Order of Provisional Attachment
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Petitioner |
Sree Meenashi Industries |
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Respondent |
Addl. Chief Secretary Commissioner of Commercial Tax |
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Decision by |
Madras High Court |
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Date of Order/Judgement |
16-February-2022 |
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Citation No. |
2022 (2) GSTPanacea 1 HC Madras W.P. No. : 3079 & 3083 of 2022 |
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Hon’ble Judge |
Justice Suresh Kumar |
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Decision |
In Favour of Assessee |
Order of Provisional Attachment-The order of provisional attachment made by the first respondent dated 20.12.2021, shall not stand in the legal scrutiny. Therefore, it is liable to be set aside.
FACTS OF THE CASE
Petitioner is registered under ‘Tamil Nadu Goods and Services Tax Act, 2017’ with the respondent and they are doing business.
A search under Section 67 of the TNGST Act was conducted on 24.2.2021 at the premises of the petitioners.
Pursuant to the said search, according to the Revenue, they have unearthed incriminating documents or accounts, which according to the Revenue, reveals some tax evasion on the part of the petitioner.
Therefore, assessment proceedings were initiated against petitioners. However, during pendency of said proceedings, the respondent invoked Sec. 83 whereby bank accounts of petitioners were freezed. Hence, this petition.
Order of Provisional Attachment
ARGUMENT BEFORE COURT
PETITIONER’S CONTENTION
According to the learned counsel, before invoking Section 83, the first respondent has no material or reason to form an opinion that unless the Bank accounts of the petitioners are attached, the interest of the Revenue can not be protected. In the absence of any such reasons specifically stated by the first respondent in the provisional attachment order passed under Section 83, that order shall not stand in the legal scrutiny, therefore, the consequential communication issued by the bank authorities also would not stand.
This issue was already engaged by the Hon’ble Supreme Court of India in in the matter of Radha Krishan Industries v. State of Himachal Pradesh & Ors.
In the said decision dated 20.4.2021, S.C has given a detailed mandatory Conditions and guidelines to be followed before invoking Section 83 of the Act., which are prescribed by the Statute for a valid exercise of the power, must be strictly fulfilled.
Before ordering a provisional attachment, the Commissioner must form an opinion 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.
Relying upon these findings given by the Hon’ble Supreme Court of India Petitioner contend that, the said mandatory guidelines has not been followed in the present case.
Order of Provisional Attachment
RESPONDENT’S ARGUMENT
Mr. N.R.R. Arun Natarajan, learned Special Government Pleader appearing for the respondent submit that, it is a case of search followed by the present proceedings issued under Section 83 of the TNGST Act, wherein it become necessitated for the first respondent on the basis of the opinion, he already formed, because of the input submitted or supplied to him, that it become expedient to invoke Section 83 of the TNGST Act, to freeze the bank account of the petitioners, without which, the interest of the Government, from the Revenue point of view, cannot be protected.
The language used in Section 83 of the TNGST Act merely says that, the Commissioner must form an opinion to invoke Section 83 of the TNGST Act, on what basis such an opinion should be formed, need not be revealed in detail in the order to be passed under Section 83 of the TNGST Act.
In sofar as the mandatory guidelines prescribed by the Hon’ble Supreme Court in Radhakrishna’s case is concerned, though the said judgment, in respect of those guidelines, is binding on all other authorities including this Court, under what circumstances, that judgment was passed, has to be looked into, he contended.
The learned Special Government Pleader would contend that, in the present case, the petitioner ought not to have come before the High Court by directly invoking Article 226 of the Constitution of India. In this context, He contended that, under Rule 159 under the heading ‘Provisional attachment of property’, especially under the Sub-Rule (5) of Rule 159, any person whose property is attached may, within seven days of the attachment under sub-rule(1), file an application 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.
When such kind of procedure is available under the Rule, the petitioner/assessee could have very well filed such an application under Sub-Rule(5) .
The writ petition can be rejected as not maintainable because the guidelines fixed in the Radhakrishna’s case by the Hon’ble Supreme Court may not be applicable to the present facts of the case, as the petitioner has straightaway approached this Court to file the writ petition.
Order of Provisional Attachment
MADRAS HIGH COURT HELD
HC held that guidelines of Section 83 of the GST Act was interpreted by the Hon’ble Supreme Court in Radhakrishna’s case, where, to be followed mandatorily.
In one of the guidelines, Clause (iv), the Court says that, the power to order a provisional attachment of the property of the taxable person including a bank account is a draconian in nature. Therefore the conditions, which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled.
In clause (x), the Court says that, the Commissioner is duty to bound to deal with the objection to the attachment by passing a reasoned order, which must be communicated to the taxable person, whose property is attached.
By the facts of the case, certainly this Court without hesitation, can come to a conclusion that, the said criterion fixed by the Hon’ble Supreme Court in Radhakrishna’s case has not been met in the present case by the Commissioner, who passed the order under Section 83 of the Act.
Therefore, absolutely there can be no quarrel as of now that, what shall be the criterion to be followed by the Commissioner or any other officer, who exercise the power under Section 83 of the Act.
Insofar as the defence raised by Pleader appearing for the respondents that the writ petitions are not maintainable because the petitioners have not exhausted the appeal remedy provided under sub-rule (5) of Rule 159, the writ petitions can be rejected as not maintainable.
Herein the case in hand, as we discussed above, for the aforesaid reasons, the order of provisional attachment made by the first respondent dated 20.12.2021, shall not stand in the legal scrutiny. Therefore, it is liable to be set aside. As a sequel, the consequential order, informing the petitioner by the respondent Bank authorities dated 30.12.2021 is also set aside.
Insofar as the assessment is concerned, it is open to the Revenue to complete the assessment at the earliest withutmost cooperation of the petitioners.