Enprocon Enterprise Ltd. Vs Assistant Commissioner of State Tax (Gujarat High Court)
Conclusion: Commissioner ought not to have delegated his powers of provisional attachment of the immovable property under Section 83 to the Assistant Commissioner, therefore, the order of provisional attachment passed by the Assistant Commissioner was hereby quashed and set aside.
Held: Assessee-company was registered under the provisions of the Gujarat Goods and Services Tax Act, 2017. The office premises of assessee situated at Ahmedabad and Baroda were raided by the Authorities, in exercise of their powers, under Section 67 of the CGST Act, 2017. Later, an order of provisional attachment of the immovable property came to be passed by the Assistant Commissioner of State Tax in exercise of powers, under Section 83. The only question that fell for consideration, was whether the order of provisional attachment passed by Assistant Commissioner in exercise of powers under Section 83 of the GGST Act, 2017, was sustainable in law. It was held Commissioner ought not to have delegated his powers of provisional attachment under Section 83 to the Assistant Commissioner. Therefore, the orders of provisional attachment as well as the order of prohibition were not sustainable on two counts, i.e. (i) the order had been passed by the Assistant Commissioner, and (ii) the order had been passed without any credible materials, available for the purpose of passing such order of provisional attachments. The order of provisional attachment passed by the Assistant Commissioner, so far as the immovable property was concerned, was hereby quashed and set aside.
The Gujarat High Court has held that the Commissioner ought not to have delegated his powers of provisional attachments under Section 83 of the CGST Act to the Assistant Commissioner.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. By this Writ Application, under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs:
“(A) Your Lordship may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction inter alia quashing and setting aside the warrant of authorisation issued under Section 67(2) of the CGST Act, 2017, seizure conducted by the respondents pursuant to search operation initiated on 29.07.2019 and subsequent proceedings / enquiry conducted in pursuance of the search and seizure operation initiated on 29.07.2019, in the interest of justice;
(B) Your Lordship may be pleased to issue a writ of mandamus, or any other appropriate writ, order or direction to the respondents inter alia directing the respondents to return the seized material back to the applicant, in the interest of justice;
(C) Your Lordship may be pleased to further quash and set aside the provisional attachment orders at Annexure ‘A’ (Colly) issued purportedly u/s. 83 of the CGST Act, 2017, in connection with the bank accounts of the applicant and the office premises of the applicant respectively issued to the Branch Manager, HL Commerce College Branch, Central Bank of India, Branch Manager, Naranpura Branch, ICICI Bank, Branch Manager, Vijaya Bank, Ashram Road Branch and City Survey Superintendent, Paldi, Ahmedabad, in the interest of justice;
(D) Your Lordship may be pleased to issue a writ of prohibition or any other appropriate writ, order or direction inter alia quashing the undated show cause notice issued on 01.08.2019 (Annexure B) purportedly issued u/s. 74 of CGST Act, 2017, in the interest of justice.
(E) Your Lordship may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction inter alia quashing the order of prohibition dated 30.07.2019 (Annexure C) passed under rule 139(4) of the CGST Rules, 2017, in the interest of justice.
(F) Pending admission, hearing and final disposal of this application, Your Lordship may be pleased to stay the execution, implementation and operation of the provisional attachment orders as annexed hereto at Annexure A Colly., passed purportedly u/s. 83 of the CGST Act, 2017, in the interest of justice.
(G) Pending admission, hearing and final disposal of this application, Your Lordship may be pleased to stay the execution, implementation and operation of order of prohibition dated 30.07.2019 (Annexure C) passed under rule 139(4) of CGST Rules, 2017, in the interest of justice.
(H) Your Lordship may be pleased to pass such other and further orders as may be deemed just, fit and proper in the facts and circumstances of the case, in the end of justice.”
2. The facts, giving rise to this Writ Application, may be summarized as under:
2.1. The writ applicant is a company, incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of laying of pipelines, works contract, renting the machinery and sale of old machinery and scrap material, etc.
2.2. The writ applicant is a company registered under the provisions of the Gujarat Goods and Services Tax Act, 2017 (for short ‘the GGST Act, 2017’).
2.3. It appears that the office premises of the writ applicant situated at Ahmedabad and Baroda were raided by the respondent-Authorities, in exercise of their powers, under Section 67 of the CGST Act, 2017. In other words, search and seizure was undertaken by the Authorities some time in the months of March and April, 2019. It also appears that the proceedings under Section 73 of the GGST Act, 2017, have been initiated against the writ applicant.
2.4. It further appears that later an order of provisional attachment of the immovable property situated at B-705, Mondeal Heights, near Wide Angle, S.G.Highway, Ahmedabad, came to be passed by the Assistant Commissioner of State Tax in exercise of powers, under Section 83 of the Act, 2017.
2.5. Being dissatisfied with the order of provisional attachment, the writ applicant is here before this Court, with the present Writ Application.
3. On 20th September, 2019, a Co-ordinate Bench of this Court, passed the following order:
“1. Mr. Ravish Bhatt learned Advocate for the petitioner has inter alia invited the attention of the court to the order of prohibition dated 30.7.2019 passed by the Assistant Commissioner of State Tax under rule 139(4) of the Gujarat Goods and Service Tax, 2017 (hereinafter referred to as ‘GGST Act, 2017’) to submit that such order is beyond the scope of the provisions of subsection (2) of section 67 of the GGST Act, 2017.
2. It is further submitted that the respondents have exercised powers of provisional attachment of property under section 83 of the GGST Act whereby, the three bank accounts of the petitioner maintained with the Central Bank of India, H.L. Commerce College Branch, Ahmedabad, ICICI Bank, Naranpura Branch, Ahmedabad and Vijaya Bank, Ashram Road Branch, Ahmedabad have been attached.
