[Ref: In the matter of M/s. Valerius Industries Limited vs Union of India on 28th August, 2019 before DB of Gujarat High Court]
The DB of Gujarat High Court in M/s. Valerius Industries Limited vs Union of India on 28th August, 2019 observed that it is only the opinion of the Commissioner which is condition precedent for taking action under Section 83 of the CGST Act, 2017 for provisional attachment of any property. However, any exercise of powers by any other officer (other than Commissioner) shall be in violation of the mandate of Section 83 and consequently, the provisional attachment shall be illegal.
In Para No. 35, it is mentioned that “in the case on hand, Section 83 makes it abundantly clear that it is the Commissioner’s opinion which is relevant. The Legislature has thought fit to confer this power upon the Commissioner. Whether such power conferred upon the Commissioner by the legislature could have been delegated to the three subordinate officers referred to above by virtue of the order dated 15th January 2018 passed in exercise of power under subsection (3) of Section 5 read with clause 19 of Section 2 of the Act and the rules framed thereunder. In our opinion, the answer has to be in the negative. Although there is no specific challenge to the order dated 15th January 2015 passed by the Commissioner of State Tax delegating his power under Section 83 to the subordinate officers, yet, we are of the view that by virtue of such order, such impugned order of provisional attachment cannot be defended.”
While dealing with the scope of exercise of powers under Section 83 of the CGST Act, 2017 it has been observed in Para No. 42 as under:
“In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith.”
Basically, in the aforesaid matter order of provisional attachment under Section 83 of the Act, 2017 has been passed by the State Tax Officer – 1, Unit 44, Vadodara and the same has been challenged by the petitioner i.e. M/s. Valerius Industries Limited. Respondent submitted that although the power has been conferred by the statute upon the Commissioner and the satisfaction has to be of the Commissioner, yet, by order dated 15th January 2018 bearing No. GSLS5(1)S83B14, the Commissioner of State Tax, Gujarat State, Ahmedabad has delegated his power under Section 83 conferred upon him by the statute to: (1) Deputy Commissioner (2) Assistant Commissioner and (3) State Tax Officer. In view of such order delegating the power, the State Tax Officer could be said to be empowered to pass the impugned order of provisional attachment of property under Section 83 of the Act. It cannot be argued that the impugned order of provisional attachment passed by the State Tax Officer is without jurisdiction. Ms. Mehta further submitted that in the same manner, the State Tax Officer could be said to have been empowered to order provisional attachment of the bank accounts also.
It is pertinent to note that Gujarat High Court while dealing with question of provisional attachment of property and bank account in this case in Para No. 52 has concluded as under:
” 52. Our final conclusions may be summarized as under:
1. The order of provisional attachment before the assessment order is made, may be justified if the assessing authority or any other authority empowered in law is of the opinion that it is necessary to protect the interest of revenue. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far fetching, which would warrant the formation of the belief.
2. The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons.
3. The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution.
4. The power under Section 83 of the Act for provisional attachment should be exercised only if there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of wholly or any part of his / her property with a view to thwarting the ultimate collection of demand and in order to achieve the said objective, the attachment should be of the properties and to that extent, it is required to achieve this objective.
5. The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.
6. The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings.
7. The authority before exercising power under Section 83 of the Act for provisional attachment should take into consideration two things: (i) whether it is a revenue neutral situation (ii) the statement of “output liability or input credit”. Having regard to the amount paid by reversing the input tax credit if the interest of the revenue is sufficiently secured, then the authority may not be justified in invoking its power under Section 83 of the Act for the purpose of provisional attachment.”
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