Jaychem Enterprise Pvt. Ltd. Vs Additional Director General & Ors. (Bombay High Court)
Summary: The Bombay High Court, in Jaychem Enterprise Pvt. Ltd. Vs Additional Director General & Ors., considered a writ petition challenging the provisional attachment of the petitioner’s bank account during proceedings under Section 67 of the Central Goods and Services Tax Act, 2017. The Division Bench comprising Chief Justice Dipankar Datta and Justice G. S. Kulkarni examined whether the petitioner could directly invoke writ jurisdiction without first pursuing the statutory remedy available against provisional attachment. The Additional Director General, Directorate General of GST Intelligence (DGGI), Nagpur Zonal Unit, had issued an attachment order dated 18 June 2021 in Form GST DRC-22, attaching the petitioner’s account maintained with DBS Bank at Andheri East, Mumbai.
The petitioner argued that the attachment order was without jurisdiction because the account was a cash credit account, which, according to the petitioner, could not lawfully be attached. In support, reliance was placed on Formative Tex Fab Vs State of Gujarat & Ors., decided by the Gujarat High Court, and Bindal Smelting Pvt. Ltd. Vs Additional Director General, Directorate General of GST Intelligence, decided by the Punjab and Haryana High Court. The petitioner sought quashing of the attachment order. The respondents, however, objected to the maintainability of the writ petition on the ground that the petitioner had not exhausted the statutory remedy under Rule 159(5) of the Central GST Rules.
The High Court examined Section 83 of the CGST Act, which permits provisional attachment of property to protect government revenue, and Rule 159, which prescribes the procedure governing such attachment. In particular, Rule 159(5) allows a person whose property has been attached to file an objection within seven days, following which the Commissioner may release the property through Form GST DRC-23 after providing an opportunity of hearing. The Court observed that in Bindal Smelting, the petitioner had first exercised this statutory remedy and the High Court had subsequently examined the order passed on the objection. The statutory procedure was therefore relevant to determining whether direct judicial intervention was appropriate.
The Division Bench held that Rule 159(5) provides an effective remedy and is capable of affording substantial relief where sufficient grounds are established. Questions concerning whether the attachment genuinely protected revenue, whether a cash credit account could be attached, and the position regarding the balance in the current account required factual examination by the competent authority. The petitioner was therefore required to approach the Additional Director General with an appropriate objection. If the authority refused to release the property, it would have to pass a reasoned order, which could subsequently be challenged before the appropriate forum in accordance with law.
Accordingly, the Bombay High Court declined to interfere with the provisional attachment at that stage because the petitioner had not pursued the remedy under Rule 159(5). However, it granted the petitioner one week to approach the Additional Director General and directed that, upon such an approach, the authority must provide an opportunity of hearing and pass a reasoned order. All contentions on the merits were expressly kept open. The writ petition was disposed of without costs. The decision establishes that, where the statutory mechanism for challenging a GST provisional attachment is available and effective, a taxpayer should ordinarily pursue that remedy before seeking intervention under writ jurisdiction.
Cases Discussed:
1. Formative Tex Fab Vs State of Gujarat & Ors. (Gujarat High Court); R/Special Civil Application No. 14059 of 2020. The petitioner relied on this decision to contend that a cash credit account could not be provisionally attached under GST law. The Bombay High Court recorded the reliance but did not decide the substantive question concerning attachment of such an account, leaving the issue open for examination under Rule 159(5).
2. Bindal Smelting Pvt. Ltd. Vs Additional Director General, Directorate General of GST Intelligence (Punjab and Haryana High Court); CWP No. 31382 of 2019 (O&M). The petitioner relied on this decision in support of its challenge to the attachment of a cash credit account. The Bombay High Court observed that, in Bindal Smelting, the taxpayer had first invoked Rule 159(5), and the High Court had examined the resulting order on the objection. This distinction supported the conclusion that Jaychem Enterprise should first exhaust the available statutory remedy.
FULL TEXT OF THE ORDER OF BOMBAY HIGH COURT
1. Proceedings against the petitioner under Section 67 of the Central Goods and Services Tax Act, 2017 are pending. During the pendency of such proceedings, the Additional Director General, DGGI, Nagpur Zonal Unit by an order dated 18th June, 2021, recorded in Form GST DRC-22, has attached a bank account maintained by the petitioner in DBS Bank, Andheri (E), Mumbai. Such order of attachment is the subject matter of challenge in this writ petition.
2. Section 83 of the Central GST Act permits provisional attachment to protect revenue in certain cases. Such power has to be exercised in the manner laid down in sub-rule (1) of Rule 159 of the Central GST Rules (hereafter “the said Rules”, for short). However, sub-rule (5) of Rule 159 provides as follows:
(5) Any person whose property is attached 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, 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.
3. This writ petition has been presented by the petitioner without taking recourse to Rule 159(5) of the said Rules. Objection to the maintainability of this writ petition has been raised by the learned counsel for the respondents by referring to such provision.
4. Mr. Jain, learned counsel for the petitioner has contended that the attachment order passed by the Additional Director General is without jurisdiction, since a cash credit account cannot be attached. Reliance has been placed by him on the Division Bench decisions of the Gujarat High Court in M/s. Formative Tex Fab Vs. State of Gujarat & Ors. (R/Special Civil Application No. 14059 of 2020) and the Punjab & Haryana High Court at Chandigarh in Bindal Smelting Pvt. Ltd. Vs. Additional Director General, Directorate General of GST Intelligence [CWP No. 31382 of 2019 (O&M)] to support such a contention. He has, accordingly, prayed for quashing of the impugned order.
5. On perusal of the decision in Bindal Smelting Pvt. Ltd. (supra), it appears that the Court considered the grievance raised before it only after recourse to Rule 159(5) of the said Rules had been taken by the petitioner and an order passed on the objection that was raised. The Court examined the order passed by the relevant authority and bearing in mind the facts as well as the legal position, proceeded to pass an appropriate order.
6. It is clear that sub-rule (5) of Rule 159 of the said Rules provides a remedy if any particular order of attachment under sub-rule (1) leaves a party, subject to tax, aggrieved. We are of the opinion that such a remedy, as made available by the said Rules, is not an ineffective remedy but on the contrary, if sufficient case is set up, substantial relief can be granted to the objector. It is for the petitioner to satisfy the Additional Director General that for the reasons urged, the property ought to be released from attachment by making an appropriate order in Form GST DRC-23. The position as to whether the impugned order, in fact, seeks to protect the interest of the revenue or is otherwise, including the balance in the current account as submitted by the petitioner, would require a factual examination and determination. Thus, it is all the more necessary that the petitioner exhausts the remedy provided by sub-rule (5) of Rule 159 of the said Rules. Should the Additional Director General refuse to release the property from attachment, a reasoned order is required to be passed and such order could be subjected to a challenge before the appropriate forum in accordance with law.
7. Since the petitioner has not taken to recourse to sub-rule (5) of Rule 159 of the said Rules, we decline interference at this stage. However, we grant the petitioner a week’s time to approach the Additional Director General under the said provision and if such an approach is made, a reasoned order shall be passed after extending an opportunity of hearing.
8. All contentions on the merits of the rival claims are kept open.
9. The writ petition stands disposed of accordingly. No costs.
