Sri Sai Balaji Associates Vs the State of Andhra Pradesh

In this writ petition, the challenge is directed at a notice issued under Section 70(1) of the GST Act, 2017, by the third respondent to M/s. Sterlight Technologies Limited, Vishakapatnam, who are customers of the petitioner. The petitioner, represented by learned counsel Mr. G.V. Shivaji, contends that the third respondent’s authority under Section 70(1) does not extend to directing the suspension of payments from customers. The petitioner argues that while Section 70(1) grants the power to summon individuals for evidence or document production in an inquiry, it does not authorize the prohibition of payments due to the petitioner. The petitioner seeks to have the last paragraph of the impugned notice, which includes this directive, removed from the notice.

In the given legal context, the Learned Government Pleader acknowledges a potential procedural error related to the issuance of a notice under Section 70(1) of the Goods and Services Tax (GST) Act. Specifically, it is admitted that the officer who issued the notice might not have had the authority to direct the summoning party to withhold payment to the assessee. Section 70(1) generally pertains to the power of officers to summon individuals and require them to provide information or produce documents in relation to a tax investigation.

However, the Government Pleader contends that although the directive to stop payment by the summoning party may not have been within the officer’s power under Section 70(1), such authority could be derived from Section 83 of the GST Act. Section 83 addresses the provisional attachment of property or bank accounts belonging to the assessee. This provision allows for the temporary attachment of the assessee’s assets to secure the government’s interest pending the completion of proceedings. Thus, the Government Pleader argues that the powers vested under Section 83 could justify the action taken, as this section is designed to protect the government’s revenue interests by preventing the dissipation of assets that might be needed to satisfy any tax liabilities that may be determined upon the conclusion of the proceedings.

In summary, while there may have been a procedural error in the use of Section 70(1), the Government Pleader asserts that Section 83 provides a legal basis for the provisional attachment of assets, including the potential authority to direct the withholding of payments, thereby upholding the broader aims of ensuring tax compliance and safeguarding revenue.

In the legal dispute concerning the issuance of a notice under Section 70(1) of the Goods and Services Tax (GST) Act, a few key points emerge. The Government Pleader conceded that a notice under Section 70(1) does not grant the authority to direct the summoning party to withhold payments to the assessee. However, the Pleader argued that such powers exist under Section 83 of the GST Act, which deals with the provisional attachment of assets or bank accounts of the assessee.

Section 70(1) of the GST Act specifies that a proper officer has the power to summon individuals for evidence or to produce documents during an inquiry. It does not extend to directing a party to stop payments to the assessee, which goes beyond the scope of this section. In contrast, Section 83 allows for provisional attachment of property or bank accounts by the Commissioner if it is deemed necessary to protect government revenue.

The impugned notice in question was issued under Section 70(1), not under Section 83. Therefore, the action taken by the third respondent in directing M/s. Sterlight Technologies Limited to halt payments to the assessee is deemed an overreach of authority, as it was not supported by the powers granted under Section 70(1). The notice should have been issued under Section 83 if such a directive was necessary.