The Gujarat High Court reiterated that process of provisional attachment shouldn't involve harassing the assessee, nor should it hamper or have an irreversible negative impact on his/her business.
The Division Bench of Justice J.B. Pardiwala and Justice Nisha M. Thakore was adjudicating upon a writ petition challenging the provisional attachment order passed under the Gujarat Goods and Services Tax Act, 2017.
The petitioner-assessee runs the business of manufacturing and selling ingots and have a factory situated near Rajkot, Gujarat State. The assessee is duly registered under the GST Act.
The office of the Deputy Commissioner of State Tax, Vadodara on suspicion that the assessee had shown purchases from fictitious firms, which were otherwise non-existent launched proceedings against the assessee. Accordingly, a search was carried out at the business premises as per the procedure prescribed under Section 67 of the GST Act.
Pursuant to the above search, the dispute arose with regard to the claim for input tax credit availed by the writ applicants on the ground that the Firm from whom the writ applicants had made purchase, were not found to be genuine.
The petitioner-assessee cooperated. It was his case that apart from the aforesaid properties, the respondent authorities have also seized the mobile phone, laptop and other documents from the business premises. When representation made to that regard wasn't responded, he preferred the present writ.
Learned Counsel for the petitioner-assessee contended that exercise of power for ordering the provisional attachment must be preceded by formation of an opinion by the Commissioner that “it is necessary so to do for the purpose of protecting the interest of the Government revenue” He further submitted that while exercising such power of provisional attachment of the properties of the taxable person including bank account, demat account is draconian in the nature and such condition of forming opinion by the Commissioner should be strictly adhered to before passing order of provisional attachment.
He placed reliance on Radhe Krishan Industries Vs. State of Himachal Pradesh whereby the Central Board of Indirect Taxes and Customs of the Revenue Department have laid down various guidelines for provisional attachment of the property under Section 83 of the CGST Act, 2017.
In view of the above, Learned Counsel submitted that the respondent authority should not have acted in manner to hamper normal business activities of the writ applicants by provisionally attaching the stock of goods worth Rs.4.91 Crore, demat account worth Rs.57,17,413/- as well as current account having closing balance amount of Rs.1,03,374/-.
Alternatively, he submitted that in any case, the interest of revenue can be protected presuming for the sake of arguments, the future demand which may arise if at all the same may be secured by imposing suitable conditions or at least permit the writ applicants to operate the demat account as well as current account and provisional attachment qua the stock of the goods be lifted.
High Court's Analysis
The Court accepted the petitioner-assessee's contention and noted at the outset that inspite of repeated reminder in various decisions has once again, the respondent-authority overlooked the guidelines issued by the Central Board of Indirect Taxes and Customs dated 23.02.2021, which otherwise in clear terms provides the guidelines to be adhered while exercising powers conferred upon the respondent authority under Section 83 of the GST Act.
It thus cautioned the respondent-authority that such instructions were issued by the CBITC in woke of the observations made by the Courts as regards modalities of implementation of provisions of Section 83 of the act by the Tax officers.
The Court mentioned that it has previously held that power of provisional attachment under Section 83 of the act should be exercised by the authority only if there is 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. The Court held that power under section 83 of the act should not be used as a tool to harass the assessee nor should it be used in as manner which may have irreversible detrimental effect on the business of the assessee."
It stated that time and again, the Court as well as even the instructions issued by the higher authority of the respondents, has directed the proper officer to ensure that their action of the provisional attachment should not hamper normal business activities of the taxable person.
In light of the above, the Court quashed and set aside the order of the provisional attachment qua the stock of goods, two demat accounts as well as current account of the writ applicants is concerned.
At the same time, the Court permitted the respondent authorities to secure the original data by availing necessary certificate under Section 65B of the Information and Technology Act.
Case Title: ARYA METACAST PVT. LTD. & 1 other(s) vs STATE OF GUJARAT & 1 other(s)
Case Details: R/SPECIAL CIVIL APPLICATION NO. 2787 of 2022
Coram: Justice J.B. Pardiwala and Justice Nisha M. Thakore
Read Order Here:
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