1. These petitions are filed for challenging provisional orders of attachment passed by the respondent authorities attaching the petitioner’s factory premises, stock and bank accounts. The facts behind such action of the respondents are that the petitioner-a Private Limited Company is engaged in manufacture and trading in caster oil and related products. The premises of the petitioner and other entities in the same business were raided. During the period between 27.06.2018 and 07.07.2018, Revenue authorities collected several documents and recorded statements of responsible persons. On the basis of such materials, the case of the department is that the petitioner is engaged in large scale bogus billing activities. The petitioner is thereby defrauded the Revenue. The respondents roughly assessed the petitioner’s possible tax and penalty liabilities under the Gujarat Goods & Service Tax Act and Central Goods & Service Tax Act at close to Rs. 45 crores.
2. Counsel for the petitioner submitted that the petitioner has been in business since several years. In the past, no such allegation had been made. Statements of the director of the petitioner and other persons were recorded under duress. The petitioner has not indulged any bogus billing activity. The department has attached the petitioner’s bank accounts, premises and stock thereby making it impossible for the petitioner to operate its business. The goods attached are perishable in nature. On some reasonable conditions, attachment should be suspended.
3. On the other hand, learned AGP explained the modes operandi allegedly employed by the petitioner for defrauding the Government revenue. He submitted that there is reliable material on record to establish such allegation. Pending assessment, the competent authority passed the order of provisional attachment to protect the interest of the Revenue.
4. In facts of the case, we have to balance the interest of both sides. At the prima facie stage, the department contends strongly that the petitioner has indulged into revenue defalcation. Possible tax and penalty liabilities are substantial. At the same time, it is not disputed that the petitioner is also involved in legitimate business activities. By freezing the petitioner’s bank accounts and attaching the properties, the petitioner is temporarily rendered penalized. The petitioner cannot operate the business, cannot move the stock and cannot make payments. On reasonable terms, we propose to suspend the attachments.
5. In the process, we have taken note of the following facts:
(i) As per the department, the petitioner’s possible tax and penalty liabilities are substantial;
(ii) Petitioner’s assessments are pending and would be completed in due course which may take sometime. Till then, the petitioner’s financial liabilities would not be crystallized;
(iii) The petitioner’s stock worth Rs. 1.2 crores (approximately) is seized which is perishable in nature;
(iii) At the instance of the department, the petitioner has deposited a sum of Rs. 2 crores in the petitioner’s ledger account in terms of section 49 of the Gujarat Goods & Service Tax Act. Such amount would be available with the department for recovery in case the liabilities of the petitioner are crystallized;
(iv) The petitioner concedes that the factory premises with plant and machinery are not encumbered. The same would therefore be poor security for any possible tax collection.
6. Under the circumstances, we would permit the petitioner to carry on the legitimate business by suspending provisional attachments subject to fulfillment of following conditions:
(i) The petitioner creates an undertaking to maintain a stock of the goods of a minimum of Rs. 5 crores. Such undertaking shall be filed before the department as well as before this Court by 15.11.2018;
(ii) The petitioner give unconditional bank guarantee to the department to the tune of Rs. 5 crores. For this limited purpose of enabling the petitioner to create stock and give bank guarantee, it would be open for the petitioner to receive payments from its dealers. The director of the petitioner will file undertaking before this Court latest by 30.10.2018 that such payments will not be utilized for any purpose other than creating the stock as directed above and for raising bank guarantee.
7. Upon fulfilling such conditions, the attachment orders would automatically stand suspended along with the directions to the petitioner’s dealers, for not making payment to the petitioner, which will also be suspended.