Provisional attachment order passed by mechanical exercise of power is not sustainable

Anjani Impex Vs State of Gujarat (Gujarat High Court)

The writ applicant is a partnership firm registered with the GST having GSTIN 24ANPPS8920H1Z1. The firm is engaged in the business of manufacturing of different types of textile fabrics. It appears that an inquiry has been initiated against the firm by the CGST Department, Surat by issuing summons under Section 70(1) of the Act, 2017 dated 30^th June, 2020. It appears that pending the inquiry, the Department has taken two fold action. First an order in Form GST DRC-01A dated 23^rd July, 2020 has been issued, Annexure-F, Page-30 of this paper-book and secondly, an order of provisional attachment of property under Section 83 of the Act in Form GST DRC-22 has been passed.

HC held that they are not inclined to interfere with the order passed in Form GST DRC-01A dated 23^rd July, 2020, referred to above. However, we are of the view that the order of provisional attachment of the immovable properties in the form of the industrial unit and the residential premises under Section 83 of the Act is not sustainable in law.

A bare perusal of the order of provisional attachment, would indicate that the same is nothing but a result of mechanical exercise of power under Section 83 of the Act, 2017.

Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion. But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a precondition to the formation of opinion. The use of the word “may” indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, though subjective, must be based on some credible material disclosing that is necessary to provisionally attach the goods or the bank account for the purpose of protecting the interest of the government revenue. The statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings. “Belief” is a mental operation of accepting a fact as true, so, without any fact, no belief can be formed. It is equally true that it is not necessary for the authority under the Act to state reasons for its belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed, as it has been held by the Supreme Court in Sheonath Singh’s case [AIR 1971 SC 2451], that the Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court. In the case at hand, Ms. Mehta, the learned A.G.P. appearing for the respondents very fairly submitted that not only the impugned order of provisional attachment is bereft of any reason, but there is nothing on the original file on the basis of which this Court may be in a position to ascertain the genuineness of the belief formed by the authority. The word “necessary” means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word “necessary” must be construed in the connection in which it is used. The formation of the opinion by the authority should reflect intense application of mind with reference to the material available on record that it had become necessary to order provisional attachment of the goods or the bank account or other articles which may be useful or relevant to any proceedings under the Act.

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