3. It was submitted that apart from the attachment of the bank accounts, the respondents have also provisionally attached the office premises of the petitioner being B-705, Mondeal Heights. It was submitted that the immovable property which has been attached by the respondents is worth more than a crore rupees, which is more than the amount estimated by the respondents, which may become due and payable in case an assessment order is passed against the petitioner. It was submitted that therefore, there is no justification for attaching the bank accounts over and above the attachment of the office premises when the liability that may arise is already protected by the attachment over the office premises.
4. This court has also heard Ms. Maithili Mehta learned Assistant Government Pleader for the respondents.
5. On a perusal of the order dated 30.7.2019 passed by the Assistant Commissioner of State Tax, Unit 22, Ahmedabad under rule 139(4) of the GGST Rules, pursuant to the search of the premises of the petitioner
under sub-section (2) of section 67 of the GGST Act, 2017, it is evident that the properties in respect of which the prohibition order has been passed were not found at the premises which came to be searched.
6. Under the circumstances, the attachment of such property appears to be beyond the scope of the powers of the concerned Officer under subsection(2) of section 67 of the Act.
7. In the aforesaid premises, issue rule, returnable on 10.10.2019. Ms. Maithili Mehta learned Assistant Government Pleader waives service of notice of rule on behalf of the respondent Nos.1, 2 and 4 and Mr. Nirzar
Desai learned Senior Standing Counsel waives service of notice of rule on behalf of respondent No.3.
8. In the meanwhile by way of interim relief, the order dated 30.7.2019 issued under rule 139(4) of the GGST Rules as well as the attachment of the above-referred three bank accounts of the petitioner under section 83 of the GGST Act, 2017, are hereby stayed.
9. Direct service is permitted, today.”
4. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration, is whether the order of provisional attachment passed by the Assistant Commissioner in exercise of powers under Section 83 of the GGST Act, 2017, is sustainable in law.
5. The issue is no longer res integra, in view of the decision of this Court rendered on 28th August, 2019, in the case of Valerius Industries Versus Union of India [Special Civil Application No.13132 of 2019]. A Co-ordinate Bench of this Court, to which one of us, Mr.J.B.Pardiwala, J., is a party had the occasion to consider two questions, (i) the power of Commissioner of State Tax to delegate his powers under Section 83 of the Act to the Assistant Commissioner, and (ii) assuming for the moment that it is permissible for the Commissioner to delegate his powers to the Assistant Commissioner, what is expected of the Assistant Commissioner while exercising his delegated powers under Section 83 of the Act, for the purpose of provisional attachment. We may quote the relevant observations, made in the judgment referred to above as under:
“15. Section 83 of the Act, 2017, which is relevant for our purpose, reads as under:
“83. Provisional attachment to protect revenue in certain cases.
(1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, 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 in such manner as may be prescribed.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under subsection (1).”
16. The plain reading of Section 83 of the Act referred to above makes it clear that the powers have been conferred by the legislature upon the Commissioner. The subjective satisfaction that for the purpose of protecting the interest of the government revenue, it is necessary that the goods should be provisionally attached should be that of the Commissioner. The Commissioner has been conferred with the power to pass an order in writing for the purpose of attaching provisionally any property including the bank account belonging to the taxable person. Indisputably, in the case on hand, the order of provisional attachment of the bank account as well as the goods has not been passed by the Commissioner, the same has been passed by the State Tax Officer I.e. the respondent No.3 herein.
17. The order of provisional attachment of property under Section 83 in form NO.GST DRC22 in accordance with Rule 159(1) of the Rules reads as follows:
FORM GST DRC – 22
[See rule 159(1)]
Reference NO.AC/U44/STO1/Valerius/2018-19
dated : 20/11/2018
To,
The Manager
Bank of Baroda
Alkapuri Branch
Vadodara
Provisional attachment of property under Section 83
It is to inform that M/s. Valerius Industries, having principal place of business at 26/1 GIDC Industrial Estate bearing registration number as 24AANFV4191N12H (GSTIN/ID), PAN: AANFV4191N is a registered taxable person under the Gujarat Goods and Services Tax Act 2017 & Central Goods and Services tax Act 2017. Proceedings have been launched against the aforesaid taxable person under section 67 of the said Act to determine the tax or any other amount due from the said person.
As per information available with the department, it has come to my notice that the said person has Current Account No 01880200001055 FD RD & CC Account No.01880500000081 account in your bank. In order to protect the interests of revenue and in exercise of the powers conferred under section 83 of the Act, R R Bhatiya, State Tax Officer 1, Unit44, Vadodara, hereby provisionally attach the aforesaid account / property.
No debit shall be allowed to be made from the said account or any other account operated by the aforesaid person on the same PAN without the prior permission of this department. The property mentioned above shall not be allowed to be disposed of without the prior permission of this department.
Sd/-
(R.R. Bhatiya)
State Tax Officer 1,
Unit 44, Vadodara.”
18. The order of provisional attachment of the goods valued at Rs.1,60,00,000/reads as under:
“Details of goods seized:
M/s Valerius Industries 26/1 G.I.D.C. Industrial Estate, Kalol, Dist: Panchamahal GSTN:24AANFV4191N1ZH
The process of site inspection was held at your business premises from 20/11/18. In this connection, it has come to the notice during this inspection and the site inspection of the business premises of the other dealers conducted by the concerned officers that, out of the purchases shown in the books of accounts by you, following dealers have been prima facie found to be engaged only in the billing activity.
STATEMENT OF PURCHASE SHOWN IN BOOKS WITHOUT TAKING PHYSICAL DELIVERY OF GOODS.
