Provisional attachment should not hamper normal business activities of taxable person

By Editor4 Goods and Services Tax Judiciary March 17, 2022

TaxGuru Citation: 2022 taxguru.in 1299
Case Name: Arya Metacast Pvt. Ltd. Vs State Of Gujarat (Gujarat High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Gujarat High Court

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Arya Metacast Pvt. Ltd. Vs State Of Gujarat (Gujarat High Court)

In the facts of the case, undisputedly, the respondent no.2 has not only provisionally attached the stock of goods lying at the factory premise of the writ applicants, at the same time, the respondent No.2 has also provisionally attached the demat account and current account of the writ applicants. These are the valuable assets of the writ applicants, more particularly, raw material and the finished goods are valuables which are otherwise necessary for running of the business of the applicants. Even operating the demat account and current account are essentially required for the routine business of the writ applicants. Time and again, this Court as well as even the instructions instructions issued by the higher authority of the respondents, has directed the proper officer to ensure that their action of the provisional attachment should not hamper normal business activities of the taxable person. Even thereafter this Court vide judgment dated 27.01.2022 passed in Special Civil Application No.188 of 2022 in the case of M/s. Utkarsh Ispat LLP Vs. State of Gujarat had an occasion to deal with the similar facts whereby the respondent authorities have provisionally attached goods, stock and receivables and also bank accounts. This Court did not approve the provisional attachment of the goods, stock and receivables, more particularly, when the entire stock and receivables have been pledged and a floating charge has been created in favour of the Kalupur Commercial Bank Limited for the purpose of availing the cash credit facility with the provisional attachment of the goods, stock and receivables the entire business will come to a standstill.

For the aforesaid reasons, present writ application succeeds in part. We hereby quash and set aside the order of the provisional attachment dated 27.11.2021 qua the stock of goods, two demat accounts as well as current account of the writ applicants is concerned. So far the prayer of the writ applicants with regard to release of electronic items including Mobile Phone, laptop and other documents seized during the search proceedings are concerned, same is also directed to be released forthwith on condition that the writ applicants shall file an undertaking before the respondent no.2 thereby declaring that the aforesaid goods electronic items including mobile phone, laptop and other seized documents shall be retained in its original form and shall not be disposed of pending the investigation, if any. At the same time, we permit the respondent authorities to secure the original data by availing necessary certificate under Section 65B of the Information and Technology Act.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. By this writ application under Article 226 of the Constitution of India, the writ applicants have challenged the provisional attachment order passed under the Gujarat Goods and Services Tax Act, 2017 (for short “GST Act”).

2. Brief facts giving rise to this writ petition as pleaded by the writ applicants are summarized as under:

2.1 The writ applicant No.1 is a Private Limited Company and the writ applicant no.2 the Managing Director of the said company. The writ applicant no.1 is engaged in manufacture and sale of ingots, having factory situated near Rajkot, Gujarat State. The writ application is duly registered under the GST Act and is thus a registered taxable person.

2.2 The writ applicants have claims to have regularly paid output tax for three Financial Years i.e. A.Y. 2018-1 9, 2019-20 and 2020- 21. It is further pleaded by the writ applicants that they have entered in business transaction only with genuine dealers who are registered taxable persons under the GST act. In support, the writ applicants have placed on record regularly maintained record of the purchase transactions, which include invoices, e-way bill, weightment slips, photographs of material being unloaded and material received inspection report etc.

2.3 It appears that the office of the Deputy Commissioner of State Tax, Vadodara, suspected that the writ applicant had shown purchase from fictitious firms, which are otherwise non existent. The respondent launched the proceedings against the writ applicants whereby search was carried out at the business premises of the writ applicants as per the procedure prescribed under Section 67 of the GST Act.

2.4 It appears that pursuant to the said search, the dispute arose with regard to the claim for input tax credit availed by the writ applicants on the ground that the Firm from whom the writ applicants had made purchase, were not found to be genuine.

2.5 The writ applicants during such search had cooperated with the respondent authority. Pursuant to such search, the writ applicants were served with three form GST DRC-22 dated 27.11.2021, whereby the respondent authority had passed an order of provisional attachment of various properties of the writ applicant. The details of which are summarized as under: