section 83 of the Act for the purpose of provisional attachment."

16. We are of the view that none of the above referred conditions are fulfilled in the present case.

17. In the result, this writ application stands partly allowed. The relief with regard to the order in

Form GST DRC- 01A is not granted, whereas the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside".

15. Relying upon the said Division Bench decision of the

Gujarat High Court, the Andhra Pradesh High Court also in the

case of M/s.Arhaan Ferrous & Non ferrous Solutions &

others v. Senior Intelligence Officer & others, wherein the

Andhra Pradesh High Court had referred to the decision of

Gujarat High Court decision and made the following

observations:

A perusal of the impugned orders of provisional attachment shows that the fourth respondent herein stated in the said orders that, as per the information available with the Department and in order to protect the interest of the Government revenue, in exercise of the powers conferred under Section 83 of the Act, the account is provisionally attached.

In this context, it may be appropriate to refer to the provisions of Rule 159 of the Sales Tax Rules. According to sub-Rule (5) of Rule 159 of the Rules, the assessee may, within seven days of the attachment under sub-Rule (1), file an objection to the effect that the property attached was or is not liable to attachment before the Commissioner and

the Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC-23.

Admittedly, except saying that the orders of provisional attachment are passed in order to protect the interest of the Government revenue, no other reasons are assigned by the fourth respondent in the impugned orders of provisional attachment. When sub-Rule (5) of Rule 159 of the Rules specifically provides for filing objections against the orders of provisional attachment, the contention that the reasons for ordering provisional attachment were recorded in the Note File and that there is no need to extract the same or state the same in the provisional order of attachment, in the considered opinion of this Court, cannot stand for judicial scrutiny. The Hon'ble Supreme Court, in the above referred judgment, also categorically ruled that the formation of opinion on the basis of tangible material which indicates the necessity to order provisional attachment to protect the interest of the Government revenue is mandatory.

Unless reasons are recorded broadly, the assessee cannot be expected to file any objections under the provisions of sub-Rule (5) 13 of Rule 159 of the Rules.

16. In view of the aforesaid two decisions, i.e., the Division

Bench of the Gujarat High Court and the Division Bench of

Andhra Pradesh High Court, under similar state of facts, if we

look take into consideration the impugned order in the present

case, relevant portion which has already been reproduced in the

preceding paragraph, it leaves us in no doubt that the impugned

order lacks reasons/grounds and circumstances on the basis of

which the Principal Commissioner had formed an opinion that

there was requirement for issuance of the order of provisional

attachment.

17. We are fully endorsing the view of the two High Courts,

wherein it has been emphatically held by both the High Courts